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Calculating behaviour: The EPA is rewriting the most important number in climate economics

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CLIMATE economists refer to it as “the most important number you’ve never heard of”. The social cost of carbon (SCC) tries to capture the cost of an additional ton of carbon-dioxide pollution in a single number—around $47 in present dollars. Using it, more than $1trn worth of benefits have been calculated in economic-impact assessments that accompany environmental regulations. But now that the Environmental Protection Agency (EPA) is headed by Scott Pruitt, a climate-change sceptic who is friendly with fossil-fuel firms, the maths is likely to be redone. In its recent proposal to repeal the Clean Power Plan, a contentious Obama-era rule that sought to curb CO2 emissions from power plants, the EPA buried a significant haircut to the cost of carbon. The new calculations place it anywhere between $1 and $6—a cut of between 87% and 98%. Mr Pruitt, who has zealously applied himself to undoing the work of the past administration, could use the revised number to justify wiping away reams of environmental regulation that are based on it.

After a court ruled in 2008 that regulators must take the negative externalities of CO2 emissions into account, agencies began using differing estimates of the costs it imposed. The calculation requires simultaneous modelling of climate change and its impact on human health, migration and economic productivity—a fiendishly difficult task. The Obama administration convened a committee of experts to do this in 2009. It began publishing estimates that year. In March, President Donald Trump issued an executive order disbanding the committee and withdrawing all of its technical guidance (it had published social-cost estimates for other greenhouse gases like methane and nitrous oxide too).

Because regulations are subject to lawsuits, Mr Pruitt is somewhat constrained in what he can do at the EPA. Ignoring the cost of CO2 altogether would not go down well in court. Refusing to propose an alternative to the Clean Power Plan would cross an even brighter red line: the Supreme Court ruled in 2007 that greenhouse gases were a risk to human health. Dismantling the resulting “endangerment finding” would require the EPA to muster a convincing argument that such emissions do not contribute to global warming—a daunting prospect. “The fossil-fuel flunkeys in the Trump administration are always trying to maximise the fossil-fuel industry’s advantage, while not stepping on any of the traps that will snap shut on them if they go into the wrong places with dishonest arguments and numbers,” says Sheldon Whitehouse, a Democratic senator from Rhode Island and outspoken critic of the Trump administration’s EPA, who at one point refers to Mr Pruitt as “that little scoundrel”.

Instead, the EPA has opted to put the cost of CO2 much lower. This has been done by including only the domestic benefits of reducing greenhouse-gas emissions, instead of the global benefits, as the Obama-era calculation did. Because America contributes 15% of global CO2 emissions, one idea would be to divide the worldwide cost by 7—which is what the new calculations seem to do. Another technique is to increase the discount rate. This greatly reduces the estimated cost of emitting CO2, since many of the costs of climate change appear in the distant future.

The previous calculations of the social cost of carbon were not perfect. The National Academy of Science published a 300-page report in January offering refinements. “There was a consensus that the social cost of carbon was in need of updating,” says Michael Greenstone, who served on Mr Obama’s Council of Economic Advisers. “But we should be updating it so that all the advances in our understanding are included. Instead, the Trump administration is ignoring science, and trying to find the dials to turn down regulation, with no analytical evidence.”

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Julio Marchi ©

Publisher / Editor at BS News & Media Services
A free thinker, not labelled as anything, not associated with any party, not part of any group or engaged with any religion... A simple guy tired of the nowadays bullshit who decided to promote more serious debates about what is really happening hoping to bring back intelligence to the superficial and shallow news & headlines that unfortunately took over the existing media scene.
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