The social cost of carbon (SCC) is shared amongst nations all over the planet. Specifically, it is a projection, in terms of dollar units, of the economic damages that would result from emitting greenhouse gases, in terms of ton units, into the atmosphere (Rennert and Kingdon 2019). It is generally positive because it enables policymakers to quantify the economic impact of increasing or reducing emissions and is used by local, state and federal governments (Rennert and Kingdon 2019). That said, on the surface level, it seems to bring numerically specific, collective understanding of environmental policy’s economic impact in the United States an abroad. Further, the SCC takes various time periods into account because it converts future damages into their present-day value and adds them up to determine total potential economic damages (Rennert and Kingdon 2019). Then, the modeling process is repeated with a small additional amount of emissions to see how much it changes the total cost of damages (Rennert and Kingdon 2019). Considering the model is verified thousands of times to evaluate the uncertainty of the estimates, another pro of the SCC approach is it improves accuracy in the exercise of calculating costs and benefits. However, a potential con in the SCC approach is models vary (Rennert and Kingdon 2019). Varying equations led to a lack of consensus in the answer for how to design a policy. For example, due to variance in modeling the geographical scope of the calculation, there will be different answers amongst different scientists (Rennert and Kingdon 2019). Since evaluators can choose which model they want to use, the policy-making is subject to bias. Moreover, some parts of the calculation require researchers to make assumptions that contain value judgements and incorporate information that is inherently uncertain about the future (Rennert and Kingdon 2019). While the SCC approach has its pros and cons, it does provide a way to consider the degree and type of effect decisions have on the environment.
Considering the pros and cons, the Trump administration made changes to the SCC approach under the premise there are nuances in economics and it is not necessarily common sense. It takes pressures, aside from only economics, into account in decision-making. The team does not respect the accuracy of Environmental Impact Assessment and Life Cycle Analysis as strong enough in itself. Particularly, according to the Trump administration, multi-criteria analysis (MCA) may be more comprehensive than CBA once goals beyond efficiency and distributional incidence are considered. However, implications of using the MCA approach is the environment’s health can be considered low priority amongst other factors the Trump administration views as superiorly important. Further, the Trump administration does not value benefits transfer which is crucial in using past studies to determine the accuracy of future projections. Trump explains the research is insufficient, however the alternative is to base the future projections on no objective criteria. It implies, without numerical analysis, policy-makers are going to evaluate decisions based upon their own platforms.
Source:
Rennart, Kevin and Cora Kingdon. 2019. “Social Cost of Carbon 101.” Resources for the Future. August 1. https://www.rff.org/publications/explainers/social-cost-carbon-101/.
Comment by Professor Morgan:
Mary,
Thanks for starting your post with the statement that the social cost of carbon is being used by nations all across the globe. So despite the cons associated with it, there is a greater understanding that this analysis is worthwhile considering as we make public policy.
Comment by Neisa McMillan:
Mary,
Great summary and explanation of how the SCC model works and how the Trump administration has made changes. You added that the team lacks respect in the EIS and Life Cycle analyses, which I believe is a pretty valid assertion. I am interested in learning more about the multi-criteria analysis (MCA) and why the Trump administration might choose MCA over CBA. I’d also like to learn more about how and why Trump EPA researchers choose to disregard previous studies and as to what grounds that they have in asserting the insufficiencys of previous research. It is interesting that the current administration demands more transparency, yet doesn’t entirely provide it themselves.
Comment by Camryn Soehnlein:
Mary,
You provide a lot of really important information in this post. The statement “policy-makers are going to evaluate decisions based upon their own platforms” summarizes the entire Trump administration. The government has been doing this a lot recently with more than just environmental concerns. Too often we are seeing decisions being made based on personal opinions or beliefs rather than evidence and science. Great job!
