With One Number, Biden Will Start to Reverse Trump’s Way of Valuing Climate
(Bloomberg) -- President Joe Biden has begun reactivating Obama-era approaches for building climate change into federal policy, action that may soon revamp environmental regulation by establishing a much higher dollar value for greenhouse gas emissions in the U.S.
The White House will soon revisit values for the “social cost of carbon,” a figure that has been used to shape dozens of energy-related regulations. The Trump administration disbanded the interagency group responsible for the work and reduced the estimate to a small fraction of conventional values. Biden was widely expected to release an interim social cost estimate on Friday, but the White House instead published a Federal Register notice that governs how the federal government will conduct climate analysis in reviewing the environmental impact of government projects.
It signals a wider return to climate policy that will eventually reinstate a higher social cost of greenhouse gases. This pivotal figure attempts to estimate the money saved from avoiding each additional metric ton of the three most important planet-warming gases: carbon dioxide, methane and nitrous oxide. The social cost of carbon is used in federal benefit-cost analyses to account for damage caused by fossil fuel, capturing impacts from pollution that aren’t reflected in the market prices for gas, oil and coal.
Typically an obscure economic measure of climate change, the social cost of carbon occasionally escapes academic journals to play a central role in federal climate policy. A federal court ruled in 2007 that the White House had to consider the costs of climate change in rulemaking, and President Obama convened an interagency working group to identify a measure grounded in data and the mechanics of strict federal guidelines.
The models underpinning the social cost of carbon have become something of a punching bag in economic circles, in part because of the particular sensitivity of their results to assumptions over how fast money loses value over time. Economists call this the discount rate.
On his first day in office President Joe Biden signed an executive order directing the government to publish an interim social cost of greenhouse gases within 30 days and a final number by the end of January 2022. Researchers, industries and environmentalists have begun to line up to advise the White House just how they think this number should be calculated.
Michael Greenstone, a University of Chicago economist and co-chief of Obama’s social of carbon work, issued guidance last month on what the Biden administration should do. Nobel laureate Joseph Stiglitz and Lord Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment, published a blistering indictment of the conventional process last week. The Electric Power Research Institute, a utility industry group, wrote a note this month saying that “the shortcomings in the current modeling framework and SC-GHG use need to be addressed.”
A very high social cost of carbon “would do nothing but scare people,” said Paula DiPerna, special advisor at CDP, a British nonprofit that collects climate disclosures from companies. “You have to frame this as a way of making invisible threats visible so they can be acted upon.”
The National Academies in 2017 published a voluminous report calling for external input into the process. Several industry groups took up that offer on Feb. 16, addressing a letter to key White House officials: “It is not clear what the process is to solicit public and stakeholder input” for today's interim numbers, the industry groups wrote. The letter, first reported by E&E News, was signed by the U.S. Chamber of Commerce as well as trade groups for energy, chemical, and other industrial companies.
“There are a lot of things that they’ll weigh in how they decide to change this number,” said Kevin Rennert, director of the Social Cost of Carbon Initiative at the think tank Resources for the Future.
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