The Social Cost of Carbon Passes Its First Judicial Test

Earlier this week, the 7th Circuit affirmed the Department of Energy’s new energy efficiency requirements for commercial refrigeration equipment.  This is a big deal in its own right, simply because the numbers are really large – according to DOE, the rule will save 2.89 quadrillion BTUs over the lifetime of equipment purchased under the rule.  It’s a reminder that energy efficiency remains a key to reducing carbon emissions.

Aside from the bottom line, the case is notable for two reasons, one fascinating to administrative lawyers and the other to climate policy wonks.  First up, the administrative lawyers.

As with my post from last week, the case is largely a 68-page recital of Chevron deference.  Unlike the D.C. Circuit’s affirmance of the Boiler MACT rule, the 7th Circuit only mentioned Chevron five times, but the case is all about deference to agency decisions that are not arbitrary and capricious.  One element of the deference here is noteworthy.  Plaintiffs challenged DOE’s engineering analysis, on the ground that DOE had not adequately validated its model against real-world data.  The Court rejected the challenge, stating that:

“That a model is limited or imperfect is not, in itself, a reason to remand agency decisions based upon it.”  Rather, we will remand only if the model “bears no rational relationship to the reality it purports to represent” or if the agency fails to provide a full analytical defense” when the model is challenged.

I think that most scientists would say that that is a pretty generous standard!

For the climate policy wonks, the big news is that the Court blessed DOE’s use of the administration’s determination of the “Social Cost of Carbon” scc-tablein determining the environmental benefits of the rule.  First, the Court concluded that DOE had authority to consider the SCC in formulating the rule.  Since DOE’s statutory authority requires it to consider “the need for national energy … conservation,” it was not a reach for the Court to agree with DOE that the potential environmental benefits of the rule are appropriately part of the calculus in determining the need for energy conservation.

The plaintiff also challenged DOE’s calculation of the SCC.  The Court pretty much rejected the claim out of hand, finding that DOE’s seemingly barebones response to comments was sufficient, and noting that DOE had referenced in its response various comments that had also supported DOE’s SCC values.

It’s not much to go on, but given the certainty of additional litigation involving the SCC, I’m sure that DOE – and EPA and environmentalists – are pleased to have survived this first hurdle.

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  1. Pingback: Five on Friday – Five Recent Developments that We’ve Been Watching Closely | Corporate Social Responsibility and the Law

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