Foes of Obama climate policy prepare battle over cost of carbon
Three months ago, the Obama administration made a little-noticed but potentially pivotal move in the stepped-up fight against climate change: it boosted the U.S. government's official estimate of the future economic damage caused by carbon pollution.
After its first review, a panel of technical experts from 11 government agencies raised the so-called "social cost of carbon," known as SCC. The measure is used by many arms of the U.S. government to determine the financial benefits of new regulations since 2010.
The new 2020 forecast of $43 a ton was a 58 percent jump from the previous estimate, made in 2010. The issue is to be reviewed biannually.
The move should make it much easier for the Environmental Protection Agency and other federal bureaus to enact tougher measures to crack down on emissions by showing that the greater benefits of such measures will justify their costs.
But the change, both made and announced quietly, has drawn intensifying scrutiny.
Opponents of President Obama's newly invigorated climate change strategy are targeting the SCC in Congress -- and possibly in court -- in their efforts to knock back more rules. They argue that the method and methodology for calculating the SCC is opaque.
"This has all the characteristics of a stealth approach toward making a greenhouse gas rule more justifiable by exaggerating the social benefits," said Luke Popovich, a spokesman for the National Mining Association.
Even some supporters of greenhouse gas regulations or the use of carbon taxes have found fault in the opaque process in which the SCC was revised and the economic models used.
"These models have crucial flaws that make them close to useless as tools for policy analysis," wrote Robert Pindyck, an MIT economist, in an article that will appear in the September issue of the Journal of Economic Literature. He said certain "arbitrary" inputs could have a "huge" effect on the figure.
Attacks against the SCC are expected to intensify as Obama launches the next steps of his Climate Action Plan, which relies heavily on executive action to combat pollution from power plants, the biggest source of U.S. carbon emissions.
The EPA is to publish its new standard for carbon emissions from newly constructed power plants on September 20 -- likely relying on higher SCC figures to justify the cost. New standards for existing power plants are due by June 2014.
The revised SCC may also have an impact on major fossil fuel initiatives, such as the Canada-to-U.S. Keystone XL pipeline, if the administration decides to factor it into its decision on approving the project. A new calculation could mean that the project's societal costs outweigh its benefits.