Biden Turns Back to Obama-Era Method of Valuing Climate Change

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The Biden administration is reverting to an Obama-era method of calculating the cost of greenhouse gases—a move that industry is almost certain to challenge.

The social cost of carbon is the estimated harm to society of releasing carbon dioxide—the main greenhouse gas—into the atmosphere. It has been used to shape dozens of energy-related regulations.

The Biden approach, which pegs the social cost of carbon at $51 a ton for 2021 after adjusting for inflation at a 3% discount rate, replaces a Trump-era method that was as low as $1. The new figure will be used on an interim basis while an interagency working group readies a “more complete update” expected in early 2022, an administration official who spoke on condition of anonymity said Friday.

The Trump-era estimates “do not reflect current science and economics,” the official said.

Range of Impacts

The figure takes into account a wide range of impacts, including lost agricultural productivity, property damages from strong storms, and diminished fresh water availability.

Also included in the social cost of greenhouse gases are estimates of the money saved from avoiding each additional ton of methane and nitrous oxide.

A higher dollar figure makes it harder for agencies to issue new regulations that are more permissive to industry because it more starkly shows the benefits of tough rules outweigh the costs.

In June, the Government Accountability Office said the EPA under Trump had arrived at its lower estimate because, among other things, it only considered domestic costs, rather than global costs.

Seeking Public Comment

In drafting the permanent social cost of greenhouse gases, the task force will solicit public comment on “how to incorporate the latest science and economics,” and will engage with “experts, the public, and stakeholders,” according to the administration official.

Paula DiPerna, special adviser at CDP, a British nonprofit that collects climate disclosures from companies, has warned that a very high social cost of carbon “would do nothing but scare people.”

An extremely high dollar figure suggesting that the risks of climate change are shockingly high could spook investors or signal to the public that the problem is essentially insoluble.

“You have to frame this as a way of making invisible threats visible so they can be acted upon,” DiPerna said. “Pushing for a higher price doesn’t always get you to action. The price has to be correct and truly reflective of hidden costs, but then it has to come with an action plan to address those costs. One without the other is frightening to the average person.”

Biden signaled his intention to rework the social cost of carbon on his first day in office, when he signed an executive order directing the government to publish a new, interim cost of greenhouse gases within 30 days.

The White House published a Federal Register notice on Feb. 19 laying out ground rules on how the federal government will conduct climate analyses when reviewing the environmental impact of government projects.

©2021 Bloomberg L.P.

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