OMB Seeks Public Comments on Its Interim Social Cost of Carbon Metrics

The Office of Management and Budget (OMB) announced that it will solicit public comments on the interim social cost of carbon (SCC) metrics released in February by the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG). 

Key Take-Aways and Actions

  • The Social Cost of Greenhouse Gases and specifically the SCC is a key metric used by the U.S. Environmental Protection Agency (EPA) and other agencies to place a monetary value on greenhouse gas (GHG) emissions and reductions during rulemaking and permitting actions. 
  • The Biden Administration previously announced that it would restore the use of the SCC metrics and undertake a process to reevaluate the values and uses of the metrics in agency decision-making processes.
  • Interested parties must submit comments on or before June 21, 2021.

On behalf of the IWG, the OMB announced that it is seeking public comment on the interim SCC and other greenhouse gases (collectively SC-GHG) established by IWG’s “Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990” (TSD). Comments are due June 21, 2021 and should focus on the interim TSD, as well as on how best to incorporate the latest peer-reviewed science and economics literature in order to develop an updated set of SC-GHG estimates.

The SC-GHG metrics place a dollar value per metric ton for future damage and harms caused by GHG emissions. Federal agencies use these social costs in rulemakings, permitting actions, and in analyzing other policy matters. EPA has already used the interim value in its March 15 regulatory impact analysis to project the climate-related co-benefits of its just-finalized “update” to the Cross-State Air Pollution Rule, and in the recent hydrofluorocarbons rule.

As directed by Executive Order 13990, the IWG released the interim figures in February 2021, with final and updated figures expected in January 2022. For the cost estimate of three greenhouse gases—carbon, methane, and nitrous oxide—the interim social costs tracked closely with the Obama-era figures, when adjusted for inflation. For carbon dioxide, the social cost of releasing a metric ton is valued at $51. Releasing a metric ton of methane currently is valued at $1,500, and releasing a metric ton of nitrous oxide currently is valued at $18,000. In each case, these values reflect a 3 percent discount rate, with the TSD noting that “[w]hile point estimates are important for providing analysts with a tractable approach for regulatory analysis, they do not fully quantify uncertainty associated with the SC-GHG estimates.” These interim figures also take into consideration GHG’s international impacts, eliminated from the analysis by the previous administration.

Notably, OMB’s notice comes shortly after two lawsuits challenging the interim SC-GHG. Louisiana and several other states asked a Missouri federal court to block agencies from using these interim values, saying they violated notice-and-comment regulatory requirements. In a separate Louisiana federal court filing, Texas and nine other states challenged the process to determine the social cost of carbon, claiming President Biden exceeded his authority and circumvented normal rulemaking procedure.

In addition, the request for public comment follows pressure from major industry groups for “ample” public comment opportunities on the SCC. “We believe that the directives associated with updating these values should adhere to rigorous methodology including ample channels and opportunities for public and stakeholder input,” industry groups said in a February 2021 statement to the White House.

Next Steps

Interested parties should submit comments on or before June 21, 2021 and watch for the final costs expected in January 2022.

Beveridge & Diamond’s Air and Climate Change practice group helps clients navigate all aspects of carbon markets and climate change programs as well as complex legal issues in the fast-moving area of sustainability. For more information, please contact the authors.