7th Circuit: DOE’s Use of Social Cost of Carbon Measure Okay

On August 8, the U.S. Court of Appeals for the Seventh Circuit, in a decision affirming the final energy efficiency regulations issued by the Department of Energy (DOE) for commercial refrigeration equipment, held that DOE’s use of a measure of carbon emissions known as the “Social Cost of Carbon” was proper under the law; that the Department was authorized to consider such environmental factors in its standards. The case is Zero Zone, Inc., et al., v. US Department of Energy.

The Social Cost of Carbon employed by the DOE involved “an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year,” 79 Fed. Reg. 17,726, 17,777 (Mar. 28, 2014). This is one of the first courts to rule on the propriety of using this yardstick in measuring the benefits of a government action—here the promulgation of new rules in reducing CO2 emissions. This is a fairly controversial concept.