The new year brings new NEPA (interim) guidance on climate change. It recommends several ways that federal agencies should consider climate change impacts for projects subject to NEPA review. The guidance is effective immediately but is subject to a 60-day comment period that could lead to revisions. Comments on the guidance are due to CEQ on March 10, 2023.

All projects that are federally funded or need federal permits, such as offshore wind farms, highway projects, fossil fuel drilling leases, interstate natural gas pipelines, are subject to NEPA. Climate change is one of the impacts that must be assessed. Yet the ways in which agencies have assessed climate impacts have been uncertain, lacking in uniformity, and complicated by politics.

The guidance attempts to fix this. It sets out an approach for all federal agencies:

(1) Quantify the reasonably foreseeable GHG emissions (including direct and indirect emissions) of a proposed action, the no action alternative, and any reasonable alternatives.

(2) Disclose and provide context for the GHG emissions and climate impacts associated with a proposed action and alternatives, including by, as relevant, monetizing climate damages using estimates of the [Social Cost of Carbon], placing emissions in the context of relevant climate action goals and commitments, and providing common equivalents.

(3) Analyze reasonable alternatives, including those that would reduce GHG emissions relative to baseline conditions, and identify available mitigation measures to avoid, minimize, or compensate for climate effects.

This sounds reasonable enough. It relies on conventional NEPA methods—quantifying impacts, mitigating those impacts, considering alternatives. Yet it represents a major shift in climate policy. The Trump administration had previously taken steps to minimize the role of climate change in NEPA reviews. This guidance puts climate change front and center.

The guidance also prioritizes federal projects that reduce emissions, such as clean energy projects. It instructs agencies to use a "rule of reason" and the "concept of proportionality" to relax climate scrutiny for those beneficial projects. It also suggests that agencies focus on long-term benefits of those projects over short-term impacts:

Absent exceptional circumstances, the relative minor and short-term GHG emissions associated with construction of certain renewable energy projects, such as utility-scale solar and offshore wind, should not warrant a detailed analysis of lifetime GHG emissions.

This is significant. Many have complained that NEPA fails to sufficiently account for the environmental benefits of projects. This guidance says that considering those benefits is appropriate.

A final word on the social cost of carbon (SC-GHG). The interim guidance directs agencies to use the "best available" SC-GHG estimates "to translate climate impacts into the more accessible metric of dollars." In other words, how much do climate impacts cost? The higher the number, the more difficult it will be for agencies to justify projects that create significant emissions resulting in significant social costs.

However, the phrase, "best available," highlights the uncertainty (and controversy) surrounding the metric. The Biden Administration has been using an interim value of $51 per metric ton of CO2 as its Interagency Working Group develops a final proposal. But in November 2022, EPA got out ahead of the Working Group and published its own, much higher, SC-GHG value of $190. The interim $51 value is also being challenged in federal court. Any revised SC-GHG value will almost certainly face a similar lawsuit, whether its EPA's number or a different one proposed by Working Group. These discrepancies and lawsuits make it hard to predict how agencies will identify the "best available" SC-GHG under the interim guidance.

We'll update you with any significant changes to the guidance following the comment period.

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