The Fifth Circuit recently allowed the federal government to resume use of the "social cost of carbon" (SCC), after a district court enjoined reliance on the metric earlier this year. The SCC aids cost-benefit analysis of regulatory actions and can provide insights into the impacts of climate change and greenhouse gas emissions reductions. The continued legal back and forth over the SCC demonstrates that it is a highly contested and important concept, supporting much of President Biden's climate agenda and with potential spillover effects for corporate carbon pricing.
Background
The legal battles directly stem from an Executive Order President Biden issued on his first day in office, but continue a dispute that began in the last two presidential administrations.Executive Order 13990 re-established an Interagency Working Group (IWG)!指令发布SCC临时估计sCC使用并指令IWG继续开发SCC定值,原定于今年1月发布。 SCC定序部分本身响应Trump政府的行动,解散IWG并指令使用SCC估计值远低于Obama政府In February 2021, the Biden IWG issued the interim SCC, which returned to the Obama-era estimates as follows:
Source: Interagency Working Group on Social Cost of Greenhouse Gases
Litigation over the Biden SCC estimates and effects on the Federal Government
A host of state attorneys general immediately challenged the interim SCC in two separate lawsuits in Louisiana and Missouri. Among other claims, these suits alleged the interim SCC failed to comply with the Administrative Procedure Act's notice-and-comment requirements, was arbitrary and capricious, and otherwise was enacted without statutory authorization.[1] In February, a District Court Judge in the Western District of Louisiana hearing one of these challenges issued a preliminary injunction, prohibiting agencies from "adopting, employing, treating as binding, or relying upon" any SCC estimates that depart from those used in the Trump Administration.
This opinion immediately reverberated across the federal government. In a motion to stay the injunction pending further appeal, the Justice Department wrote:
The consequences of the injunction are dramatic. Pending rule-makings in separate agencies throughout the government—none of which were actually challenged here—will now be delayed. Other agency actions may now be abandoned due to an inability to redo related environmental analyses in time to meet mandatory deadlines.[2]
In light of this injunction, a host of federal rulemakings, grants, and agency processes were delayed, including federal oil and gas leasing and grants made under a $2.3 billion program for capital-intensive transportation projects. In court filings, the Justice Department further catalogued how the injunction was derailing federal operations dealing with climate change. A declaration filed by a high ranking Office of Management and Budget (OMB) official documented disruptions to at least 21 rulemakings by the Department of Energy, 5 by Environmental Protection Agency, 9 by the Department of Transportation, and 3 by the Department of the Interior.[3] The injunction would have forced the Transportation and Interior Departments to redo 60 and 27 environmental impact analyses, respectively.
Apart from its impact on agency rulemaking, the injunction threatened to implicate the White House's international climate efforts. For instance, the United States engages in regular conversations with the Canadian government to align SCC measurements across borders.[4] Multilateral discussions with the Asian Development Bank may also be affected, as its energy policy reviews often incorporate references to SCC measures.[5] The Justice Department argued the injunction would impede this international cooperation.
On March 16th, the Fifth Circuit stayed the injunction pending appeal. The Court primarily rested its decision on Plaintiff's lack of standing, noting the states' injuries are "merely hypothetical."[6] Even if an agency did consider the SCC, it would only be one factor agencies consider "in determining when, what, and how to regulate or take agency action"[7] The Fifth Circuit also considered the breadth of the impacts on government activities caused by the lower court's sweeping injunction.[8]
The SCC moving forward
The IWG will now continue its work as litigation challenging the SCC continues. This includes the Louisiana proceeding and the Fifth Circuit's stay, as well as a pending 8th Circuit appeal of a Missouri district court decision, [9] which dismissed another challenge to the interim SCC for lack of both standing and ripeness.[10]
The IWG must still promulgate updated "final" SCC figures, which are expected to be higher than the interim ones based on President Obama's IWG. It is unclear when this might occur: neither the White House nor OMB has issued an official update. Prior to the injunction, however, OMB had already solicited and received detailed public comment on how to incorporate the latest peer reviewed science and economics literature into the new SCC measure.[11] Since, technical experts across federal agencies had been synthesizing and summarizing this input, with the "goal of providing updated estimates in the next couple of months."[12] Given delays caused by the litigation, it's uncertain if the Government intends to honor this timeline. Additionally, the IWG had intended to subject their updated estimates to a peer review process and, to this end, EPA had published a request to nominate experts on January 25th.[13]
The IWG's work and the final SCC will be closely watched, both by the federal government and the private sector. Under the SEC's recently proposed climate-disclosure rule, publicly registered companies that use an internal carbon price—i.e., an "estimated cost of carbon emissions used internally within an organization"—would be required to disclose the price per metric ton of carbon dioxide equivalent used, and the company's rationale for selecting that price.[14] While not bound to do so, in setting internal carbon prices some companies may reference or even adopt the IWG's estimate of the SCC. However, with the fate of the interim SCC unclear, and an array of carbon markets around the globe setting other prices on carbon, many companies may be less inclined to adopt the IWG's SCC in their internal carbon pricing.
