The social cost of carbon is an estimate that policymakers use in accounting for negative externalities that are created through the release of greenhouse gases. These costs are viewed as external costs because the greenhouse gas emitter does not directly pay for them, as they are passed on to third parties. Policymakers use these estimates in cost-and-benefit calculations when considering proposed government actions.
Last year, President Biden issued an Executive Order directing federal agencies to apply a cost of about $51 per ton to carbon dioxide emissions (the Trump administration had reduced that figure to approximately $7 per ton).
Ten states filed suit in Louisiana district court, challenging the Biden Administration's social cost of carbon figure, arguing that the Executive Order did not undergo proper procedures under the federal Administrative Procedure Act. The court issued a preliminary injunction, barring use of the Biden Administration's estimate. The injunction has far-reaching effects and includes every federal agency. It is likely that the lower court's injunction will not hold up on appeal to the Fifth Circuit and that this case will make its way to the Supreme Court.