The Social Cost of Carbon

The Environmental & Energy Law Program is tracking the environmental regulatory rollbacks of the Trump administration. Click here for the list of rules we are following

Why it Matters

A “social cost of carbon” is a powerful tool. It helps agencies better consider the costs that carbon emissions impose on society, and calculate the benefit of reducing pollution. When the social cost of carbon is not part of a government agency’s cost-benefit analysis, there is less regulatory leverage for reducing greenhouse gas emissions.

Current Status

The Interagency Group on the Social Cost of Greenhouse Gases (GHGs) has been disbanded and the technical documents withdrawn.

History

On November 15, 2007, the Ninth Circuit held that a weakened fuel efficiency rule was arbitrary and capricious because the National Highway Traffic Safety Administration (NHTSA) failed to consider the cost of carbon pollution.

In February, 2010, invoking President Clinton’s EO 12866, the Interagency Working Group on the Social Cost of GHGs calculated a social cost of carbon.

The Interagency Working Group on the Social Cost of GHGs published the sixth technical update to the SCC in August, 2016. The cost was set at $36/ton.

On August 8, 2016 the Seventh Circuit upheld the Department of Energy’s use of the social cost of carbon in a cost-benefit analysis for updated refrigerator efficiency standards.

Trump Era

On March 28, 2017, President Trump’s Executive Order on Promoting Energy Independence and Economic Growth disbanded the Interagency Working Group on the Social Cost of GHGs, and announced that the social cost of carbon technical documents are “withdrawn as no longer representative of governmental policy.” Agencies were directed to revert to older White House guidance on how to do cost-benefit analyses. Under this guidance, an agency could but is not encouraged or directed to consider the health and economic costs of carbon pollution.

On October 10, 2017, EPA released a proposal to repeal the Clean Power Plan, which included an analysis using the Trump administration’s social cost of carbon approach. The analysis counted only direct domestic benefits of carbon mitigation activities rather than considering the potential benefits worldwide. analysis of the social cost of carbon. The new approach used a higher discount rate (7%) than the rate used in standard economic practice (3%). The discount rate adjusts estimates of future climate damage into current dollars to determine what we could spend today to avoid future damage. A higher discount rate lowers the value of preventing future damage and makes it easier to portray current regulations as having costs that exceed their benefits.

On July 26, 2018, a group of six senators submitted comments to the Federal Energy Regulatory Commission (FERC) as it considers revising its Pipeline Policy Statement, the senators called on FERC to incorporate the social cost of carbon into its process for evaluating natural gas pipelines.

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