[1] See, e.g., Complaint, Louisiana et al., v Biden et al., 21-CV-01074 (W.D.La提交日期为2021年4月22日ECF No.unfref2名称SUPDefs运动留置mm.,21-CV-01074公元前LA,2022年2月19日ECF编号103-1.
The European Commission is currently discussing a draft of a proposal for a Carbon Border Adjustment Mechanism ("CBAM") Regulation that it is expected to present on July 14, 2021. A CBAM was already announced in the European Commission's Communication for a Green Deal and is intended to protect the EU's domestic industry that is at risk of carbon leakage—to create a level playing field—and to serve as a policy tool to encourage third countries to reduce their greenhouse gas ("GHG") emissions.
The CBAM draft proposal is subject to intense negotiations among the different Directorates-General of the European Commission, and it is likely that it will be amended several times before the Commission finally presents it on July 14. Nevertheless, the draft already suggests that the CBAM proposal will require importers of covered goods into the EU to purchase and surrender a number of CBAM certificates that reflect the goods' embedded emissions.依据欧洲议会s/www.europara.eu/doceo/document/TA-9-2021-0071_EN.html>决议 ,CBAM建议可能包含以下元素:
In addition to the details of the CBAM Regulation yet to be concluded by the EU, it also remains to be seen how the EU's pending efforts to adopt the CBAM will affect other international carbon pricing and climate mitigation efforts. However, the timing of the EU's movement on the CBAM is significant in the context of the G7 Communiqué from the Cornwall meeting, which "acknowledge[s] the risk of carbon leakage" and "recognise[s] the potential of high integrity carbon markets and carbon pricing to foster cost-efficient reductions in emissions levels, drive innovation and enable a transformation to net zero." These actions provide important fodder for the prospect of a more significant international agreement on carbon pricing as momentum continues to build toward the Glasgow COP 26 in November.
很明显,GGPPA允许那些已经建立自己的定价系统(如不列颠哥伦比亚省碳税)的省继续实施,只要它们满足联邦基准并容留Quebec决定继续参与加利福尼亚联通碳市场ahrfs/www.canada.ca/en/encern-climate-changes/climate-crap-thow-it-will-work.html#toc2联邦系统下收到的所有收益都返回产生收益的省对于那些未承诺计费排放的省,政府将在提交报税表时以支付形式向个人退还大约90%的燃料收费收益i/p>
/p>Alblict先前与加利福尼亚州和魁北克省联手建立区间交易程序,2018年新政府当选时突然退出跨边界市场萨斯喀彻温省、安大略省和艾伯塔省质疑GGPA合宪性萨斯喀彻温省上诉法院和安大略上诉法院分判该判决合宪性艾伯塔法院判定它不是.
它还指出,温室气体排放就其性质而言,对省际协调构成具体挑战。The Court observed that, absent a federal pricing floor, any province's failure to implement a sufficiently stringent pricing mechanism could undermine the efficacy of GHG pricing everywhere due to the risk of carbon "leakage," i.e., that emissions reductions occurring in any given province would be offset, as emissions and business activity migrate to provinces implementing weaker programs.
Responding to arguments that the GGPPA amounted to federal infringement upon traditional provincial arenas, including a province's control over its natural resources, the Court emphasized the law's design as a "backstop." It noted that the GHG pricing floor is not imposed on provinces with established, "sufficiently stringent GHG pricing system[s]." By virtue of this design, the GGPPA affords provinces "the flexibility to design their own policies to meet emissions reductions targets." Moreover, to the extent the GGPPA infringes upon traditional provincial arenas, the majority viewed this "limited constitutional impact" as "justified" in light of the irreversible harms posed by climate change, which will be "borne disproportionality by vulnerable communities and regions."
