Obama officials raise ‘social cost’ of carbon in federal regulations

The Obama administration has increased the “social cost” of carbon emissions in federal regulations, a move that could lay the groundwork for new rules on climate change.

The order, handed down by the Office of Management and Budget (OMB) with little fanfare, bumps the so-called social cost of carbon — a monetized estimate of health, property and environmental damage — to $35 per metric ton, up from $21.

The directive requires all federal agencies, including the Environmental Protection Agency, to use the new figure when crafting regulations.

A spokeswoman for the OMB said the change reflects broad consensus in industry and government.

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“These updated values are well within the range of mainstream estimates; indeed, similar estimates are used by other governments, international institutions, and major corporations,” said OMB spokeswoman Ari Isaacman Astles.

Regulatory experts said the change could help the White House move forward with controversial rules that would limit emissions from power plants. By raising the social cost of carbon, the administration has likely ensured that the estimated benefits of those regulations would be greater, they said.

“The big regulatory action that they’re looking at, that certainly would be the most costly and have the biggest impact on the economy, are the rules for new and existing power plants,” said Jeff Holmstead, the Environmental Protection Agency’s air quality chief under former President George W. Bush.

“It certainly gives them a justification to be more aggressive than they otherwise would be,” said Holmstead, who is now a partner and head of the environmental strategies group at law firm Bracewell and Giuliani.

Utilities and industry groups are fighting vigorously against the emissions rules, which they say would be catastrophic for the economy. They say the rules would shutter a sizable number of power plants, potentially leading to more frequent blackouts, and create higher costs for consumers.

The Obama administration argues it has the legal standing — and an overriding responsibility — to regulate greenhouse gas emissions under the Clean Air Act.

President Obama vowed in his State of the Union address that he would act alone to address climate change if Congress failed to pass legislation.

But the White House missed its April deadline for finalizing emissions rules on new coal-fired power plants, disappointing environmental and public health groups that have pushed Obama for aggressive action.

Republican lawmakers and businesses have challenged the rule on legal grounds, and some insiders have suggested the administration delayed enacting the emissions rules because it fears they won’t hold up in court.

Frank O’Donnell, president of Clean Air Watch, said the new calculation for carbon could signal Obama is ready to forge ahead with emissions standards for refineries and, most significantly, for existing coal-fired power plants.

“I think the White House is clearly now saying there is a much higher social cost from greenhouse gas emissions than previously acknowledged. That means it really puts the heat on the EPA to move soon and aggressively,” O’Donnell said.

“The White House will look very weak-kneed and foolish if it doesn’t do something about existing power plants, based on this new analysis.”

Holmstead agreed that the new carbon cost figure would give the White House cover to propose the emissions limits.

“In essence, they have made it easier to justify more stringent things, more costly things,” he said.

The new carbon cost has already appeared in one major federal regulation.

The Energy Department used the new figure in a microwave efficiency rule it issued on Friday.

The agency said the standards for microwaves would yield $3 billion of energy savings by 2030, and over the next 30 years reduce enough carbon pollution to take the equivalent of 12 million cars off the road.

Jonathan Silver, a former Obama Energy Department official and a visiting fellow with think tank Third Way, defended the carbon cost as a mainstay in regulatory calculations. He said the federal government should “always incorporate the latest science” when crafting rules.

The interagency working group that decided on the increased social carbon cost incorporated new data on sea-level rise, coastal damage and agricultural productivity, among other items.

Rachel Cleetus, senior climate economist with the Union of Concerned Scientists’ climate and energy program, said the new cost is largely on par with other estimates.

“The new social cost of carbon (SCC) estimate is broadly consistent with what we’re seeing in the scientific and economic literature on the growing risks and costs of climate change, and in fact is likely an underestimate of the true cost of our carbon emissions,” Cleetus told The Hill in an email.

But despite the adjustment on carbon, it remains to be seen whether the Obama administration is gearing up for the major push on climate change that environmentalists have long hoped for.

Thomas Pyle, president with conservative think tank Institute for Energy Research, predicted the higher social carbon cost would turn out to be a self-serving tool for the Obama administration to justify coming actions.

“They want to downplay the costs of their regulatory agenda by in essence creating out of thin air the benefits to their regulatory agenda,” Pyle said.