The Wall Street Journal is suggesting that there should be no benefit assigned to reducing the carbon dioxide emissions that drive climate change, seeking to criticize the Obama administration for raising the figure used to estimate those benefits -- the “social cost of carbon.” However, experts widely agree that the government should calculate a social cost of carbon, and recent studies support the administration's new estimate.
WSJ Suggests No Benefit To Reducing Carbon Emissions, Contrary To Experts
WSJ Editorial Suggests There Should Be No Social Cost Of Carbon. In an editorial, The Wall Street Journal criticized the Obama administration for raising the social cost of carbon, or the estimate of the damages caused by emitting a ton of carbon dioxide in one year, which is used by regulatory agencies to calculate the benefit of reducing carbon emissions.The Journal suggested that the social cost of carbon should be $0, approvingly citing the previous lack of a social cost for carbon, adding that “Congress has never legislated that there are social costs to carbon emissions” and claiming that assigning such as cost is an “inventio[n]” to “ri[g] the rule-making” :
[I]n 2010 an interagency working group conjured a new way to goose the benefits of regulation. Every metric ton of carbon that was reduced by regulation would suddenly count for $21 in “social benefits.” This figure was derived by guesses about how more carbon in the atmosphere may harm everything from agricultural productivity to human health to flood risks. The government's previous official estimate? $0.
The Administration has now gone further as part of its microwave rule and raised its estimated benefit from carbon reduction to about $36 a metric ton. The Department of Energy explained that this “update” was the result of new assumptions based on “the best available science,” which means whatever science the feds decide to favor. The practical effect is to further inflate the supposed benefit of new rules, thereby offsetting the enormous economic costs.
All of this is profoundly undemocratic. Congress has never legislated that there are social costs to carbon emissions, much less how to measure them. Mr. Obama couldn't pass his anticarbon agenda through Congress in his first two years even with a Democratic supermajority. He's now trying to impose it by regulation, and to do so he's rigging the rule-making with inventions like the “social cost of carbon.” Someone needs to impose a political cost on Mr. Obama's arbitrary rule by regulation. [The Wall Street Journal, 6/27/13]
Court Ordered Bush Administration To Assign A Social Cost Of Carbon Above $0. New York University School of Law's Institute for Policy Integrity noted that a court chastised the National Highway Traffic Safety Administration (NHTSA) in 2007 for assigning a social cost of carbon of $0 in setting fuel economy standards, and that “even NHTSA admitted that its $0 valuation was unsupported.” The Institute further noted that while the social cost of carbon is difficult to quantify, agencies also attempt to estimate the costs and benefits for variables such as traffic noise and energy security:
In November 2007, the U.S. Court of Appeals for the Ninth Circuit ordered NHTSA to revise its light truck rule as quickly as possible, chastising the agency for disregarding the climate change implications of vehicle emissions.
"[T]he values that NHTSA assigns to benefits are critical. Yet, NHTSA assigned no value to the most significant benefit of more stringent CAFE standards: reduction in carbon emissions." (Ninth Circuit Court of Appeals, Ctr. for Biological Diversity v. NHTSA)
The Ninth Circuit rejected the way NHTSA valued climate change in its cost-benefit analysis. Though estimates for the social cost of carbon vary widely, even NHTSA admitted that its $0 valuation was unsupported, and the court observed a growing consensus that pricing each ton of carbon dioxide at $13.60 would capture the trillions of dollars of projected climate change costs. Notably, NHTSA's refusal to price carbon contrasted starkly with its willingness to quantify equally indeterminate costs and benefits, like traffic noise and energy security.
A National Academy of Sciences report -- commissioned by Congress and cited heavily by NHTSA --concluded that combating climate change was the “most important” reason to raise CAFE standards. Any decision ignoring such considerations was, in the court's view, arbitrary and capricious and in violation of the Administrative Procedure Act. [Institute for Policy Integrity, November 2008]
Bush Administration Prevented EPA Officials From Implementing A $40 Cost Of Carbon. The Washington Post reported in 2008 that Bush appointees overruled career EPA officials on a social cost of carbon:
Several EPA officials, speaking on the condition of anonymity, said that throughout the process, White House officials instructed the agency to change their calculations with the aim of reducing the “social cost of carbon,” a regulatory term that reflects the economic burdens stemming from greenhouse gas emissions.
