Victory for Cato: Feds Now Seeking Input on the Social Cost of Carbon

It’s about time!

For months, we have been hammering away at the point that the Feds’ current determination of the social cost of carbon is grossly out of touch with the relevant scientific literature and economic guidance.

Perhaps in response to the fact that they can’t argue against what we have been saying, the Administration has finally capitulated and is opening up their determination of the social cost of carbon (SCC) for public comment.

Their SCC calculation—in keeping with the playbook of the president’s Climate Action Plan—is a backdoor way of implementing a carbon tax. And it is slowly, pervasively, and worse of all, silently, creeping into all of our lives.  We’ve been trying to stop all of this by, at the very least, pulling back the cloak of secrecy and trying to make this once-esoteric  subject a topic of dinnertime conversation.

Meanwhile,  the government’s regulatory push using the SCC continues.

The Institute for Energy Research has recently identified nearly 30 federal regulations which have incorporated the SCC into their cost benefit analysis (and several more have been recently announced).

The SCC is used to make regulations seem less costly.  We say “seem,” because the “benefit” from reducing carbon dioxide (CO2)  emissions, as valued by the SCC, is likely never to be realized by the American consumer—yet the other costs (such as increased manufacturing costs) most assuredly will be.

The SCC is a theoretical cost of each additional CO2 emission. But the theory is so loosey-goosey that with a little creativity, you can arrive at pretty much any value for  the SCC—a point noted by M.I.T.’s Robert Pindyck in an article for the Summer 2013 edition of Cato’s Regulation.

As the Obama Administration wants to regulate away as many carbon dioxide emissions as possible, it is in its own self-interest to try to arrive at the highest SCC value possible.  This way, the more that CO2 emissions are reduced, the more money is “saved.”

Or so the idea goes.

But their path towards a high SCC is one away from both the best science and the most common-sense economics.

We imagine that readers of this blog probably are well-aware of the details behind this reality, as we have laid them out on many occasions,  so we won’t go into them again here.

Instead, we want to point out several opportunities to draw further attention to the short-comings in the Administration’s SCC determination.

The period for accepting public comments on several proposed rulemakings is open, and provides a good opportunity to remind the issuing agency what they did wrong. For example, here is a recently-announced regulation proposal from the Department of Energy (DoE) which seeks to impose higher energy efficiency rules for residential furnace fans. It employs the SCC to make this rule seem a lot sweeter than it actually is.

We have already submitted comments on several of these proposed regulations, including DoE regulations to increase the efficiency standards for Microwave Ovens, Walk-In Freezers, and Commercial Refrigeration Equipment.

So, it’s important that  the White House’s  Office of Management and Budget (OBM)  just announced that the social cost of carbon determination currently in force will be open to public comment starting sometime in the presumably near future (keep an eye on the Federal Register for the official announcement).

While it is too early to tell, this willingness to hear public comments on the SCC probably originated from the comments received on the Petition to Reconsider the proposed Microwave Oven ruling—the first rulemaking to incorporate the Administration’s latest-worst iteration of the SCC (which was about a 50% increase over its original figure). There hasn’t been an official announcement as to the result of Petition, but the scientific argument against it is a Cato product.

More than likely, though, this will all be for show.  The feds could selectively use some comments and  somehow find a way to raise the SCC even further.  Like we said, that’s easy to do—crank down the discount rate, or  crank up the damage function (make-up new damages not included in the current models)—even while paying lip service to the lowered equilibrium climate sensitivity and the CO2 fertilization effect.

We’d be more than happy to be wrong about this. But until then, our efforts to set things straight will continue.