Page:Technical Support Document - Social Cost of Carbon, Methane and Nitrous Oxide Interim Estimates under Executive Order 13990.pdf/3

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Executive Summary

A robust and scientifically founded assessment of the positive and negative impacts that an action can be expected to have on society provides important insights in the policy-making process. The estimates of the social cost of carbon (SC-CO₂), social cost of methane (SC-CH₄), and social cost of nitrous oxide (SC-N₂O) presented here allow agencies to understand the social benefits of reducing emissions of each of these greenhouse gases, or the social costs of increasing such emissions, in the policy making process. Collectively, these values are referenced as the “social cost of greenhouse gases” (SC-GHG) in this document. The SC-GHG is the monetary value of the net harm to society associated with adding a small amount of that GHG to the atmosphere in a given year. In principle, it includes the value of all climate change impacts, including (but not limited to) changes in net agricultural productivity, human health effects, property damage from increased flood risk natural disasters, disruption of energy systems, risk of conflict, environmental migration, and the value of ecosystem services. The SC-GHG, therefore, should reflect the societal value of reducing emissions of the gas in question by one metric ton. The marginal estimate of social costs will differ by the type of greenhouse gas (such as carbon dioxide, methane, and nitrous oxide) and by the year in which the emissions change occurs. The SC-GHGs are the theoretically appropriate values to use in conducting benefit-cost analyses of policies that affect GHG emissions.

Federal agencies began regularly incorporating social cost of carbon (SC-CO₂) estimates in benefit-cost analyses conducted under Executive Order (E.O.) 12866^[1] in 2008, following a court ruling in which an agency was ordered to consider the value of reducing CO₂ emissions in a rulemaking process. The U.S. Ninth Circuit Court of Appeals remanded a fuel economy rule to DOT for failing to monetize CO₂ emission reductions, stating that “while the record shows that there is a range of values, the value of carbon emissions reduction is certainly not zero.”^[2] In 2009, an interagency working group (IWG) was established to ensure that agencies were using the best available science and to promote consistency in the values used across agencies. The IWG published SC-CO₂ estimates in 2010 that were developed from an ensemble of three widely cited integrated assessment models (IAMs) that estimate global climate damages using highly aggregated representations of climate processes and the global economy combined into a single modeling framework. The three IAMs were run using a common set of input assumptions in each model for future population, economic, and GHG emissions growth, as well as equilibrium climate sensitivity (ECS) – a measure of the globally averaged temperature response to increased atmospheric CO₂ concentrations. These estimates were updated in 2013 based on new versions of each IAM. In August 2016 the IWG published estimates of the social cost of methane (SC-CH₄) and nitrous oxide (SC-N₂O) using methodologies that are consistent with the methodology underlying the SC-CO₂ estimates. In January 2017, the National Academies of Sciences, Engineering, and Medicine issued recommendations for an updating process to ensure the estimates continue to reflect the best available science. In March 2017, Executive Order 13783 disbanded the IWG and instructed agencies when monetizing the value of changes

↑ Under E.O. 12866, agencies are required, to the extent permitted by law and where applicable, “to assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” As indicated in the discussion above, many statutes also require agencies to conduct at least some of the same analyses required under E.O. 12866, such as the Energy Policy and Conservation Act which mandates the setting of fuel economy regulations.
↑ Ctr. for Biological Diversity v. Nat'l Highway Traffic Safety Admin., 538 F.3d 1172, 1200 (9th Cir. 2008).

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[1] Under E.O. 12866, agencies are required, to the extent permitted by law and where applicable, “to assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” As indicated in the discussion above, many statutes also require agencies to conduct at least some of the same analyses required under E.O. 12866, such as the Energy Policy and Conservation Act which mandates the setting of fuel economy regulations.

[2] Ctr. for Biological Diversity v. Nat'l Highway Traffic Safety Admin., 538 F.3d 1172, 1200 (9th Cir. 2008).

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