Antisocial genesis of the social cost of carbon

By Susan E. Dudley, Brian F. Manix and Sofie E. Miller
October 10, 2013

The day after his 2009 inauguration, President Barack Obama committed to “creating an unprecedented level of openness in government.”

He vowed to build on “transparency [that] promotes accountability by providing the public with information about what the government is doing,” “participation [that] allows members of the public to contribute ideas and expertise,” and “collaboration [that] actively engages Americans in the work of their government.”

Despite these promises, and despite longstanding requirements of administrative law, the Obama administration is making significant regulatory decisions behind closed doors — without transparency or public involvement. Yet these new regulations could have enormous impact on Americans for generations to come.

The president’s ambitious regulatory agenda to address climate change relies on a “social cost of carbon” (SCC) — an estimate of the monetary value of eliminating one ton of CO2 emissions — to calculate the benefits used to justify a host of regulatory actions and government subsidies. These include renewable fuel and mileage mandates for our cars, water limits for washing machines and dishwashers and less visible rules that will likely affect the price of food and electricity.

Rather than working openly with experts and the public to develop this key metric, the administration quietly released a revised SCC in May as a fait accompli. The new SCC is $41 per ton — almost double the value that the administration set in 2010.

This revised social cost of carbon first appeared in a “technical support document” produced by an interagency working group. Since then, the SCC has been used to justify new regulations that the government estimates will cost Americans hundreds of millions per year — including new efficiency standards for major appliances and revised power plant rules.

The United States releases more than 5 billion millon tons of CO2 per year, so the new SCC of $41 per ton amounts to an increase of about $100 billion per year in the total social cost of U.S. CO2 emissions.

If Congress had enacted a carbon emissions tax to address climate change, this revision would amount to a trillion-dollar tax increase over the next decade. Instead, this trillion dollars will be placed on the scales of benefit-cost analysis — weighing in favor of expanded regulation by the Department of Energy, the Transportation Department, the Environmental Protection Agency and all the other federal agencies engaged directly or indirectly in climate policy.

The implications for the economy are troubling, particularly since, according to the administration, only 7 percent to 10 percent of those benefits will accrue to U.S. citizens. The vast majority of the benefits will go to other nations — while we bear all the costs.

The SCC is not a bad idea in principle. To the climate, all CO2 molecules look alike, so any cost-effective collection of carbon-reduction policies must have the same implicit marginal cost. The effect of CO2 emissions on global climate systems is independent of the source of the emissions, so using one set of SCC values across the government can discourage agencies from trying to outbid each other in their efforts to save the planet.

Nonetheless, the SCC’s influential role in a variety of future policies, as well as the difficulties and uncertainties of calculating the SCC, demand conscientious attention — including public comment and peer review — to the task of getting it right.

Should benefits to other nations be included in the value, even if they don’t reciprocate? What is the appropriate discount rate for considering effects that may occur far in the future? What do different economic models tell us about SCC values?

The process of scientific inquiry revels in debate, discussion and discourse. Public comment and peer review of how the government selected, weighed and combined the integrated assessment climate models; what those models mean, and the appropriateness of the various assumptions made to deal with economic and scientific uncertainty will not only add credibility to future government climate policies, but encourage advances in scientific understanding of these complex issues.

By releasing the SCC as a fait accompli, the administration has denied non-governmental experts and the public the opportunity to weigh in. It undermines the president’s promises for open government and established administrative policies.

In addition, it drives regulatory decisions affecting prices of fuel, electricity and consumer goods that could have serious ramifications for the economy — and the well-being of Americans today and into the future.

 

PHOTO (Top): A truck engine is tested for pollution exiting its exhaust pipe as California Air Resources field representatives (unseen) work a checkpoint set up to inspect heavy-duty trucks traveling near the Mexican-U.S. border in Otay Mesa, California, September 10, 2013. REUTERS/Mike Blake

PHOTO (Insert): President Barack Obama delivers remarks on renewable energy at Ohio State University in Columbus, Ohio, March 22, 2012. REUTERS/Jason Reed

26 comments

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Well, since the oil behemoths in collusion with Congress have been acting in like fashion for the last century, it’s about time that an American president would use their same tactics to push through rules that might actually help humans in the long run! Good on’em!!!

Posted by hapibeli | Report as abusive

No industrial or other activity should be allowed that is not at least environmentally neutral.
What’s left to discuss?
We humans have suicidally destroyed a home that took 4 billion years to develop – for a few pieces of paper.
A pathetic legacy that has already begun, and will continue to cause, our own extinction.
I can’t understand how destructive activities are even contemplated.

Posted by Nurgle | Report as abusive

It’s strange that the fossil fuel industries seem to know EXACTLY what regulations are being developed or discussed. Otherwise, why are they spending millions of dollars a month for years in TV advertising to fight the unknown?

We all know that Congress has given complete immunity from environment suits to the frackers even though there have been no comprehensive studies on the environmental impact. The recent EPA report studied one community – only one! Many states have challenged this immunity, collecting data that indicates there may be severe problems, but unable to challenge the federal government and oil industry.

