Trump Administration Undervalues Cost of Carbon by 7x

Over the past four years, the Trump administration has made it a mission (often succeeding) to dismantle major climate policies, weaken environmental rules, regulations, and protections, and kickstart destructive new development projects – all with the potential for significant increases in U.S. greenhouse gas emissions.

Federal agencies must quantify the societal impacts of carbon emissions in order to conduct sound policy evaluations. Many other countries, including the United Kingdom, Canada, and Mexico use standardized methodology to estimate this “cost of carbon” in virtually all government decision making. 

Earlier this year, it was reported that the Trump administration not only disbanded the group in charge of calculating future damages of climate change, but also reduced the federal government’s estimation for the cost of carbon emissions by seven times from its previous estimates.

A report by the Government Accountability Office (GAO), the Congressional investigative agency, identified the benefit in naming a federal entity to take the lead in updating social cost of carbon (SCC) estimation methods, saying it could “strengthen regulatory analysis.” The GAO made this recommendation based on its findings that the SCC estimates being used by the current administration were dangerously low and rarely properly utilized. 

What do carbon emissions cost society? 

The SCC is an estimate of damages to agriculture, public health, energy use, and other aspects of the economy resulting from an incremental increase of carbon dioxide emissions in the atmosphere in a given year. The calculation of the SCC effectively quantifies and monetizes the effects of climate change for use in policy and regulatory cost-benefit analysis and is often used to demonstrate the long-term economic benefits to reducing CO2 emissions.

Since 2008, when the Center for Biological Diversity challenged the National Highway Traffic Safety Administration to include the SCC within its analysis of fuel economy standards, the U.S. government has used the SCC for all new economic analyses. Federal agencies have used the uniform SCC estimate to analyze the effects of approximately 100 federal actions that impact greenhouse gas pollution – from vehicle emissions standards, to power plant regulations, to efficiency standards. 

Under the Obama administration, the federal government’s Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) developed and reviewed models for SCC calculation based on updated scientific data. The IWG, made up of representatives from each relevant executive branch agency, removed responsibility from individual federal agencies to develop their own SCC models, standardizing the process and ensuring that accurate numbers were being used in analyses with consistency and transparency. The most recent IWG calculation estimated an average cost of $50 per metric ton of CO2 in 2020 — that estimate increases each year, with the furthest prediction being $82 in 2050. 

In its calculations, the IWG utilized information that predicted carbon-related damages on the entire planet, implying that a ton of CO2 emitted in the U.S. will have detrimental impacts across the world. To support this methodology, the GAO notes in its June report that as greenhouse gases are emitted into the atmosphere, they become “well mixed” and contribute to climate change-related damages globally, regardless of their origin. This removes the moral justifiability for SCC calculations that only account for domestic damages and highlights the international economic consequences of each additional ton of carbon emitted.

Between 2000 and 2019, 7,348 major disasters were recorded, costing the global economy about $2.97 trillion and taking 1.23 million lives. From disastrous wildfires along the West Coast to a spike in floods and storms displacing people across the globe, extreme weather events driven by climate change take a heavy toll on the world economy that needs to be accounted for. The COVID-19 pandemic has had a blatant negative impact on the economy, particularly affecting communities that are more vulnerable to poor air and water quality, environmental determinants of health undermined by climate change. The pandemic’s direct effects on public health have been further exacerbated by this year’s extreme heat wave, which represents a consequence of climate change that is less visible but equally damaging. 

Implications of undermining the Social Cost of Carbon

Since the 2017 Trump administration executive order (13783) removed the IWG from modelling the SCC trajectory, federal agencies have withdrawn focus from the effects U.S. emissions have on other countries, calculating the federal social price of carbon at the domestic level only. Without the IWG, these agencies can determine their own SCC estimates for use in cost-benefit analysis and policy rationalization, none of which incorporate key global damages.

 In addition to a major reduction in scope, SCC calculations without the standardized IWG modelling also use different and increased discount rates: 3 and 7 percent compared to prior use of 2.5, 3, and 5 percent. The discount rate is used to convert future damages into present-day value, determining the value of future costs and benefits compared to present costs and benefits in analysis. Higher discount rates mean the future effects hold significantly less weight than present effects. By raising discount rates used in estimating the SCC, the Trump administration deflated the impact of carbon pollution on future generations.

The current national estimates, based solely on domestic damages and with an increased discount rate, are seven times lower than prior IWG estimates: the Trump administration misleadingly changed the SCC to $7 in 2020 and $11 in 2050. 

Many recent expert estimates far surpass even Obama-era IWG predictions for the global SCC. Recently, climate scientists found an SCC estimate of approximately $150-200 per ton of CO2 using updated assessments of time and risk, further emphasizing the disparity between current U.S. federal estimates and the true cost.

With these extremely low and manipulated SCC numbers, the current administration has been able to justify destructive regulatory rollbacks as well as expedite the approval of dozens of major, environmentally threatening fossil fuel, energy, and water projects. Amid the current pandemic and with the presidential election approaching, there is more room and heightened urgency for Trump to fast-track environmental reviews for these projects.

One of the projects is a move to open up one of the country’s largest regions of protected wilderness, Alaska’s Arctic National Wildlife Refuge, to oil and gas development. Though Alaska has untapped potential for hydropower development, something that could sustainably offset diesel reliance, the push to “secure America’s ‘energy dominance’” prevails under the current administration. The drilling proposed would not only begin a long-term fossil fuel production venture, but would further prop up the fossil fuel economy that contributes to a warming climate, as well as have detrimental effects on the surrounding ecosystem. 

The Department of the Interior released an environmental impact statement for the project, which predicted globally dispersed direct and indirect CO2 emissions increases and detailed their potential impacts on climate change and wildlife. This review, criticized as insufficient, deliberately and explicitly excludes the social cost of carbon analysis protocol, as it is no longer a required aspect of evaluation under the current federal rules.

What’s next?

 In 2017, shortly after Trump’s Executive Order 13783 calling for the promotion of “energy independence and economic growth” went into effect, the National Academies of Sciences, Engineering, and Medicine conducted an assessment of SCC calculation methods, strongly recommending that they be updated and strengthened. These recommendations have since been ignored, and according to the June GAO report, the federal government has no plans to address them. 

The current administration immediately began dismantling over 70 Obama-era rules on fuel-economy standards, vehicle emissions, and methane leaks (among others). These actions will result in the U.S. emitting an extra 1.8 billion tons of CO2 between now and 2035, according to analysis by the Rhodium Group. This doesn’t include the effect of the U.S. withdrawal from the Paris Climate Accord, moves to use new lands for gas and oil development, and the replacement of the Clean Power Plan. Four more years of federal climate policy rollbacks and environmental deregulation could do irreversible, incalculable damage to our planet. 

Despite the federal government’s lack of contribution to valid calculation and utilization of a meaningful SCC, several states have adopted the true SCC for use in pushing various climate policies, including Wisconsin’s Bill 766 introduced in January and Colorado’s SB 19-236 signed into law in 2019.

Under the current circumstances, no one entity is held accountable to addressing the true cost of carbon. Yet, we are all responsible for the effect our collective emissions have on the planet and we will all have to cope with the consequences of the climate crisis and rampant emissions. For the sake of the environment, global public health, and international economies, we must reconcile this – and part of that comes from a universal estimate for the social cost of carbon. 

Featured Image: Photo Illustration by Amanda Griffiths, Climate XChange. Smoke Stack Photo by Mike Burton on flickr. Smoke Photo by veeterzy on Unsplash.