But under a new policy from the Trump administration, federal agencies will be able to write off the cost of climate change — defined in cost-benefit analysis as the social cost of carbon — as zero. It may even be calculated as beneficial, if fossil fuel supporters get their way.
In his broad executive order on energy, President Trump on Tuesday disbanded the Interagency Working Group the Social Cost of Greenhouse Gases. He also withdrew the group’s technical documents, which form the scientific and economic basis for calculating the social cost of carbon and give federal agencies a key tool to measure the benefits cutting greenhouse gas emissions.
A senior White House spokesperson said Monday that he was “not familiar” with studies that show the economic costs of climate change.
The move to erase the social cost of carbon could have wide-reaching ramifications. For instance, it could put the later versions of the federal Fuel Economy Standards in jeopardy, if the administration opts to reconsider them, since the climate benefits provide a key justification for cutting fuel use.
And if the Environmental Protection Agency is forced to take a stab at the country’s nascent methane leak reduction efforts, currently on hold, the outcome would likely favor industry cost-cutting over protecting the country from climate change.
Likewise, a federal rule to reduce emissions from the airline industry — which has been under development for nearly a decade — is likely to come out much softer, if at all, without taking social cost of carbon into account. These policies all rely heavily on acknowledging that greenhouse gases are emitted at a steep cost. In fact, the social cost of carbon has been called the linchpin of national climate policy.
That’s because cost-benefit analysis is the bread and butter of federal rulemaking. Before issuing a new rule, a federal agency must assess the rule’s costs and benefits. It can only act after determining that benefits justify its costs.
Prior to 2009, when President Obama created the working group, there was no consistent way to quantify the benefits of cutting greenhouse gases from vehicles, power plants, and other sources. The now-defunct working group, comprised of economists and scientists from across the federal government, came out with a government-wide estimate for the social cost of carbon. The number reflects “changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change,” as well as other factors. For 2017, the SCC is $39 per metric ton.
According to the White House, “the work of [the group] will no longer represent government policy.”
A senior administrative official suggested Monday that agencies needing to quantify the costs or benefits related to greenhouse gas emissions should refer to previous guidance issued by the Office of Management and Budget, or OMB. A White House fact sheet on the executive order says the working group “did not follow sound guidelines governing cost-benefit analysis.”
The administration’s statements reflect key talking points of several industry-funded think tanks. For years, conservative groups with ties to the fossil fuel industry have been criticizing the way the social cost of carbon was calculated.
For one, the working group decided that, because climate change is a global, pervasive concern, global impacts would be taken into account. That, opponents said, ran counter to the guidance from OMB, which says domestic impacts should be the focus of cost-benefits analysis. Global impacts may be taken into account but should be reported separately.
Secondly, there are many ways to calculate the value of addressing tomorrow’s problems today. The working group, citing the generational impact of climate change, did not discount future costs as much as conservative groups would have liked. It’s not that the working group went against OMB’s guidance — which notes that “special ethical considerations arise when comparing benefits and costs across generations” — they just didn’t discount future generations as much as they technically could have, given the unique challenges of climate change.
There is a straight line from critics of the social cost of carbon to the Trump administration.
Myron Ebell from the Competitive Enterprise Institute and Thomas Pyle from the American Energy Alliance were both part of President Trump’s EPA transition team —and they led a coalition of conservative groups calling for the Obama administration to stop using social cost of carbon.
David Kreutzer, a member of President Trump’s beachhead team at the EPA and a former economist at the Heritage Foundation, also has criticized the social cost of carbon. These organizations — many of which have been funded by the Koch brothers and other fossil fuel interests opposed to action on climate change — disagree with the ethical concerns about how much people today are willing to pay to prevent climate damage in the future. (For that matter, many of them, like Trump, don’t accept that climate change even is a problem, despite the overwhelming scientific evidence.)
But here’s the kicker: If you discount tomorrow’s problems by too much, addressing them now starts to stop making financial sense. From a moral standpoint, it doesn’t make sense to force our children and our children’s children to face catastrophic climate change because we don’t want to pay for it. From a pennywise perspective, it could.
If the Environmental Protection Agency wants to issue a new carbon pollution limit on a source, the social cost of carbon is critical. If the EPA can’t quantify the cost of continuing to drive global warming, then the costs of stopping it may appear too high.
The end result could be that policies that increase carbon pollution and exacerbate climate change have no cost and policies that reduce greenhouse gas emissions have no benefit. Without measurable climate benefits, the Trump EPA could claim that setting pollution limits on power plants or oil and gas facilities is too costly.
Trump’s decision to abandon the SCC is likely to lead to litigation. The courts have already acknowledged there is a challenge inherent in assigning a dollar value to the cost of carbon pollution — but ultimately concluded that the value is “certainly not zero.”