Finally, the Court held that the GGPPA's fuel and excess emission charges are "constitutionally valid regulatory charges," not taxes.3位持异见法官均对GGPPA造成政府内部不平衡表示担忧。科泰大法官同意多数人的意见,即气候变化构成国家关注问题,但认为议会-非行政部门-应负责处理该问题。布朗大法官与罗大法官同意省政府GPA构成联邦超量他们解释说,法律威胁加拿大联邦体系结构,允许国家政府做出更宜留待各省作决定。
pem>Upshot :美国企业和决策者注意到这项决定有几个原因:- First为联邦基准开脱,并部分侵入省政府对脆弱社区,包括土著人民将法院裁决环境司法置于应对气候变化努力中心In this respect, it affirms the stature that the Biden-Harris Administration has accorded environmental justice as a critical component of its climate strategy, including in its Day One executive order and initial efforts to re-establish the social cost of carbon pollution.
- Second, in holding that the risk of carbon leakage warrants a minimum national price, the Court recognizes the fundamental dilemma for any jurisdiction embarking on carbon pricing in the absence of assurances that its neighbors won't undercut its competitiveness.加拿大支持解决碳渗漏问题,同时尊重省政府实验不同碳定价机制,并在此方面可提供实用模式供联邦政策框架使用,既适应又支持已经推进某种形式的碳定价的州的努力。
- 第三批,认为联邦基准不是一种税,而是一种旨在减少排放的合法监管收费,多数法院的裁决与一个重要的
最后,裁决可能重新聚焦于可能对美国出口应用碳边界调整总统气候问题特使John Kerry最近敦促欧洲联盟(EU)延缓拟议的碳边界调整机制, cap-and-tradebase
The Federal Energy Regulatory Commission (FERC) has scheduled a conference on September 30, 2020 regarding carbon pricing in organized wholesale electricity markets. According to the conference notice, the purpose is to discuss "considerations related to state adoption of mechanisms to price carbon dioxide emissions…in regions with FERC-jurisdictional organized wholesale electricity markets." This conference should be of significant interest to a wide range of market participants and their investors, plus consumers of electricity, state policymakers and other diverse interests.
Although not mentioned in FERC's notice, a diverse group of stakeholders filed a request with FERC in April to convene a conference to discuss "integrating state, regional, and national carbon pricing in organized regional wholesale electric energy markets." As discussed in an earlier post to this blog, the group did not ask FERC to direct carbon pricing but instead to gather a wide range of stakeholders to discuss the technical and implementation issues raised by incorporating carbon pricing policies into those markets.
Wholesale electricity markets operators are grappling with how to reconcile wholesale markets with state carbon reduction policies without interfering with competitive market price signals. Carbon pricing could alter the economic dispatch of resources to prioritize less carbon-intensive resources and displace more carbon-intensive resources. This has a bearing on FERC's jurisdictional scope, such as how wholesale markets function and their prices.
The FERC conference will be held either in-person or electronically. An agenda for the conference was not included in FERC's notice. Supplemental notices will be issued prior to the conference.
Advocates of the conference expect that carbon pricing could alter the economic dispatch of resources to prioritize less carbon-intensive resources and displace more carbon-intensive resources. This has a bearing on FERC's jurisdictional scope, such as how wholesale markets function and their prices.
The request says that the unique features of organized wholesale electricity markets present an opportunity for integrating policies that directly price carbon emissions into energy market operation. Carbon pricing in those markets could further state policies while preserving the benefits of market-based approaches to electric energy markets.
The aim of the conference would be to start a dialogue among a broad range of stakeholders and interested parties regarding the opportunities and challenges associated with integrating carbon pricing into the organized wholesale markets.
Among the broad issues suggested to be addressed at the technical conference are:
- The mechanisms for pricing carbon on a state, regional, or national level.
- How the costs of carbon emissions and other pollutants are already incorporated into wholesale markets, and how these experiences inform ways to integrate a carbon price into the markets and achieve efficient market operation.
- The potential for carbon pricing to create regulatory certainty and incentives for financing resources that further state environmental goals as well as maintain reliability and cost effective customer service.
- The relative merits, practical issues and obstacles to incorporating carbon prices into the wholesale markets.
The request for technical conference includes a suggested detailed conference agenda organized around stakeholder-specific panels for the following groups: (1) state and regional greenhouse gas initiative officials, (2) RTO representatives, (3) stakeholders and experts representing load, generation, renewable and advanced technologies, environmental and other interests, and (4) states.
There is no deadline for FERC to act on the request and no requirement that it act on the request at all.