Federal Power Regulation Fee Exploiting the social prices of CO2 – count on it?

By Roger Caiazza

Here is another example of arming the Social Cost of Carbon (SCC). Remember that the SCC is defined as the current value of the projected future net damage from today’s emission of one tonne of CO2. This made-up parameter harms the poor and ignores the benefits of fossil fuels, contains flawed arguments, and includes other inherent problems described by Willis Eschenbach here, here, and here. The problem now is that it is being used to slow down the fossil fuel infrastructure.

The District of Columbia Circuit Court issued a ruling in the Vecinos para el Bienestar de la Comunidad Costera v. FERC on August 3, 2021, accusing the Federal Energy Regulatory Commission (FERC) of failing to consider the social costs of carbon (SCC) a “generally recognized” analytical instrument for evaluating the significance of greenhouse gas effects within the framework of the national environmental protection law (NEPA). According to Lexology’s John Mizerak, “The decision will likely result in the agency adding the need for the SCC to project reviews, even though the decision does not mandate future use of the tool.”

In this case, the litigants argued that the FERC Environmental Impact Statement for Liquefied Natural Gas Export Terminals and Pipelines in Texas should have taken the SCC into account. Although FERC quantified the greenhouse gas emissions from the construction and operation of the facilities, their environmental statements did not take into account the “importance of the projects’ contribution to climate change”. The litigants argued that the SCC was a tool for estimating the costs of climate change from greenhouse gas emissions and should have been used in the FERC impact assessments.

I am not a lawyer and I leave the interpretation of the legal consequences of the decision to others. Mizerak explains: “Accordingly, FERC and other authorities in pre-trial detention and in the future need to assess the instrument and the accuracy of the science behind it more directly. Proponents will argue that the social cost of carbon is the type of “generally accepted” theoretical approach that must be included in NEPA under Section 1502.21 ”.

On the other hand, I’m an air pollution meteorologist who has spent a lot of time evaluating the environmental impact of fossil fuel infrastructure. Predicting the effects of pollutant sources on air quality is a strictly regulated process. Applicants submit their modeling logs for review by regulators and finally submit the results and input data to the authorities for replication as the final review of the submissions. Ultimately, these analyzes are incorporated into the environmental impact statements that are used to approve the application. It is important that the debate ends when the modeling results show that the impact of the facility results in an ambient air quality that is below national standards for ambient air quality and the change in air quality is below the specific limits for acceptable changes. The facility can obtain its permits to fly.

The use of the SCC in the environmental permit raises implementation problems for the applicants. At the top of the list is how the SCC calculation is used. For example, if the permit application allows 10,000 tons of CO2 emissions per year, then the SCC “significance” is the current value of the SCC multiplied by 10,000 tons. What do you compare this calculated value with? In this particular case, the exported LNG could be used to displace coal. In this case, it would be appropriate for the applicant to request a credit for these reductions in relation to the operation of the LNG terminal. Since there are no quantitative regulatory limits, the decision on the importance of environmental compatibility inevitably becomes a qualitative decision that is ripe for litigation for the usual suspects.

In conclusion, I cannot comment on the legal implications of this court decision. However, it will complicate and delay all permit applications as there is no recognized process for applying the SCC results in permit applications. Since the invented SCC values ​​are not only based on numerous value judgments, the interpretation of the results also suffers from the same error. This is a recipe for unnecessary delays and arbitrary decisions.


Roger Caiazza blogs about New York energy and environmental issues at Pragmatic Environmentalist of New York. This is his opinion and not the opinion of any of his previous employers or any other company he was affiliated with.

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