Fifth Circuit Stays Erroneous District Court Injunction Against Social Cost of Carbon Estimates

Last month, in Louisiana v. Biden, a federal district court in Texas enjoined all federal agencies from relying upon or otherwise considering social cost of carbon estimates developed by an Interagency Working Group appointed by President Biden. This decision misapplied multiple administrative law doctrines, as I detailed in this post.

Today, a panel of the US Court of Appeals for the Fifth Circuit granted a stay of the district court’s injunction, pending appeal. In a brief per curiam opinion, the panel (consisting of Judges Southwick, Graves, and Costa) explained why the district court was wrong to enjoin agencies’ use of the IWG social cost of carbon estimates.

The Fifth Circuit’s opinion both provides useful context, and explains why the plaintiff states do not have standing to press their specific claims (though they might well have standing to challenge specific agency actions that rely upon social cost of carbon estimates). Here are the relevant portions:

When federal agencies promulgate regulations or take other agency action with economically significant effects, they conduct a cost-benefit analysis. This has been done since the Carter administration, although presidential oversight of regulatory action through a systematic review process began as early as the Nixon administration. In 1993, President Clinton issued Executive Order 12866 which, among other things, mandates the prepublication review process for economically significant regulations. Exec. Order No. 12866. . . states”[e]ach agency shall assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” Administrations retained EO 12866’s commitment to costbenefit analyzes and strengthened it with additional directives or guidelines for regulatory analysis.

In 2003, the Office of Management and Budget (OMB) issued Circular A-4 to provide guidance to agencies on how to conduct the cost benefit analysis implemented by EO 12866. See OMB Circular A-4 (Sept. 17, 2003). Compliance with Circular A-4 is not required by any statute or regulation and is not binding on any agency.

In cost-benefit analyzes, agencies consider the impact of the emissions of greenhouse gases. The impact of these emissions on various factors like health, agriculture, and sea levels, can be quantified into dollar amounts per ton of gas emitted—ie, the Social Cost of Greenhouse Gases (SC-GHG).

To encourage consistency in determining SC-GHG, in 2009, President Obama instituted the Interagency Working Group (IWG) to develop a method for quantifying the costs and effects of emissions. In 2010, the IWG developed a method to quantify GHG emissions into social costs estimates based on peer-reviewed frameworks.

In 2017, President Trump disbanded the IWG and its method for quantifying SC-GHG in Executive Order 13783. . . . That order still contemplated, however, that agencies would continue to “monetize the value of changes in greenhouse gas emissions resulting from regulations” and that estimates would be consistent with Circular A-4 (to the extent permitted by law). . . .

In January 2021, President Biden signed Executive Order 13990 and reinstated the IWG to advise him on the SC-GHG. . . . The IWG was also directed to develop new estimates for the SC-GHG, and until those new estimates are published, to develop Interim Estimates within 30 days, as appropriate and consistent with applicable law. Pursuant to EO 13990, agencies must use the Interim Estimates when they conduct cost-benefit analyzes for regulatory or other agency action. The IWG published the Interim Estimates in February 2021. The Interim Estimates are the same as the SC-GHG estimates from 2016, adjusted for inflation.

The Plaintiff States sued the United States’ Government Defendants in April 2021 to preemptively challenge the Interim Estimates. They claim the Interim Estimates will lead to increased regulatory burdens when agencies conduct cost-benefit analyses. The Plaintiff States therefore brought several challenges to Interim Estimates pursuant to the Administrative Procedures Act (APA). The Plaintiff States’ claims are premised on the broad use of the Interim Estimates. They do not challenge any specific regulation or other agency action.

In February 2022, the district court entered a preliminary injunction enjoining the Government Defendants from using, in any manner, the Interim Estimates. The Government Defendants move to stay the injunction pending appeal arguing, among other things, the Plaintiff States lack standing, their claims are not ripe, and the Interim Estimates are not final agency action under the APA. Because we conclude the Government Defendants have made a strong showing that they are likely to succeed on the merits, and the balance of harms to the parties’ favors granting the stay, we GRANT the Government Defendants’ motion. . . .

The Government Defendants are likely to succeed on the merits because the Plaintiff States lack standing. The Plaintiff States’ claimed injury is “increased regulatory burdens” that may result from the consideration of SC-GHG, and the Interim Estimates specifically. This injury, however, hardly meets the standards for Article III standing because it is, at this point, merely hypothetical. . . . The Government Defendants are also likely to succeed in showing that the Plaintiff States have failed to meet their burden on causation and redressability. The increased regulatory burdens the Plaintiff States fear will come from the Interim Estimates appear untraceable because agencies consider a great number of other factors in determining when, what, and how to regulate or take agency action (and the Plaintiff States do not challenge a specific regulation or action). . . .

The Interim Estimates on their own do nothing to the Plaintiff States. So we discern no injury that would satisfy Article III at this stage. . . . The Plaintiff States’ claims therefore amount to a generalized grievance of how the current administration is considering SC-GHG. And that fails to meet the standards of Article III standing. See Lujan504 US at 568 (“[R]espondents chose to
challenge a more generalized level of Government action,” instead of
“specifically identifiable Government of violations law,” which is “rarely if
ever appropriate for federal-court adjudication.” (citation omitted)).

The Government Defendants have shown they will be irreparably harmed absent a stay. The preliminary injunction halts the President’s directive to agencies in how to make agency decisions, before they even make those decisions. It also orders agencies to comply with a prior administration’s internal guidance document that embodies a certain approach to regulatory analysis, even though that document was not mandated by any regulation or statute in the first place. The preliminary injunction sweeps broadly and prohibits reliance on § 5 of EO 13990, which creates the IWG, a group created to advise the President on policy questions in addition to creating the Interim Estimates. It is unclear how the Plaintiff States’ qualms with the Interim Estimates justify halting the President’s IWG. All of this effectively stops or delays agencies in consideration of SC-GHG in the manner of the current administration has prioritized within the bounds of applicable law. The preliminary injunction’s directive for the current administration to comply with prior administrations’ policies on regulatory analysis absent a specific agency action to review also appears outside the authority of the federal courts. We therefore find the Government Defendants are irreparably harmed absent a stay of the injunction. . . .

In sum, the Plaintiff States’ claims are based on a generalized grievance of the use of Interim Estimates in cost-benefit analyzes of regulations and agency action. But their claimed injury does not stem from the Interim Estimates themselves, it stems from any forthcoming, speculative, and unknown regulation that may place increased burdens on them and may result from consideration of SC-GHG. We conclude the standing inquiry shows the Government Defendants’ likelihood of success on the merits in this appeal, and the other factors, including the public
interest, favor granting a stay of the injunction.

It is possible that the plaintiff states will seek en banc review of this decision, perhaps in part due to the relatively “liberal” make up of this particular Fifth Circuit panel. Yet this is not a “liberal” or unorthodox panel of opinion. It is, instead, a rather straightforward application of Article III’s standing requirements. Moreover, as I detailed in my prior post on this litigation, standing is but one of multiple reasons the plaintiff states’ claims should have been dismissed.

I should reiterate that nothing in the Fifth Circuit’s opinion presumes that the IWG social cost of carbon estimates are reasonable or reliable, nor does it presume that the Biden Administration’s climate policies are the correct ones. It instead focused on whether the plaintiff states are pressing claims that federal courts can properly hear, and it did so correctly.

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