Court Upholds Legality of Federal Social Cost of Carbon Estimate
In August 2016, the 7th U.S. Circuit Court of Appeals unanimously upheld the Department of Energy’s (DOE) use of the social cost of carbon during the development of efficiency standards for commercial refrigeration equipment. The decision follows an industry group challenge of the DOE’s authority to use the estimate to quantify benefits of efficiency standards.
- The social cost of carbon estimate was developed by an interagency working group convened by the Council of Economic Advisers and the Office of Management and Budget
- The estimate is meant to be a comprehensive estimate of climate change damages and includes changes in net agricultural productivity, human health, property damages from increased flood risk, and changes in energy system costs
- The figure has been used in a variety of rulemakings, including the final Mercury and Air Toxic Standards and Clean Power Plan
- The Court found it was reasonable for the DOE to consider global climate benefits when calculating national regulatory costs. In addition, the Court found the DOE is authorized by Energy Policy and Conservation Act to use the social cost of carbon estimate
- In 2015, the social cost of carbon was estimated to be $36 per metric ton of carbon dioxide emissions (in 2007 dollars)
This case represents the first ruling on the use of the social cost of carbon in a regulatory cost-benefit analyses. The ruling provides a precedent for the continued use of the social cost of carbon in regulatory proceedings for the federal government. The ruling also may bring credibility to this policy as an accepted standard for other stakeholders such as states or public utility commissions.
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