December 05, 2017

Cardin Requests GAO Study of Trump Changes to Key Measure of Carbon Pollution Cost

WASHINGTON – Seven Senators, including U.S. Senator Ben Cardin (D-Md.), a senior member of the Senate Environment and Public Works Committee, have asked the Government Accountability Office (GAO) to examine the government’s method for calculating the social cost of carbon — the measure of long-term damage done by carbon pollution — after the Trump administration dramatically reduced estimates of the costs of climate change in recent actions. Using a lower estimate for the social cost of carbon could allow the administration to undermine a range of environmental regulations by exaggerating the compliance costs compared to the societal benefits of reduced carbon emissions. Senator Cardin, with Senator Sheldon Whitehouse (D-R.I.), and Senators Michael Bennet (D-Colo.), Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Kamala Harris (D-Calif.) and Dianne Feinstein (D-Calif.), made the request in a letter to the Comptroller General today.

Earlier this year, President Donald Trump issued an executive order disbanding an important interagency working group charged with formulating the social cost of carbon and withdrew the guidance it had issued. The Trump administration also directed agencies to use an outdated Office of Management and Budget policy to monetize the value of greenhouse gas emissions from changes in federal regulation. The result has been a severe downtick in the value of the social cost of carbon. The Environmental Protection Agency’s assessment of its proposed rule to repeal the Clean Power Plan, for example, dropped the social cost of carbon from $45 per ton to as low as $1 per ton for 2020. 

The Senators ask the GAO to look at states and other countries’ social costs of carbon; the Trump administration’s justification for dramatically changing the way it discounts the costs or benefits of regulation change affecting carbon pollution; and the rationales that have been used to support various discount rates in assessing the social cost of carbon.

Full text of the Senators’ letter to the GAO is below. A PDF copy is available here.

 

December 5, 2017

 

The Honorable Gene L. Dodaro

Comptroller General of the United States

U.S. Government Accountability Office

441 G Street, NW

Washington, DC 20548

Dear Mr. Dodaro:

We write to ask the GAO analyze the social cost of carbon.  Various statutes, executive orders, and guidance from the Office of Management and Budget (OMB) direct federal agencies to analyze the benefits and costs of proposed regulations.  These regulatory impact analyses can also provide affected entities, agencies, Congress, and the public with important information about the potential effects of new regulations.

In 2008, a federal appeals court held that the National Highway Transportation Safety Administration violated the Energy Policy and Conservation Act by failing to include in its cost-benefit analysis of fuel economy standards for light trucks the benefits of carbon emission reduction.  The court noted that monetized estimates existed of the social cost of carbon (SCC)—the dollar value of the net damages of an increase in emissions of carbon dioxide, a greenhouse gas.  In 2009, in part because agencies used varying SCC estimates, the White House convened an interagency working group to develop SCC estimates for government use, and it issued final estimates in a 2010 guidance document.  Since then, the working group has issued revised estimates on several occasions and also developed estimates for damages from an increase in emissions of methane and nitrous oxide, which are also greenhouse gases.  Federal courts have upheld agencies’ use of these SCC estimates.  In addition, the National Academies has recommended improvements to the working group’s process, including by updating SCC estimates roughly every five years to remain consistent with the current state of scientific knowledge.

The Government Accountability Office (GAO) reported in 2014 that, in developing the original estimates, the working group used consensus-based decision making, relied largely on existing academic literature and models, and took steps to disclose limitations and incorporate new information.[1] In 2014, GAO also issued a report on environmental regulations and recommended that OMB should consider clarifying the relationship between the working group’s guidance document and OMB Circular A-4, which provides direction to federal agencies for systematic evaluation of benefits and costs.[2]

In March 2017, Executive Order 13783 disbanded the working group and withdrew SCC guidance documents as no longer representative of governmental policy.  The order directs agencies to be consistent with OMB Circular A-4 when monetizing the value of changes in greenhouse gas emissions resulting from regulations.  As a result, the Environmental Protection Agency’s draft regulatory impact analysis for its proposed rule that would repeal the Clean Power Plan includes revised values reducing the SCC from approximately $45 per ton to as low as $1 per ton for 2020 (both figures in 2011 dollars).

We request that GAO build on its past work on this topic.  In particular, we would like GAO to answer the following questions:

  1. To what extent have individual states developed and/or used estimates for the SCC; what have been the differences, if any, in these estimates and uses?
  2. To what extent have other countries developed and/or used estimates for the SCC; what have been the differences, if any, in these estimates and uses?
  3. To what extent have estimates been developed and/or used for the social cost of other greenhouse gases, such as methane and nitrous oxide?
  4. What justification did the Trump administration use to support its change from a default discount rate of 3% for climate -focused regulations to 7%? 
  5. What rationales have been advanced to support the use of various discount rates in assessing the social cost of carbon?  To the extent that discount rates are based on evolving factors like interest rates and economic growth rates, should they be periodically reevaluated?

Please contact Aaron Goldner (Senator Whitehouse) at (202) 224-2921 to discuss in detail the specific scope of work and timelines for completing this request.

Thank you in advance for your consideration.

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[1] GAO, Regulatory Impact Analysis: Development of Social Cost of Carbon Estimates, GAO-14-663 (Washington, D.C.: July. 24, 2014).

[2] GAO, Environmental Regulation: EPA Should Improve Adherence to Guidance for Selected Elements of Regulatory Impact Analyses, GAO-14-519 (Washington, D.C.: July. 18, 2014).