Comment #1:
Original Post by Taylor Joy:
The social cost of carbon is a dollar amount estimate of economic damages that would be spent from emitting one ton of greenhouse gases into the atmosphere (Rennert and Kingdon 2019). This value is helpful for policymakers to put decisions in economic terms (Rennert and Kingdon 2019). One of the biggest cons I noticed when reading about how the social cost of carbon is calculated is the fact that there are so many different places that error can occur. For the SCC to be calculated, future climate responses must be predicted as well as how those climate responses and temperature changes will impact the economy and human health (Rennert and Kingdon 2019). While we do have methods to predict these outcomes, depending on what data goes into the models, determines what will come out. I was thinking about how if someone (a policymaker or otherwise) who doesn’t believe that climate change is an issue and wants a cost-benefit analysis to be in their favor, may not put the most reliable data into their model so that the analysis looks to be more expensive with not enough benefits. When politics get involved, there is sure to be some sort of skewing data. Another con that I noticed was the time that it would take to calculate the SCC and to gather all of the information that goes into it. I know we now have better and more accurate technology than the past, but combining that many different factors and researching them thoroughly will take a lot of time.
One of the biggest pros to having a social cost of carbon is allowing for many if not all factors involving carbon to be included. The reading mentions that not only the economic impact of agriculture and energy use is taken into consideration but also human health (Rennert and Kingdon 2019). I believe that by including human health economic impacts into the plan, it can seem more accessible to people. I think with how the current political climate is now, people seem to be fairly selfishly motivated. If policymakers know that human health is taken into consideration too, they may be more inclined to want to make policies to do something about it.
The Trump administration used an executive order to create a new approach for calculating the cost of greenhouse gas emissions (Gilmer 2020). The methane rule put in place by the Obama Administration was rolled back (Gilmer 2020). The new plan only looked at domestic effects and does not include global impacts (Gilmer 2020). With this change, the social cost of greenhouse gases is seven times lower than what the Obama Administration previously predicted (Gilmer 2020). For people who are unaware of how the whole process works, this can make it seem like the social cost of greenhouse gases is not significant and it may not be worth it to do anything about it. It also ignores that the world is interconnected and what the United States does has an impact on other countries and vice versa.
https://news.bloomberglaw.com/environment-and-energy/courts-ruling-against-trump-elevates-debate-on-climate-metric/?utm_source=Email_Share (Links to an external site.)
https://www.rff.org/publications/explainers/social-cost-carbon-101/ (Links to an external site.)
Rosenbaum, Walter A. 2020. Environmental Politics and Policy. Los Angeles, California: Sage.
My Comment:
Hi Taylor,
I agree, it was interesting to see geographical scope play such a role in the SCC model’s answer. The central goal of the Clean Air Act (CAA), originally passed in 1970, is achieved through the attainment and maintenance of National Ambient Air Quality Standards (National Parks Service 2018). However, I am writing my final paper about how pollution sourced from places that are nearby national parks degrades the latter’s air quality. Your insight about pollution flowing to neighboring areas conveys the correlation between the pollution sources and national park air quality.
CAA amendments from 1977 added particular goals to protect Class I watershed areas, such as National Parks more expansive than 6,000 acres, from facing degradation because of new air pollution sources (National Parks Service 2018). Simultaneously, in 88 percent of parks, air pollution is halting tree growth, destructing leaves, altering water bonds, and inhibiting visibility (Yale School of the Environment 2019). Moreover, 85 percent of U.S. National Parks contain air pollution to a degree hazardous to human health (Yale School of the Environment 2019). Evidently, the modern CAA implementation is not strict enough to protect the air quality at National Parks. My recommendation is to enhance enforcement of Class I standards defined by the CAA by writing explicit requirements for environmental reviews of new oil and gas leases at locations near National Parks to be completed by state governments.
