President Biden’s team is temporarily returning to numbers used by the Obama administration to assess the monetary benefits of policies curbing greenhouse gas emissions but with suggestions it will ratchet up the final values.
The action could help the Biden administration justify stricter emissions controls.
The Biden administration announced Friday it will adopt the Obama administration’s social cost of carbon, adjusted for inflation, in the interim while an interagency working group explores longer-term updates to the metric over the next year.
The move means federal agencies will use an average social cost of carbon of $51 per ton as they assess the costs and benefits of mandates to curb emissions. Federal agencies will also adopt interim values for the social cost of methane and nitrous oxide, two other greenhouse gases, mirroring the Obama administration’s metric.
Biden, in a day-one climate executive order, had directed an interagency working group to publish interim values for the social cost of carbon and other greenhouse gases within 30 days. That deadline had lapsed Feb. 19.
Returning to the Obama administration’s values in the interim “will enable Federal agencies to immediately and more appropriately account for climate impacts in their decision-making,” said Heather Boushey, a member of Biden’s Council of Economic Advisers, in a blog post.
She added the interagency working group will “continue the process of bringing the best, most up-to-date science and economics to the estimation of the social costs of greenhouse gases.”
Many economists had expected Biden to return to the Obama administration’s numbers in the near term. The Trump administration had dramatically slashed the social cost of carbon to between $1 and $7 per ton to help it justify rolling back or weakening climate change mandates.
Some prominent economists, however, suggested the Biden team should settle on interim values twice as high, around $100 per ton. That included Michael Greenstone, the former chief economist in the Obama White House who led development of the initial social cost of carbon.
Those economists arrived at that number by using a lower discount rate, which determines how to weigh the costs people incur in the present against the benefits people would feel in the future.
Climate economists have generally suggested a low discount rate for the social cost of carbon because many of its worst costs won’t be felt for decades. The lowest discount rate the Obama administration used was 2.5%. Adjusted for inflation, that yields a social cost of carbon of $76 per ton, according to the Biden interagency working group.
Nonetheless, the Biden administration is already suggesting it is likely to use an even lower discount rate in the final values, which Biden has directed be published within a year.
In a technical support document, the interagency working group noted that the latest scientific and economic understanding of discount rates suggests lower rates should be used for analysis of benefits and costs that span multiple generations.
That document also notes that the models behind the social cost of carbon don’t incorporate the full scope of climate change effects and lag recent scientific research.
“Taken together, these limitations suggest” the interim social cost of greenhouse gas values “likely underestimate societal damages from GHG emissions,” the interagency working group wrote.