Undoing the damage caused by the flawed ‘social cost of carbon’ metric
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Over the past few months, we’ve seen the energy economy grow as President Trump follows through on his promises. In Congress, we have worked to overturn a number of Obama-era regulations, including the unworkable rewrite of the stream buffer rule, which would have led to the loss of thousands of good-paying coal jobs in Appalachia and across the nation. The president has also taken important steps in addressing the Obama administration’s executive overreach by halting the controversial Clean Power Plan and Waters of the United States rule.

It is important that Congress continues to pursue further reform to limit and reduce the regulatory bureaucracy. One particularly contentious issue is misuse of the previous administration’s environmental models and metrics in rulemaking. The Environmental Protection Agency (EPA) and other federal agencies have increasingly used an ambiguous metric, the “social cost of carbon,” to justify their environmental rulemaking. This complex metric has been used to “validate” many of the air environmental regulations that targeted the direct and indirect carbon dioxide emissions from various sources.

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However, there are many flaws in applying the social cost of carbon and other social costs of greenhouse gas metrics. Unsurprisingly, the previous administration ignored longstanding precedent in its cost-benefit analyses. For one, it calculated the global benefits while only estimating the domestic costs, leading to a significantly higher estimate per ton of carbon. It also disregarded Office of Management and Budget (OMB) guidance regarding the application of appropriate discount rates to its estimates, which skews the dollar amount dramatically higher.

Discount rates are used to estimate the actual value of actions taken today on the economy of the future. Because of inflation and other factors, one dollar’s worth of benefit today is worth less than that same dollar’s worth of benefit 10, 20 or 50 years from now. The OMB’s Circular A-4 explicitly states that “a real discount rate of 7 percent should be used as a base-case for regulatory analysis.” The Obama administration, however, ignored this directive and instead opted to use the lower discount rates of 2.5, 3 and 5 percent. The reason is simple: Using a 7 percent discount rate would lead to far smaller — or even negative — values for the social cost of carbon. By using the 7 percent discount rate, the calculated “benefits” of reducing carbon dioxide emissions would be greatly diminished and would not fit the Obama administration’s messaging.

Since its first use of the social cost of carbon, the Obama administration regularly recalculated the models, often increasing the supposed cost of small increases of carbon dioxide in the atmosphere — and thus the purported monetary benefits derived from reducing those emissions.

There are other problems inherent to the social cost of carbon, including the use of climate modeling that likely overstates the sensitivity of the Earth’s climate to increased carbon dioxide emissions, the use of “co-benefits” of reductions of criteria pollutants such as ozone and particulate matter in climate policies, and failure to account for the economic benefits resulting from the use of the energy leading to the governed carbon emissions.

While the last administration used these metrics to claim lower costs and higher benefits to the economy in its rulemaking, the reality of these regulations has been economic devastation to entire regions and industries. This is witnessed by the loss of tens of thousands of good-paying energy jobs in states across the country over the past five years. I was very glad to see that the Supreme Court also took issue with the costs of runaway rulemaking when it put the brakes on the Clean Power Plan. The court’s hold reaffirmed what I have witnessed in my state of West Virginia: crippling unemployment, higher deficits and entire communities devastated.

Trump took an important step by disbanding the Interagency Working Group that concocted the metrics, and he halted the use of social cost of greenhouse gases in the rulemaking process. It is imperative that Congress also act to provide legislative certainty on these measures.

Last Congress, I introduced legislation that would prohibit the EPA and Department of Energy from using the social cost of carbon and social cost of methane as justifications for their rules. We had support from dozens of other members of Congress, and I will reintroduce my legislation in the 115th Congress soon. It’s time to put an end to the abuse of this practice and stand up for a transparent process and sound science in our environmental rules and regulations.

Jenkins represents West Virginia’s 3rd District and is a member of the Appropriations Subcommittee on the Interior, Environment, and Related Agencies.


The views expressed by this author are their own and are not the views of The Hill.