Sources:
National Parks Service. 2018. “National Parks and the Clean Air Act”. Accessed October 2. https://www.nps.gov/subjects/air/cleanairact.htm
Yale School of the Environment. 2019. “Dangerously High Pollution Levels Found in Most U.S. National Parks”. E360 Digest. Accessed October 2. https://e360.yale.edu/digest/ dangerously-high-air-pollution-levels-found-in-most-u-s-national-parks
Comment #2:
Original Post by Ashley Staat:
The social cost of carbon (SCC) is an estimate of economic damage resulting from emitting one more ton of greenhouse gases into the atmosphere. This estimate is used by local, state, and federal governments to determine policy and investment decisions primarily during benefit-cost analysis (Rennert and Kingdon 2019). The SCC is a tool to determine a policy’s effect on climate change due to changes in greenhouse gas emissions. When calculating SCC assumptions must be made which introduces some uncertainty. Future economic conditions, population growth, and emissions can be affected by future events that cannot possibly be predicted (a global pandemic for instance), therefore different scenarios with different variables and parameters must be run to account for difference scenarios Discount rates are used to convert future damages to present day values to determine how much weight should be put on future impacts. High discount rates mean future effects are much less significant and low discount rates mean they are equally as significant (Rennert and Kingdon 2019). I think the value-based judgements and uncertainty of the future are variables that can affect how the model predicts the cost of carbon and future damages are viewed by policymakers. Missing data or inaccurate data could affect the projected discount rate and undervalue or overvalue future damages. Putting monetary value on human life or chronic illness is rather morbid and difficult to quantify.
Obama issued Executive Order 13563 in 2012 to require quantifying equity, distributive impact, fairness, and human dignity in cost-benefit analysis under regulatory impact assessments (Rosenbaum 2020, 148). During the Obama administration, the Office of Management and Budget created an Interagency Working Group (IWG) of the SCC to develop a harmonized system to be used across federal agencies (Rennert and Kingdon 2019). This group determined that discount rates for domestic and global impacts. When the Trump administration took over the White House, Trump signed Executive Order 13783, which disbanded the IWG and required only damages that occur within the United States should be applied (Rennert and Kingdon 2019).
This change could have significant impact in policy and regulatory analysis because it distorts the perceived damages and puts less importance on future impacts. According to the Environmental Energy and Law Center at Harvard, some impacts this has had on policy reports include the Department of Energy releasing a regulatory review on under the executive order that recommends streamlining natural gas export approvals by reducing NEPA requirements and overly-burdensome energy efficiency standards. Additionally, the EPA released a report on deregulatory actions they have taken including aiming to reduce health-based air quality standards and potentially removing new source review permitting for air pollution controls at new and modified power plants saying this rule imposes costs and slows the development of domestic energy (EELP 2017). These changes seem to cater to industry at the expense of human health and the environment by devaluing the social cost of carbon in cost-benefit analysis. I imagine the implications mean less weighted meaning on ecological and human health damages.
References
EELP. 2017. “Regulatory Rollback: Executive Order 13783: Energy Development.” Environmental & Energy Law Program, October 30, 2017. https://eelp.law.harvard.edu/2017/10/executive-order-13783-energy-development/ (Links to an external site.).
Rennart, Kevin and Cora Kingdon. 2019. “Social Cost of Carbon 101.” Resources for the Future. August 1. https://www.rff.org/publications/explainers/social-cost-carbon-101/.
Rosenbaum, Walter A. 2020. Environmental Politics and Policy. Los Angeles, California: Sage.
My Comment:
Hi Ashley,
Excellent post! Crucially, the Trump administration’s change removed the requirement for individual government agencies to employ a harmonized set of SCC estimates in their regulatory analyses (Rennart and Kingdon 2019). Since the estimates do not need to be harmonized, they are subject to being swayed by value judgements. As a result, the lack of harmonized models led to policy recommendation based upon inaccurate analysis.
