Business groups opposed to the Environmental Protection Agency's crackdown on carbon pollution want the Obama administration to stop paying so much attention to the "global" part of global warming.
The EPA has estimated that by reducing CO2 emissions by more than half a billion tons a year, its new rule would save the world tens of billions of dollars in avoided climate damage. The agency said the benefit of reduced warming would be several times more than any cost imposed by EPA's regulation, which would control emissions from existing power plants in the United States.
But the U.S. Chamber of Commerce and the fossil fuel industry are taking the position that when considering whether regulations make economic sense, the government should consider only benefits that accrue directly to Americans—since they'll bear the cost of regulations.
At issue is an intensely controversial cost-benefit tool known to climate economists as the "social cost of carbon," or SCC. It is a calculation based on complex economic modeling that expresses a price in today's dollars for the damages to society that will be brought on by each ton of carbon dioxide added to the atmosphere.
The EPA estimated that its rule, proposed on June 2, has an annual compliance cost of about $7.5 billion. That would produce a global climate benefit of about $31 billion in 2030, it said, by preventing intense heat, drought, storms, floods and so forth from getting worse in the years to follow. (There are additional health benefits from reductions of soot and smog, which the agency calculated separately.)
"EPA pumped up that number by including global climate benefits," the Chamber said in a recent blog post on its website. It cited a research paper by scholars at the Brookings Institution and Vanderbilt University who criticized the administration's use of global benefits in its carbon calculation.
In a document explaining its cost-benefit analysis, the EPA said, "The SCC estimates represent global measures because of the distinctive nature of the climate change problem."
"Emissions of greenhouse gases contribute to damages around the world, even when they are released in the United States, and the world's economies are now highly interconnected," it said. "Therefore, the SCC estimates incorporate the worldwide damages caused by carbon dioxide emissions in order to reflect the global nature of the problem, and we expect other governments to consider the global consequences of their greenhouse gas emissions when setting their own domestic policies."
Ted Gayer of the Brookings Institution and Kip Viscusi of Vanderbilt, the authors of the Chamber's cited report, wrote that the administration should explain in more detail why it has shifted to looking at the global benefit of regulating carbon, when in past cost-benefit analyses the government took a narrower view.
One possible reason, they suggest, is altruism.
"If global warming leads to flooding in Venice or famines in Africa, there may be concern with the well-being of those affected," they wrote. "Such altruism may also pertain to species that may be adversely affected by climate change, such as polar bears, and might even include geographical features such as glaciers that have melted. The other dimension in which there may be altruistic concerns is across time with respect to future generations."
The industry argues that the White House Office of Management and Budget is legally precluded from taking the expansive view. Some even suggested that the administration shifted to its broader global calculation to exaggerate the need for regulations.
"Including global benefits appears to be a policy decision to create an intentional bias in agency decision-making to favor regulation," said a group of electric utilities and trade associations in comments to the OMB.
The U.S. Chamber is one of 19 industry associations, many representing producers and consumers of fossil fuels, that have asked the administration to scrap its carbon-cost methodology, which in recent years has been used to assess a wide range of regulations related to global warming.
Environmental groups have told OMB that there are legal, ethical and practical reasons to stick with a calculation that includes global benefits to be gained from U.S. regulatory actions.
"A domestic-only SCC value could be construed as a signal that the United States does not recognize or care about the effects of its policy choices on other countries, and signal that it would be acceptable for other countries to ignore the harms they cause the United States," said four green groups in a submission to the agency.
The World Resources Institute, in separate comments, put it this way: "If each country considers damages only within its borders as a basis for action, countries collectively will fail to mitigate greenhouse gas emissions to an optimal degree. Both textbook economics and common sense point to this conclusion."