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The Social Cost of Obama-Era Climate Calculations

December 7, 2017

States should avoid imposing dubious “social cost of carbon” rules.

More than 200 cities and 12 states have pledged to uphold the Paris climate accord, even after President Donald Trump announced his administration would withdraw the United States from the agreement. These pledges have led four states — Colorado, Illinois, Minnesota, and New York — to enact climate and energy policies based on the Obama-era social cost of carbon (SCC) calculations, which attempt to quantify the long-term economic damages associated with emitting one ton of carbon dioxide into the air. The Obama administration concluded for every ton of carbon dioxide released, $36 worth of damage occurs.

The SCC is based on flawed scientific and economic assumptions. As a result, the dozens of regulations imposed on the energy sector that were based on these calculations significantly and needlessly increase the cost of electricity without delivering any measurable environmental benefits.

The SCC overestimates how much warming will occur from increasing levels of carbon dioxide in the air because it is based on outdated estimates from 2007. These figures were derived from a study that concluded doubling the concentration of carbon dioxide in the atmosphere would warm the planet by between 1.72 degrees Celsius and 7.14 degrees C, with their “most likely” estimate to be 3 degrees C.

More than a dozen scientific studies have since found the range of possible outcomes for global warming is much smaller than the scenario relied upon in the SCC calculation. For example, a study by a group of climate modelers who conducted analyses for the Intergovernmental Panel on Climate Change in 2013 found a much smaller range of potential outcomes; they concluded there is a low-end estimate of 1.2 degrees C and a high-end estimate of 4 degrees C, with a “best guess” of 2 degrees C. Other studies have found the best estimate to be a 1.64-degree C increase, if accompanied by a doubling of atmospheric carbon-dioxide concentrations.

If the actual range of possible warming is much lower than what was assumed by the Obama administration in its SCC calculations, its cost estimate of $36 per ton is much too high.

The SCC is also problematic because its creators relied upon unrealistic assumptions and did not consider the obvious benefits associated with people having access to affordable electricity. The economic conclusions reached by the makers of SCC would be affected substantially if very reasonable changes were to be made to SCC’s assumptions. In some cases, there would even be a net benefit for each ton of CO2 emitted.

Because the scientific and economic assumptions used in the SCC are flawed, any of the policies adopted by states based on SCC will be equally flawed, unjustifiably causing real-world economic harm.

For example, electricity prices in Colorado increased by 67 percent between 2001 and 2015, a rate that was much higher than the national average, in large part due to policies forcing the premature retirement of coal-fired power plants. Lawmakers, relying on foolish assumptions similar to those found in SCC, sought to replace coal with natural gas and renewable-energy generation, both of which required substantial energy cost increases. Adopting the social cost of carbon for utility decisions will likely result in Colorado replacing the rest of its coal-fired electricity fleet, which accounted for 55 percent of the state’s electricity production in 2016, driving prices even higher.

If lawmakers implement energy policies that attempt to mimic the Paris climate agreement requirements, it will surely signal to their so-called “green” constituents they are “still in,” but they will inevitably cause substantial economic destruction and will be, for the most part, environmentally meaningless.

Lawmakers considering policies that would hold their communities to the Paris climate agreement’s standards should recognize the flaws in the SCC and reverse course. If they don’t, voters should keep their higher electricity bills in mind when they head to the polls on Election Day.

[Originally Published at American Spectator]

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Environment Energy
Isaac Orr is a policy fellow at the Center of the American Experiment on mining and energy issues.