Hearings on the White House's recently increased social cost of carbon (SCC) held yesterday offered differing views on this important consideration key to many federal rulemakings. The White House's Office of Information and Regulatory Affairs Administrator, Howard Shelanski, defended the SCC increases saying "Entities outside of the Federal government are using estimates that are similar to the updated SCC values. For example, these updated estimates are consistent with the SCC values used by other governments, such as the United Kingdom and Germany."
Mr. Shelanski further noted that "Major corporations, such as ExxonMobil and Shell, have also used similar estimates to evaluate capital investments. The Administration will continue to investigate ways to improve the social cost of carbon estimate."
Also testifying was Robert Murphy, Senior Economist for the Institute of Energy Research. Mr. Murphy's testimony focused on the fact that the SCC is a flexible concept premised upon modeling assumptions that can have an enormous impact on the cost-benefit analyses of federal regulations. He concluded his testimony by advising lawmakers that "… the public and policymakers have not been fully informed on what the economics profession actually has to say about climate change. Before justifying economically damaging regulations by reference to 'the' social cost of carbon, policymakers must realize the dubious nature of this concept."
In contrast, Mr. Shelanski concluded by adding "… The current estimates will be used in the economic analysis of rulemakings, and we fully expect comments on the SCC values in the context of future rules. We will consider those comments to ensure that we use the best available information to evaluate the costs and benefits of our regulation."
The SCC is at the center of growing debate about the costs associated with possible new greenhouse gas rules. Many feel that the Administration failed to adequately justify the boosted estimates of damages from climate change particularly given the significant implications these increases will have on various federal rulemakings. Those in opposition to climate change-related policies and science see this issue as another way to slowdown or make more difficult the Administration's commitment to better manage greenhouse gas emissions. Others believe that the SCC, even as recently increased, does not truly account for all of the damages and related costs associated with these emissions.
The written testimony of both Mr. Shelanski and Mr. Murphy are available here.