On January 6, 2023, the Biden Administration released an interim Guidance on the Consideration of Greenhouse Gas Emissions and Climate Change to assist federal agencies to “better assess and disclose climate impacts” of their policies. See NEPA Guidance on Consideration of Greenhouse Gas Emissions and Climate Change, here. The interim guidance addresses the fact that the Obama Administration’s 2016 emissions guidance was withdrawn by the Trump Administration, as well as the regulators’ view that there was a need for guidance to promote climate change goals.

The guidance is effective immediately, but is subject to a sixty (60) day comment period before becoming final. The guidance was published in the Federal Register on January 9, and comments are due by March 10, 2023. Though the interim guidance is not legally enforceable, Federal agencies are expected to apply it immediately.

What You Need to Know:

• On January 6, 2023, the Biden Administration released an interim Guidance on the Consideration of Greenhouse Gas Emissions and Climate Change to assist federal agencies to “better assess and disclose climate impacts” of their policies.
• The guidance is effective immediately, but is subject to a sixty (60) day comment period before becoming final. Though the interim guidance is not legally enforceable, Federal agencies are expected to apply it immediately.
• The new guidance provides for a "rule of reason" approach that requires the agencies to conduct environmental assessments that are "proportional to a project's impacts." In sum, agencies are encouraged to maximize the reduction of GHG emissions in future actions.

Guidance Summary

The Guidance encourages more “environmentally-friendly” projects, particularly in the infrastructure space, and it provides clarity for federal agencies as they plan and implement new policies. It recommends the following actions:

1. Engage in proactive planning processes to consider GHG emissions and climate change in all proposed actions and consider reasonable alternatives, mitigation strategies, and the no-action alternative, particularly those that make communities more resilient to climate change;
2. Quantitatively identify the projected GHG emissions anticipated immediately and throughout the lifetime of the action and use those projections to anticipate potential climate change effects;
3. Calculate the environmental cost in terms of dollars to understand the environmental cost of the project and incorporate environmental justice considerations into the climate analyses;
4. Provide the methods used to analyze the reasonably foreseeable short and long term, direct and indirect, GHG emissions;
5. Use and reference the best available information and science to project the potential effect in NEPA analyses; and
6. Act in accordance with the ‘‘rule of reason’’ as embodied in NEPA and the CEQ Regulations when determining the environmental effect of the proposed action.

The new guidance provides for a "rule of reason" approach, meaning that the agencies' environmental assessment "should be proportional to a project's impacts." Projects that will lower greenhouse gas emissions, such as renewable energy projects, will be required to undergo a less-detailed analysis of their overall impacts, including construction-related emissions, than other types of projects deemed to result in greater GHG costs in the long run. In sum, agencies are encouraged to maximize the reduction of GHG emissions in future actions. In contrast, the Trump era proposed guidance required agencies to assess GHG emissions and their effects only when the agency found a sufficiently close causal relationship between the action and the effect.

Industry Impact

The CEQ has expanded the assessment of total GHG emission costs by including both direct (source) and indirect emissions in its cost assessment. Indirect emissions “likely would include effects associated with the processing, refining, transporting, and end-use of any fossil fuel being extracted, including combustion of the resource to produce energy.” This assessment combines both upstream and downstream emissions, calculating the total net GHG emissions or reductions as compared to baseline levels.

When information is unavailable and costs undeterminable, the guidance further requires an assumption of “full-burn.” The “full-burn” theory applies to fossil fuel extraction or transportation where the agency can provide “an upper bound estimate of GHG emissions by assuming that all of the available resources will be produced and combusted to create energy.” This assumption is hotly contested and has recently been held to be unreasonable by the D.C. Circuit Court. See Delaware Riverkeeper Network v. FERC, 45 F.4th 104, 110 (D.C. Cir. 2022). 

Additionally, the guidance provides that agencies should evaluate the social cost of GHG (“SC-GHG”) emissions. The SC-GHG assessment “translates metric tons of emissions into the familiar unit of dollars, allows for comparisons to other monetized values, and estimates the damages associated with GHG emissions over time and associated with different GHG pollutants.” SC-GHG calculations have been widely criticized in the industry. NEPA, enacted in 1970, was designed to consider how proposed Federal agency actions affect the human environment as well as to provide information and policy alternatives to improve environmental outcomes. The guidance uses SC-GHG calculations to place the issue of climate and infrastructure changes at the center of the guidance. The CEQ notably does not require a full cost-benefit analysis.