The Canadians have strongly resisted building an oil pipeline in their country to the Pacific Coast, thousands of miles shorter than the proposed route to foreign countries that includes a pipeline to the US Gulf Coast. The Chinese have bought into that Canadian oil industry – big time. Why would the United States build a pipeline just to get some temp jobs while the oil is sent to the Gulf for export, much of it to China? The government reports 37 major oil spillages from leaking oil pipelines EVERY DAY, yet the EPA claims there’s no problem from potential spills!

Posted by ptiffany | Report as abusive

The new, not so credible, $41/ton estimate of the SCC was slipped into a rule regulating the efficiency of microwave ovens when they are not being used. In essence, the rule sets standards for the efficiency of the digital clock on the oven. The supposed market inefficiency of unpriced carbon? Roughly 50 cents per oven per year. The Deptartment of Energy’s own estimate of the increased cost was about seven dollars per oven, which they expect to last 10 years.

Posted by dwkreutzer | Report as abusive

The Obama administration, particularly the Environmental Protection Agency, is acting as a rogue government in all its treatment of transparency. Congressional subpoenas demanding the raw data of the science behind new regulations have been uniformly ignored, in direct contravention of the checks and balances provided by constitutional and statutory law for good government. Such autocracy seriously tilts toward dictatorial control. Arguing about the content of the science has become ridiculous. Debates about global warming, for example – are not about facts but about ideology and power over policy. It’s a war between those who treasure human progress and those who wish to see civilization throttled or eradicated – both can use science to support their views as long as regulations are based upon “literature searches” where scientific reports are gleaned from a catalog of scientific reports where anyone can say “I’ll take one of these and two of those,” and prove anything they want with scientific precision to justify any regulation they wish. To cure this sleight of hand government, agencies must do their own science with disinterested contractors – no government funded experts or beneficiaries of green groups or industry groups – who will show their raw data, interpretive protocols and clear explanations for their conclusions. Not a single federal regulation is based on that kind of strict transparency. We are governed by autocratic fairytale cherry pickers, not public servants.

Posted by awriter | Report as abusive

$100 billion annually seems low. We spend more than that on the oil wars.

How about a little transparency regarding the dollars spent to buy members of congress by the fossil fuel industry. Oh yes, the supreme court has that covered, because transparency is so damn important.

Posted by brotherkenny4 | Report as abusive

What one politician does can simply be undone by the politician.

Posted by tmc | Report as abusive

“By releasing the SCC as a fait accompli, the administration…drives regulatory decisions affecting prices of fuel, electricity and consumer goods that…have serious ramifications for the economy — and the well-being of Americans today and into the future.”

“…according to the administration, only 7 percent to 10 percent of those benefits will accrue to U.S. citizens. The vast majority of the benefits will go to other nations — while we bear all the costs.”

Judgment: Bad faith government. Under Obama, U.S. government has become a kakocracy.

Posted by OneOfTheSheep | Report as abusive

The latest protagonist in the colony collapse disorder disaster is a byproduct of burning diesel fuel. It is safe to assume that the ingredients in most pollutants are not beneficial. In the diesel example, our food supply is at risk.

Posted by auger | Report as abusive

You know @OOTS, @Benny27 was right on the head with his post back to you on ‘In pursuit of American humility”. Here, I saved a link for you: http://blogs.reuters.com/ian-bremmer/201 3/10/04/in-pursuit-of-american-humility/
You are a product of your generation as much as we are of ours, and our children are of theirs. I suspect Benny27 is a Gen X like myself. I know you are smart enough to realize that President Obama is first, just another president and hence does not deserve the attention he is getting and two, is representing the younger generations. He is only 52 you know. Barely a baby boomer himself. So railing against him is either just showing your anger against the generational changes that are occurring, which is normal, or in this special case of President Obama, a hidden racism. I don’t think you are guilty of the latter though. Maybe a smidge, but you repress it well as most of your generation has been able to do.
Keep up the posts, I really do look forward to seeing your opinion on many topics. But please try to be a little more understanding of the 21st century. We really don’t intend on turning it into a brown marble. We realize that if we do nothing, that will happen. Meaning if we continue the practices of the older generation without adapting to the changing world…

Posted by tmc | Report as abusive

Hopefully the agency will reconsider their closed door approach!

Posted by unab | Report as abusive

I think if you read who these people are you’ll understand who is antisocial.
http://www.citizen.org/documents/dudleyr eport.pdf
http://en.wikipedia.org/wiki/Susan_Dudle y
Industry does not have public interest in mind, only profits.
Out of the dark ages into the modern world is the path we should be on. I put the value of clean air and water
very high. No price can be put on my children’s health.
No more Silent Springs.

Posted by curnctadr | Report as abusive

The younger readers seem to be completely missing the points of this piece. No one wants to wilfully harm the environment. Conservatives have children and grandchildren, too. This article explains how the Administration’s action here has not only broken its promise to be open and transparent, but has also violated long-standing law requiring an opportunity for the public to comment. The consequences of the action will be enormously higher costs in the USA, leading to higher unemployment and an even worse economy. And the benefit to the environment will be miniscule.