Career EPA officials argued that the global benefits of reducing carbon are worth at least $40 per ton, but Bush appointees changed the final document to say the figure is just an example, not an official estimate. They prohibited the agency from submitting a 21-page document titled “Technical Support Document on Benefits of Reducing GHG Emissions” as part of today's announcement.
“The administration didn't want to show a high-dollar value for reducing carbon,” said one EPA official, adding that the administration cut dozens of pages from a draft that outlined cost-effective ways to reduce greenhouse gases. [The Washington Post, 7/11/08]
Marketplace: “Virtually Every Environmental Economist Agrees” Social Cost Of Carbon Is Not Zero. American Public Media's Marketplace reported on the revised social cost of carbon:
“At some level there's a bit of subjectivity that comes into play,” [Duke University economist] Pizer says. “There's going to be uncertainty about these things no matter what we do. But the key thing is, we're recognizing the answer is not zero. We know there are negative conseqeunces. And we are trying to put an accurate dollar value on it.”
It's a bit like the uncertainty of what your retirement fund will someday be, Pizer says.
The White House says its carbon damage estimate is the mid-range of estimates. But UCLA's Matthew Kahn thinks it may be too high. He says when seas rise in the future, many models assume coastal houses will be doomed. But don't forget, he says, homeowners adapt.
“When we anticipate a new threat, rational households and firms will move to higher ground,” Kahn says. “Those in currently at-risk areas will invest in stilts or other devices, hard sea walls to protect themselves. Or they will retreat.”
So, he argues, climate change could be less costly than we think. Perhaps. But there's one thing virtually every environmental economist agrees on: the social cost of carbon, the damage to the future, should not be valued as zero. [Marketplace, 6/24/13, emphasis added]
Lawyer For Manufacturers: “The Only Real Cost Of Carbon That I Know Is Wrong Is Zero.” In a story on the newly-updated social cost of carbon, The New York Times reported that even a “lawyer who usually represents manufacturers in pollution cases” said “The only real cost of carbon that I know is wrong is zero” :
[William M. Bumpers, a lawyer who usually represents manufacturers in pollution cases,] applauded the standard, however. In climate change, “there's uncertainty about the timing and magnitude of the problem, but there's no uncertainty of the problem,” he said.
“The only real cost of carbon that I know is wrong is zero,” he said. [The New York Times, 6/18/13]
Economist: “There Is No Debate That Carbon Emissions Are Seriously Underpriced.” Laura D'Andrea Tyson, of the Haas School of Business at the University of California, Berkeley, a former chairwoman of the Council of Economic Advisers under President Clinton, wrote in The New York Times that “there is no debate that carbon emissions are seriously underpriced” :
There's much debate about what the proper “social cost of carbon” might be, but there is no debate that carbon emissions are seriously underpriced. Any tax on carbon would be an important step in the right direction, and it could be gradually increased to give consumers and producers time to modify their decisions. [The New York Times, 6/28/13]
Several Studies Support Raising The Social Cost Of Carbon
Wash. Post: New Social Cost Of Carbon In Line With Exxon Estimates. The Washington Post's Brad Plumer reported that the revised social cost of carbon, which was primarily based on new studies on the effects of rising sea levels, is in line with estimates from ExxonMobil:
In essence, the White House is now saying that global warming will be more damaging than previously estimated, mainly because of new data on the effects of the rise in sea level.
[I]n its central estimate, the federal government now assumes a ton of carbon-dioxide emitted in 2013 does roughly $36 in damage, rather than its previous estimate of $22, with the value rising each year.
“These updated values are well within the range of mainstream estimates,” says OMB spokeswoman Ari Isaacman Astles. “Indeed, similar estimates are used by other governments, international institutions and major corporations.”
For instance, in its latest energy outlook, ExxonMobil said it expected an “implied” carbon price of about $80 per ton by 2040 -- a number the company uses to plan for the future.
