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 “
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
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.
READ NEXT: A Tale of Two Carbon Prices to Shape Biden’s Climate Policy
(Corrects description of notice published in the Federal Register in the second paragraph.)
To contact the authors of this story:
To contact the editor responsible for this story:
© 2021 Bloomberg L.P. All rights reserved. Used with permission.