Executive Order 13783 illustrates a major assumption made in SCC modeling is the geographical scope of the calculation. The table below shows the difference between calculating based on global damages versus domestic damages (Rennart and Kingdon 2019). I agree, since the Trump administration decided to use the SCC approach based on domestic damages, the statistic conveys a relatively low SCC. Therefore, the cost of environmentally degrading projects is going to appear relatively low. The degree to which the Trump administration is putting less importance on future impacts is reflected in the changed discount rate from the previous administration to the current one. Specifically, as other classmates mentioned, the difference is that the Trump administration is employing discount rates of 3 percent and 7 percent for use in the primary analysis of regulations (Rennart and Kingdon 2019). Alternatively, Interagency Working Group estimates had previously reported global damage numbers and had employed discount rates of 2.5 percent, 3 percent, and 5 percent (Rennart and Kingdon 2019). Thanks for bringing in the source from the Environmental Energy and Law Center at Harvard to outline impacts of the Trump administration’s change in policy.
The changed discount rates reminds me of an important factor in passing the Trump administration’s Safer Affordable Fuel Efficient (SAFE) Vehicles Rule. In order to push for the rollback, the Trump administration inaccurately cited Mark Jacobsen, an economist at the University of California San Diego. The academic said his work was misapplied, resulting in misleading conclusions about fatalities and pollution. For example, Jacobsen said the administration implausibly assumes that the U.S. will have about 6 million fewer cars on the road by 2029 if the rollback happens (McDonald 2019). This particular error, Jacobsen said, is a result of a faulty fleet turnover model that attempts to incorporate how often people choose to scrap their cars (McDonald 2019). The smaller fleet size under the rollback is significant because it changes all of the subsequent calculations. It impacts miles travelled, then gas consumed, subsequently traffic congestion, noise and pollution. The Trump Administration failing to account for 6 million cars makes the rollback appear less detrimental than it is. Similar to our class evaluation of the SCC approach, the SAFE rule reveals the reason it is important to examine how the elements of the cost-benefit analysis are determined by questioning the calculations.
Source:
Environmental Protection Agency. 2020. “The Safer Affordable Fuel Efficient (SAFE) Vehicles Proposed Rule for Model Years 2021-2026”. Accessed October 15. https://www.epa.gov/regulations-emissions-vehicles-and-engines/safer-affordable-fuel-efficient-safe-vehicles-proposed
McDonald, Jessica. 2019. “The Facts on Fuel Economy Standards” The Annenberg Public Policy Center. Accessed May 18 2020. https://www.factcheck.org/2019/05/the-facts-on-fuel-economy-standards
Rennart, Kevin and Cora Kingdon. 2019. “Social Cost of Carbon 101.” Resources for the Future. August 1. https://www.rff.org/publications/explainers/social-cost-carbon-101/.
Response by Ashley Staat:
Mary,
Wow, it is amazing to me that this seemingly small change in percentages for a analysis procedure would have such widespread consequences to environmental regulatory frameworks!
Apparently this Executive Order 13783 also has impacted mercury emissions standards. The new MATs rule for coal and oil fired power plants from the EPA is criticized as being a flawed cost-benefit analysis (Resources for the Future 2019). The External Economics Advisory says the analysis is flawed because it does not give equal weight to co-benefits associated with the reductions of SO2 and particulates and underestimates public health benefits (Resources for the Future 2019). A policy analysis article published in Science calls the changes being done to CBAs will result in weaker and inefficient regulations. By removing the co-benefit of reducing particulate matter, it removes the benefits on premature mortality and morbidity, which equate to a benefit of $33-90 billion dollars to the cost of $9.6 billion (Aldy et. al. 2020, 247). It’s kind of scary how much this can impact our regulatory structures and our public health.
References
Aldy, Joseph, Matthew Kotchen, Mary Evans, Meredith Fowlie, Arik Levinson, and Karen Palmer. 2020. “Deep Flaws in a Mercury Regulatory Analysis.” Science vol. 368, April 9, 2020: 247-248. DOI: 10.1126/science.aba7932.
Resources for the Future. 2019. “Report on Proposed Changes to the Federal Mercury and Air Toxic Standards (MATS).” December 4, 2019. Accessed October 16, 2020. https://www.rff.org/news/press-releases/report-on-the-proposed-changes-to-the-federal-mercury-and-air-toxics-standards-mats/