A few environmental economists, such as Frank Ackerman of Tufts, have argued that the White House might even be underrating the harm caused by carbon dioxide and climate change, suggesting the social cost of carbon should be twice as high, or 12 times as high, or 45 times as high. [The Washington Post, 6/6/13]
Study: Adjusted Social Cost Of Carbon 2.6 To 12 Times Higher Than Previous Estimate. A 2012 study published in the Journal of Environmental Studies and Sciences adjusted the federal government's 2010 social cost of carbon based on the long time periods in question and relative levels of wealth between different regions. The study, conducted by Cambridge University economist Chris Hope and Natural Resources Defense Council's chief economist Laurie Johnson, determined the previous estimate of $21 per metric ton of carbon dioxide was too low and would “understate potential benefits of climate mitigation” :
We reestimate the values from the models (1) using a range of discount rates and methodologies considered more appropriate for the very long time horizons associated with climate change and (2) using a methodology that assigns “equity weights” to damages based upon relative income levels between regions--i.e., a dollar′s worth of damages occurring in a poor region is given more weight than one occurring in a wealthy region. Under our alternative discount rate specifications, we find an SCC [Social Cost of Carbon] 2.6 to over 12 times larger than the Working Group′s central estimate of 21; results are similar when the government's estimates are equity weighted. Our results suggest that regulatory impact analyses that use the government's limited range of SCC estimates will significantly understate potential benefits of climate mitigation. [Journal of Environmental Studies and Sciences, September 2012, emphasis added]
Economists: Social Cost Of Carbon Higher Than Previous Estimate “In Most Cases, By An Order Of Magnitude Or More.” Economists Frank Ackerman and Elizabeth A. Stanton, of the Tufts University-affiliated Stockholm Environment Institute, found in a 2012 paper published in the online journal Economics that the government's previous social cost of carbon “omits many of the biggest risks associated with climate change” and could be as high as $900 per metric ton of carbon dioxide in cases of “high climate sensitivity, high damages, and a low discount rate” :
The social cost of carbon - or marginal damage caused by an additional ton of carbon dioxide emissions - has been estimated by a U.S. government working group at $21/tCO2 [$21 per ton of carbon dioxide] in 2010. That calculation, however, omits many of the biggest risks associated with climate change, and downplays the impact of current emissions on future generations. Our reanalysis explores the effects of uncertainty about climate sensitivity, the shape of the damage function, and the discount rate. We show that the social cost of carbon is uncertain across a broad range, and could be much higher than $21/tCO2. In our case combining high climate sensitivity, high damages, and a low discount rate, the social cost of carbon could be almost $900/tCO2 in 2010, rising to $1,500/tCO2 in 2050.
We have ended with alternate estimates that are not just minor revisions to the published figure of $21 per ton, but are higher, in most cases, by an order of magnitude or more.
In a 2010 article for Grist, Ackerman explained that the government's previous social cost of carbon is “far lower than the projected cost of many substantive mitigation measures, and if widely adopted, it could result in ineffectual regulations that would barely reduce U.S. emissions, if at all.” [Economics, 4/4/12] [Grist, 4/23/10]
Previous U.S. Social Cost Of Carbon Was About 1/4th That Used By U.K. In a report on the social cost of carbon, the Environmental Law Institute and World Resources Institute noted that the United Kingdom uses a central value of $83 per metric ton of carbon, compared to only $21 at then-current U.S. evaluation. [World Resources Institute, July 2011]
Potential “Tipping Points” Imply Larger Social Cost Of Carbon. An economic paper that “incorporate[d] beliefs about the uncertain economic impact of possible climate tipping events” among other things found a higher social cost of carbon than papers that did not take into account this uncertainty:
We find that the uncertainty associated with anthropogenic climate change imply carbon taxes much higher than implied by deterministic models. This analysis indicates that the absence of uncertainty in DICE2007 [a previous model] and similar models may result in substantial understatement of the potential benefits of policies to reduce GHG emissions. [National Bureau of Economic Research, January 2013, via Grist]