Posted by LeeOC | Report as abusive

Watch what this Administration does; not what it says.

Posted by HersheyT | Report as abusive

@auger
Without use of liquid fuel our food supply will be in danger – people always forget that without agricultural machinery and fertilizers our world can support less than quarter of people alive today, maybe third if GM food is in total priority over “organics”.

Posted by chyron | Report as abusive

Just a note: CCD has been linked to pesticide use, not diesel emissions, in recent European research.

Posted by stevedebi | Report as abusive

The authors of this piece are right-wing ideologues who are generally opposed to government intervention in the economy and in society. Ms. Dudley was a George Bush appointee, which suggests something about her political leanings. In her academic writings she has argued that governments should not set energy efficiency standards and instead should leave the matter to consumer choice. Most notoriously, she argued against the EPA’s efforts to reduce surface ozone concentrations (I am sure the medical community liked that one!). The second author, Mr. Brian Mannix, is Ms. Dudley’s spouse. He, too, was a Bush appointee – in his case at the EPA. He has been associated with neoconservative organizations such as the American Enterprise Institute. As for Ms. Sofie Miller, she lacks so much common sense that she vociferously opposed regulatory changes to make dishwashers more efficient. That’s right, dishwashers that use more water and electricity are supposedly beneficial for consumers! Readers reviewing the article should be aware of the ideological backgrounds of these authors. They are opposed to CO2 regulations in the same way they are opposed to regulations in general. It’s just part of their neoconservative outlook.

Posted by Dan85 | Report as abusive

Sadly, most of the commenters, especially those who refer to their own youthfulness, miss the points entirely. The question is not what regulation there should be, but what process is legally required for the issuance of regulations. Notwithstanding the President’s promises to be transparent and laws requiring the opportunity for the public to comment, these new rules are being put in place surreptitiously and without opportunity for the public to comment.

Posted by LeeOC | Report as abusive

2Dan85

While i can’t comment on your analysis of article, i must say that CO2 (unlike Сarbon-14 and other byproducts of fossil fuel usage) do not affect health and it’s effect on climate change is not yet proven (in High Middle Ages or golden ages of ancient civilizations weather was WARMER than today as far as we know – basically we live in warm ice age period today).
Also there’s catch with efficiency regulations – as long as they do not include energy spent on manufacturing and delivery of devices they’re inaccurate – for.ex. from ecological POV replacing old but functional dishwasher with _newly_produced_ energy-efficient one is worth the trouble only if (energy used by old device in expected remaining lifetime)-(energy to manufacture new device + energy usage of new device in old device’s remaining lifetime)>0

Posted by chyron | Report as abusive

tmc seems to think that older folks are just racists who resent generational change.

Actually, this old man resents Obama’s outright perfidy.

His way of “governing”, if you can call it that, is by stealth wherever possible and divisive bombast, otherwise.

Posted by unionwv | Report as abusive

@AUGER I don’t suppose the degree you got from East of Egypt University with that massive student loan could have opened up your mind to the knowledge that combusting ANYTHING will produce CO2 as a by-product…?

They surely didn’t teach you that even brain-dead progressive half-wits produce CO2 as a byproduct?

Such being the obvious case, perhaps you should go re-educate yourself before using big words like ‘protagonist’ in a public place. And I would strongly caution you against simply accepting without question the myriad stupidities and distractions offered up by power-mad Gen-X eco-fascists like Dan85 and TMC.

Posted by HamsterHerder | Report as abusive

This new standard is issued the same way that all decisions are decided by this POTUS, arbitrary and behind closed doors. The unadvertised component in these decisions is that there is a socio-political component which is part of all decisions. This dictator has decided that America has accrued a massive social debt to the rest of the world and it is his mission to force it to repay that debt. Thus the extreme environmental standards for the USA to help offset the abuses of the undeveloped world. This hatred for the USA will not cease untill he he and his enviromental extremist friends leave office.

Posted by gregio | Report as abusive

“China’s official news agency has called for the creation of a “de-Americanised world”, saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government.”

Our political parties are seriously hurting the country now. Both of them. We need a referendum vote on Term limits for congress and SCOUS and campaign finance reform. Nothing more or it will be turned into a never ending argument and well get nothing. Just those two things and all things can be achieved after just one or two election cycles. DEMAND IT!

Posted by tmc | Report as abusive

@chyron – look no further than nations destabilized by recently accelerating drought – GM still needs water to grow, and climate change is not helping.
@stevedebi – most recent findings link diesel emissions to CCD – your internet search will only take seconds
@ hamster – I admit the story was CO2, and not diesel – but emissions aren’t really fueling anything positive – unless you are betting on some reward for your anger

Posted by auger | Report as abusive

Any methodology that fails to take into account both the measurable costs and measurable benefits of any change in eh status quo is fundamentally defective.

Posted by Miner49er | Report as abusive