In 2009, an interagency process was launched, under the leadership of the Office of Management and Budget (OMB) and the Council of Economic Advisers (CEA), that sought to harmonize a range of different SC-CO2 values being used across multiple Federal agencies. The purpose of this process was to ensure that agencies were using the best available information and to promote consistency in the way agencies quantify the benefits of reducing CO2 emissions in regulatory impact analyses. This included the establishment of an IWG which represented perspectives and technical expertise from many federal agencies and a commitment to following the peer-reviewed literature. In 2010, the IWG finalized a set of four SC-CO2 values for use in regulatory analyses and presented them in a TSD that also provided guidance for agencies on using the estimates (IWG 2010). Three of these values were based on the average SC-CO2 from three widely cited integrated assessment models (IAMs) in the peer-reviewed literature – DICE, PAGE, and FUND[1] – at discount rates of 2.5, 3, and 5 percent. The fourth value was included to represent higher-than-expected economic impacts from climate change further out in the tails of the SC-CO2 distribution. For this purpose, it used the SC-CO2 value for the 95th percentile at a 3 percent discount rate.
In May of 2013, the IWG provided an update of the SC-CO2 estimates to incorporate new versions of the IAMs used in the peer-reviewed literature (IWG 2013). The 2013 update did not revisit other IWG modeling decisions (i.e., the discount rates or harmonized inputs for socioeconomic and emission scenarios and equilibrium climate sensitivity). Improvements in the way damages are modeled were confined to those that had been incorporated into the latest versions of the models by the developers themselves in the peer-reviewed literature.[2] In August of 2016, the IWG published estimates of the social cost of methane (SC-CH4) and nitrous oxide (SC-N2O) that are consistent with the methodology underlying the SC-CO2 estimates (IWG 2016a, 2016b).
Over the course of developing and updating the USG SC-GHG, through both the IWG and individual agencies, there were extensive opportunities for public input on the estimates and underlying methodologies. There was a public comment process associated with each proposed rulemaking that used the estimates, and OMB initiated a separate comment process on the IWG TSD in 2013. Commenters offered a wide range of perspectives on all aspects of process, methodology, and final estimates and diverse suggestions for improvements. The U.S. Government Accountability Office (GAO) also reviewed the development of the USG SC-CO2 estimates and concluded that the IWG processes and methods reflected three principles: consensus-based decision making, reliance on existing academic literature and models, and disclosure of limitations and incorporation of new information (U.S. GAO 2014).
- ↑ The DICE (Dynamic Integrated Climate and Economy) model by William Nordhaus evolved from a series of energy models and was first presented in 1990 (Nordhaus and Boyer 2000, Nordhaus 2008). The PAGE (Policy Analysis of the Greenhouse Effect) model was developed by Chris Hope in 1991 for use by European decision-makers in assessing the marginal impact of carbon emissions (Hope 2006, Hope 2008). The FUND (Climate Framework for Uncertainty, Negotiation, and Distribution) model, developed by Richard Tol in the early 1990s, originally to study international capital transfers in climate policy was widely used to study climate impacts (e.g., Tol 2002a, Tol 2002b, Anthoff et al. 2009, Tol 2009).
- ↑ The IWG subsequently provided additional minor technical revisions in November of 2013 and July of 2015, as explained in Appendix B of the 2016 TSD (IWG 2016a).
