By Marlo Lewis, Jr., Competitive Enterprise Institute
When the Environmental Protection Agency (EPA) last week proposed to adopt more aggressive methane emission standards for the oil and gas sector, it also posted a Draft Review of the Social Cost of Greenhouse Gases. The ostensible purpose of the latter document is to improve the EPA’s estimates of the benefits of regulations, such as the proposed standards, that avoid or reduce emissions of the three main anthropogenic greenhouse gases (GHGs)—carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).
Unsurprisingly, the Draft Review lowers the range of discount rates used to estimate the present value of future climate damages and GHG emission reductions. Previously (2010, 2013, 2016, and 2021), federal agencies used discount rates of 5.0 percent, 3.0 percent, and 2.5 percent. The Draft Review uses discount rates of 2.5 percent, 2.0 percent, and 1.5 percent. Significance? The lower the discount rate, the higher the estimated monetary benefits of GHG reduction policies.
Of course, many factors beside discount rates drive social cost of greenhouse gases (SC-GHG) estimates. Prominent among those are:
• The socioeconomic development pathways selected by analysts to guestimate long-term trends in annual emissions and the associated increase in atmospheric GHG concentrations;
• The “climate sensitivity” of the models selected by analysts to forecast how much global warming and sea-level rise result from a given increase in atmospheric GHG concentration;
• The carbon dioxide fertilization function selected (or omitted) by analysts to estimate the agricultural and ecological benefits of CO2 atmospheric enrichment; and
• The assumptions selected by analysts about how adaptive technologies will be developed and deployed as the world warms.
A future post will discuss the Draft Review’s handling of those factors. Suffice it to say here that the SC-GHG in the Draft Review is much higher than in previous U.S. government estimates. For example, the central estimate of the social cost of carbon (SC-CO2) in the Biden administration’s February 2021 interim report is $51 per ton in 2020 and $85 per ton in 2050. The central estimate in the Draft Review is $190 per ton in 2020 and $360 per ton in 2050. The EPA proposes to find that one ton of CO2 is 370 percent to 420 percent more damaging than it was in official estimates only 18 months ago.
Color me skeptical! A bureaucrat may be as honest as the next guy, but contrary to their “trust us, we’re the experts” messaging, agencies are not impartial umpires. Each is a dog in the fight and often leads packs of smaller dogs—the advocacy groups and research organizations whom the agency funds. When a regulatory agency assesses the science and economics of its policy proposals, it is the primary stakeholder—the most interested party.
In joint comment letters to the Office of Management and Budget (June 2021), the EPA (September 2021), the National Highway Traffic Safety Administration (October 2021), and Federal Energy Regulatory Commission (January 2022), my late CEI colleague Patrick Michaels, Heritage Foundation Chief Statistician Kevin Dayaratna, and I noted suspicious lacunae in the administration’s February 2021 interim report. The report’s list of 115 references does not include “Empirically Constrained Climate Sensitivity and the Social Cost of Carbon” by Dayaratna, McKitrick, and Kreutzer (2017), published in Climate Change Economics. Nor does the list include “Climate Sensitivity, Agricultural Productivity and the Social Cost of Carbon in FUND,” by Dayaratna, McKitrick, and Michaels (2020), published in Environmental Economics and Policy Studies.
Those studies show that, with reasonable alternative assumptions about climate sensitivity and CO2 fertilization, the SC-CO2 drops to very low numbers, with a high probability of being negative through at least 2050. In other words, each incremental ton of CO2 may yield net benefits to society for decades to come.
Although the two studies challenged the scientific rigor of U.S. government SC-CO2 estimates, one might still hope that in February 2021 the omissions were an inadvertent oversight rather than an attempt to cancel dissenting voices. That charitable explanation is no longer plausible. The Draft Review contains far more references than did the interim SC-GHG report. Yet despite our flagging the omissions in five previous comment letters, including one submitted to the EPA, the Draft Review continues to omit Dayaratna et al. (2017) and Dayaratna et al. (2020) from its canvass of the peer-reviewed literature.
In an infamous Climategate email dated July 2004, UK Climate Research Unit (CRU) director Phil Jones vowed to Hockey Stick graph author Michael Mann that he, Jones, and Intergovernmental Panel on Climate Change (IPCC) lead author Kevin Trenberth would keep a 2004 study by Ross McKitrick and Patrick Michaels out of the IPCC’s 2007 Fourth Assessment Report “even if we have to redefine what the peer reviewed literature is.”
The McKitrick-Michaels study (hereafter M&M04) found significant spatial correlations between warming trends in official land-surface temperature records and indicators of local economic activity such as income, population, GDP growth, and coal use. McKitrick and Michaels concluded that, despite official efforts to remove extraneous warming biases, the surface records were still contaminated by non-climatic factors. The most influential of those records was the CRU record maintained by Jones.
Jones and Trenberth nearly succeeded in keeping M&M04 out of the IPCC’s Fourth Assessment Report, blocking its inclusion in the first and second drafts. After a 2006 study found similar results, Jones and Trenberth allowed M&M04 to be mentioned in the final draft but with a “dismissive editorial comment not supported by any reference to the peer reviewed literature,” as Climate Audit’s Steve McIntyre put it.
So, now we have the spectacle of the EPA acting to “redefine what the peer-reviewed literature is” by keeping studies by Ross McKitrick and Patrick Michaels—and their co-authors Kevin Dayaratna and David Kreutzer—out of the agency’s new report on the social cost of greenhouse gases.
The SC-GHG aspires to be the one number to rule them all—the purportedly scientific basis for determining how much Americans should spend on taxes, regulations, and subsidies to save the planet. It is amazing that with all its billions of dollars and legions of allies, the EPA apparently feels threatened by a few dissenting voices. It is disconcerting that, were it not for a libertarian blog like this one, nobody would even know which voices have been edited out of the conversation.
Marlo Lewis, Jr. is a senior fellow at the Competitive Enterprise Institute. Lewis writes on global warming, energy policy, and public policy issues.