Social Cost of Carbon Gets Clipped

Social Cost of Carbon Gets Clipped

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Stephen D. Eule

March 29, 2017

My colleague Dan Byers summarized some of the really big stuff in President Trump’s sweeping Executive Order on energy. This post takes a look at one of the less-publicized pieces: the decision to abandon the Obama-era requirement to include the social cost of carbon (SCC) in the cost-benefit analyses of proposed regulation.

While much of the focus is on the president’s decision to revisit the Obama Administration’s Clean Power Plan, the SCC decision is the kind that will ripple through federal government and eventually yield big results.

So what is the SCC? The SCC represents an attempt to use computer models to put a dollar value on the health, property, agricultural, ecosystem, and other supposed impacts of emitting a ton of carbon dioxide. The Interagency Working Group on Social Cost of Carbon was charged with developing SCC estimates that the Obama Administration could then plug into and tip the scales on the cost-benefit analyses of countless regulatory actions over the last eight years.

And use it they did, to justify everything from the Clean Power Plan to fuel economy efficiency standards to methane venting and flaring. It was the all-purpose balm that made any rule it was applied to—presto!—cost effective, even when implementation costs to the economy were enormous.

These SCC calculations were always highly dubious. First, there is the question of whether it’s even possible to measure the SCC with any precision, a matter of no little controversy.

Then there’s the fact that most of the supposed benefit from reducing emissions in the United States, as measured by the SCC, would occur someplace else. Because greenhouse gases are well mixed in the atmosphere, any impacts are considered to be global (unlike air pollutants, whose impacts largely are local). This means the domestic climate benefits of emission reductions would be would be a fraction of the global SCC estimate. For reasons that are not entirely clear, the Interagency Working Group tasked with developing the SCC balked at creating a “domestic SCC,” undoubtedly because that would have made it more difficult to rationalize new rules.

The SCC also suffered from severe procedural shortcomings. We’ve been abundantly clear from the very beginning of this saga that the way the Obama Administration was applying the SCC to justify regulations, both major and minor, was unprecedented. And—like much else during the Obama years—we felt it represented a worrisome departure from how the federal government is supposed to openly develop and employ these kinds of metrics. In fact, the process for producing the SCC never went through the administrative steps one would normally expect for this kind of far-reaching analytical tool—no notice, no chance for public comment, and opaque data quality procedures—nor was it subject to any kind of formal rulemaking process as required by the Administrative Procedures Act.

If left uncontrolled, the SCC would creep into every nook and cranny of the federal regulatory apparatus and stifle all types of energy and infrastructure development. Many thanks to President Trump for using his executive authority to restore the previously peer-reviewed and publicly-developed guidance for addressing the value of greenhouse gas emissions in environmental reviews.