Highlights:

  • By 2015, each ton of carbon emitted into the air will cost $37 in damage to the economy, according to White House estimates.
  • Sen. David Vitter (R-LA) and six other senators asked the Government Accountability Office to review the White House’s process for developing the estimate.
  • GAO’s report shows that the Interagency Working Group on the Social Cost of Carbon operated transparently and provided numerous opportunities for public input.
  • The “social cost of carbon” estimate signals a commitment to combat the impacts of climate change and should continue to be updated as new information becomes available.
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Each ton of carbon pollution from cars, planes, and power plants comes with costs. It harms our environment and threatens our health, it drives climate change, and it negatively impacts our economy. The White House has attempted to develop a standard estimate of these costs, called the “social cost of carbon,” for agencies to use in analyzing the benefits of rules designed to reduce carbon emissions. In an Aug. 25 report, the Government Accountability Office (GAO) validated that effort.

Calculating the Social Cost of Carbon

The GAO report, requested by Sen. David Vitter (R-LA) and several anti-regulatory allies, detailed the collaborative approach taken by a group of federal agencies to develop a government-wide estimate of the "social cost of carbon." This is a monetized estimate of the damage caused by each ton of carbon pollution emitted into the air. By 2015, each ton of carbon is expected to cost $37 in damage to the economy.

According to GAO, federal agencies began to include an estimate of the social cost of carbon in their cost-benefit assessments in 2008, in response to a court decision on the National Highway Traffic Safety Administration (NHTSA)’s 2006 fuel economy standards. The Ninth Circuit sent the rule back to NHTSA after finding that the agency erred when it decided not to monetize the benefit of reduced carbon emissions.

The following year, the GAO report explains, “in part to improve consistency in agencies’ use of social cost of carbon estimates,” the White House Office of Information and Regulatory Affairs (OIRA) and the Council of Economic Advisers convened an informal interagency working group on the social cost of carbon. The working group finalized an estimate in 2010 and agreed to review it as new information becomes available.

In May 2013, on the basis of new research, the working group increased the social cost of carbon to $38 per metric ton of carbon dioxide. A month later, the Department of Energy (DOE) finalized energy efficiency standards for microwaves, which incorporated the new estimate into the regulatory impact analysis of the rule. In November 2013, OMB announced a slight revision to the estimate, “result[ing] in a central estimated value of the social cost of carbon in 2015 of $37 per metric ton of carbon dioxide. . . .”

Carbon Cost Estimates Cause Controversy

The inclusion of the May 2013 cost estimates in DOE’s final rule immediately raised concerns from all sides. Health and environmental advocates argued that the estimate was still too low because the working group overly discounted the cost of carbon emissions for future generations.

At the same time, Vitter and six other senators sent a letter to the U.S. Environmental Protection Agency (EPA), DOE, and the Office of Management and Budget (OMB) raising concerns with the increased estimate, noting that these agencies will use it to justify new rules. The Vitter letter also contended that executive branch efforts on the issue lacked transparency and public input.

Findings Validate Executive Branch Approach

Contrary to Vitter's allegations, GAO found that the social cost of carbon working group made decisions by consensus only, relied primarily on existing studies, and publicly disclosed limitations and made revisions as new information became available.

According to GAO, the working group provided numerous opportunities for public input on the estimated social cost of carbon. In fact, the working group’s decision to review the 2010 estimate was largely in response to public comments that participating agencies received. When OMB released its revised 2013 estimate, the office further addressed concerns about opportunities for public input by requesting comments on the revision.

GAO’s report also debunked Vitter's transparency allegations. GAO found that the working group relied on three prevailing academic models on the economic effects of climate change, and both the 2010 and 2013 estimates of the social cost of carbon are consistent with those models. Moreover, GAO found that the working group took steps to disclose limitations on its estimates, highlight opportunities for additional research, and review the estimates as new information becomes available.

Conclusion

While many health and environmental organizations are hopeful that the working group takes steps to improve its estimates of the social cost of carbon in the future, they note that the 2013 updates are a critical first step. The availability of a government-wide estimate allows agencies to better assess the benefits of reducing carbon pollution as they develop standards to combat the global impacts of climate change.

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