Federal Energy Regulatory Commission Use of the Social Cost of Carbon

By Roger Caiazza

Here is another example of the weaponization of the Social Cost of Carbon (SCC). Recall that the SCC is defined as the present-day value of projected future net damages from emitting a ton of CO2 today. This contrived parameter hurts the poor and ignores benefits from fossil fuels, includes flawed reasoning, and includes other inherent problems described by Willis Eschenbach herehere and here. The problem now is that it is being used to delay fossil fuel infrastructure.

The District of Columbia Circuit Court issued a decision in Vecinos para el Bienestar de la Comunidad Costera v. FERC on August 3, 2021 which faulted the Federal Energy Regulatory Commission (FERC) for failing to consider whether the social cost of carbon (SCC) is a “generally accepted” analytical tool for assessing the significance of greenhouse gas impacts under National Environmental Protection Act (NEPA). According to John Mizerak at Lexology: “The decision is likely to result in additional agency engagement of the necessity of the SCC in project reviews, although the decision does not mandate the tool’s use going forward”.

In this case litigants argued that the FERC environmental impact statement for liquefied natural gas export terminals and pipelines in Texas should have considered the SCC.  Although FERC quantified the greenhouse gas emissions from the construction and operation of the facilities, their environmental statements did not consider the “significance of the projects’ contributions to climate change”.  The litigants argued that the SCC is a tool for estimating the cost of climate change caused by greenhouse gas emissions and should have been used in the FERC impact analyses.

I am not a lawyer and will leave the interpretation of the legal impacts of the decision to others.  Mizerak states “Accordingly, on remand and in the future, FERC and other agencies will have to more directly evaluate the tool and the rigor of the science behind it. Proponents will argue that the social cost of carbon is the kind of ‘generally accepted’ theoretical approach § 1502.21 requires be incorporated into NEPA”.

On the other hand, I am an air pollution meteorologist who has spent a lot of time evaluating the environmental impacts of fossil fuel infrastructure.  Predicting air quality impacts from polluting sources is a highly regulated process.  Applicants submit their modeling protocols for review by regulatory agencies and eventually submit the results and input data to the agencies so that they can be reproduced as a final check on the submittals.  Ultimately those analyses work their way into the environmental impact statements used to permit the application.  Importantly if the modeling results show that the facility impacts result in ambient air quality less than the National Ambient Air Quality Standards and the change in the air quality is less than specific limits for acceptable changes, then the debate is over.  The facility can get its air permits.

The use of the SCC in environmental permitting opens implementation issues for applicants.  At the top of the list is how the SCC calculation will be used.  If the permit application allows say 10,000 tons of CO2 emissions per year, then the SCC “significance” is the current value of the SCC times 10,000 tons.  What do you compare that calculated value to?  In this particular case, the exported LNG could be used to displace coal in which case it would be appropriate for the applicant to claim credit for those reductions relative to the LNG terminal operations.  Because there are no quantitative regulatory limits the environmental impact significance decision necessarily becomes a qualitative one ripe for litigation by the usual suspects.

In conclusion, I cannot speak to the legal implications of this court decision.  However, it will complicate and delay any permit applications because there is no recognized process for applying the SCC results in permit applications.  As a result, because not only are the contrived SCC values are based on numerous value judgements, the interpretation of the results will suffer from the same flaw.  This is a prescription for needless delay and arbitrary decisions.


Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York.  This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.

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via Watts Up With That?


August 19, 2021 at 04:20PM

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