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Obama Urged Not to Abandon 'Social Cost of Carbon' Tool

Obama Urged Not to Abandon 'Social Cost of Carbon' Tool

The tool helps lawmakers decide how much economic sense it makes to impose carbon emissions controls and has been used in more than 40 regulatory actions.

Feb 27, 2014

Leading environmental organizations are pressing the White House not to bow to industry pressure to abandon the government's main method for measuring the future costs of global warming pollution and the benefits of new pollution controls.

At issue is an economic calculation known as the "social cost of carbon," or SCC, which estimates the cost in dollars that society will ultimately pay for the harm caused by each ton of carbon dioxide added to the atmosphere.

That price tag helps policymakers decide how much economic sense it makes to impose costly emissions controls.

Oil, gas and other industry groups recently petitioned the White House Office of Management and Budget to prohibit the use of the cost-benefit tool, arguing that it was imprecise and needed additional peer review.

In a filing on Wednesday, the method's defenders countered that while the estimates could be improved over time, they are "an important, if conservative estimate of the costs of climate change and the benefits of reducing carbon pollution."

The SCC estimate has been used in more than 40 regulatory actions, ranging from efficiency standards for appliances to proposed emissions standards for coal-fired power plants.

Similar approaches are used by other governments and international institutions. The cost calculations are based on widely used peer-reviewed climate and economic models.

"Without an SCC estimate, regulators would by default be using a value of zero for the benefits of reducing carbon pollution, implying that carbon pollution has no costs," a joint submission by experts from four organizations said. "That, sadly, is not the case, as evidenced by the large body of research outlining the sobering health, environmental, and economic impacts of rising temperatures, extreme weather, intensifying smog, and other climate impacts."

The document was sent to OMB by the Environmental Defense Fund, the Natural Resources Defense Council, the Union of Concerned Scientists and the Institute for Policy Integrity at the New York University School of Law.

A central estimate used by the Obama administration is that a ton of carbon dioxide carries a price tag to society of about $37. That means it would be worthwhile to spend $37 a ton today to control carbon pollution in order to prevent the damages the emissions would cause in the future.

Since a higher social cost of carbon can be used to justify stricter, and hence more costly regulations, Congressional allies of the fossil fuel industries grew alarmed last year when the administration increased its SCC estimates by more than 50 percent.

The use of SCC has also entered the raging debate over the Keystone XL pipeline.

The Environmental Protection Agency urged the State Department to use the SCC tool to estimate the future damages from carbon dioxide emissions associated with the pipeline. In its final environmental impact statement, issued in January, the State Department did not make any such calculation.

Environmentalists claim that the social cost of carbon suggests that the amount of excess carbon dioxide emitted by the oil carried through the proposed Keystone XL from Canada would inflict future costs of some $100 billion on society—and that this should be kept in mind when considering any benefits the pipeline might deliver in the short term.

In their letter, the environmental groups presented a detailed rebuttal of the industry's objections to the SCC calculus and said that, if anything, the current estimate of the social cost of carbon is too low. They urged OMB to review it every few years based on the latest peer-reviewed studies.

"It would be arbitrary for a federal agency to weigh the societal benefits and costs of a rule with significant carbon pollution effects but to assign no value at all to the considerable benefit of reducing carbon pollution," they said.

Indeed, they noted, an important 2007 U.S. Court of Appeals case established that "failing to count SCC benefits would be illegal."

Even Canada, they pointed out, has used the U.S. method for calculating the social cost of carbon. When it developed carbon dioxide standards for its coal fired power plants, Canada calculated that the regulation would produce $5.6 billion worth of global climate benefits.

Read the environmental organizations' letter:

 

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