POWER June 2021 - 16

LEGAL & REGULATORY
Missouri v. Biden:
The Benefits and Costs
of Carbon Emissions
Poe Leggette
he Biden administration in February announced that for
the remainder of 2021, federal agencies will conduct
regulatory and environmental analyses assuming that
the global " social cost " of emitting carbon dioxide (CO2
T
) is
$51 per ton. This " Social Cost of Carbon " is mostly directed
toward agriculture and the fossil fuel industry.
The announcement's technical paper outlines the assumptions,
and the uncertainties. It makes clear the $51 figure does
not consider the social benefits of oil and gas. With similar assumptions
and uncertainties, and for the sake of illustration, a
simplified value of that benefit can be calculated in dollars per
ton-with a global " social benefit of carbon " of $5 million per
ton (see the calculation later in this commentary).
Counting Costs, but Ignoring Benefits
This calculation is the author's, not that of the states in this
suit. The illustration shows that ignoring benefits when quantifying
costs might skew decision-making. The failure of the
social cost of carbon to consider the benefits is what lies at
the heart of the states' suit (Missouri v. Biden, filed March 8,
2021). The states claim that, by design, the social cost of carbon
skews the analysis, thus justifying more federal authority
over regulatory areas traditionally left to the states.
The suit aims broadly, first with a challenge to Section 5
of the president's climate-crisis Executive Order 13990. The
suit says the order mandates use of the social cost of carbon
government-wide, calling that an unconstitutional presidential
exercise of legislative power. The suit challenges that mandate
as unauthorized by any statute. It also challenges the
president's Interagency Working Group for adopting the mandate
without following notice and comment rulemaking. In
addition, it challenges the mandate as substantively arbitrary
and contrary to law.
Understanding the issues at play can be helped by an explanation
of how the costs and benefits are determined. The Interagency
Working Group's technical paper says the social cost is
" the monetary value of the net harm to society associated with
adding a small amount of [carbon dioxide] to the atmosphere in
a given year. " Its purpose is to " reflect the societal value of reducing
emissions of the gas " by one metric ton. It tries to value
the cost of " net agricultural productivity, " human health effects,
property damage, " risk of conflict, " environmental migration of
populations, and " the value of ecosystem services. " Certainly,
it's difficult to put a dollar value on many of these categories.
But the social cost focuses on the value of reducing the
" net harm " of emissions. While it claims to consider the " net "
benefit to agriculture of having increased CO2
in the air, it does
not consider the social value of the production of oil and gas,
which also would increase CO2
16
. Oil and gas companies would
not produce fuel if society did not find their products useful.
Agricultural workers would not farm, but for society's demand
for their food. The beneficial value from farming, and oil and
gas production, is not reflected in the social cost. For example,
social cost tries to capture added costs of healthcare if emissions
cause illness, but it does not capture the cost to society
from shutting in the oil and gas used in the healthcare industry.
Calculating Social Benefits of Carbon Emissions
No doubt there are many ways to calculate the social benefit
on the same per-ton basis as the cost. My calculation took the
following steps. From 1960 forward, four directly measured
numbers have shown reasonably close correlation. Production
of food and fossil fuels has increased; so have emissions of
CO2.
Global temperatures have been on the rise as well. Then
there's the elephant in the climate policy room-global population
has increased by 5 billion people, growing from 3 billion to
nearly 8 billion.
Then there's the elephant in the
climate policy room-global
population has increased
by 5 billion people.
The ability of the planet to provide food, heat, healthcare,
and shelter for the additional 5 billion people is in large part attributable
to the increased use of the products of oil and gas,
particularly in agriculture. And, if you regard a human life as a
social benefit, how much benefit would an economist calculate
to sustain these extra 5 billion people? National Public Radio's
Sarah Gonzalez posed the question of the economic value of a
human life to Vanderbilt University economist Kip Viscusi in an
April 23, 2020, podcast. His answer: about $10 million. From
this, the economic value of 5 billion lives is about $50 quadrillion.
Divide that by 10 gigatons of CO2
emissions per year, and
the benefit is $5 million per metric ton.
One can quarrel passionately about the assumptions in the
technical paper, and about the highly simplified calculus of
benefits shown here. That appears to be at the center of the
states' legal argument. And we should have that quarrel-on
the record, through legal process, and with the strengths and
weaknesses of the assumptions made transparent-before
the social cost of carbon becomes the law of the land. ■
-Poe Leggette is a partner with national law firm BakerHostetler
and leader of its Energy Industry team. He focuses his practice
on litigation and transactional work in the energy industry.
www.powermag.com
POWER | June 2021
http://www.powermag.com
POWER June 2021

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