Former Obama Adviser Resurrects The Debate Over The ‘Social Cost Of Carbon’ Metric

Michael Greenstone

A group of economists and lawyers are trying to resurrect a contentious climate policy battle, by criticizing the Trump administration’s abandoning of the “social cost of carbon” (SCC) estimate used by the Obama administration.

They argued the SCC is still the “best estimate” for figuring out the future cost of global warming. The group published a letter in the journal Science co-authored by Michael Greenstone, the chief economist of former President Barack Obama’s economic advisers council.

The “social cost of greenhouse gases should be regularly updated, especially to reflect the latest evidence about damage functions,” reads the letter co-authored by Greenstone. He also helped create the federal working group that developed the SCC.

The authors have “confidence that it is still the best estimate of the social cost of greenhouse gases.” The other authors included members of the Institute for Policy Integrity, a liberal think tank.

President Donald Trump disbanded the inter-agency working group behind the SCC earlier this year, sparking outrage from environmentalists and former Obama administration officials.

The White House had serious questions about two key aspects of the SCC, but conservative economists have been voicing objections to the metric for years.

David Kreutzer, an economist at the conservative Heritage Foundation, co-authored a 2016 study that found the SCC was much smaller than the Obama administration claimed and depended highly on the discount rate and models used.

In fact, the SCC is negative when based on observed temperature increases rather than climate models, according to Kreutzer’s study.

Likewise, Robert Murphy, an economist with the free market Institute for Energy Research, argued in 2013 the SCC “is a very malleable concept that can be inflated or deflated by turning certain wheels.”

And why not?

Carbon dioxide fuels the modern world. Human prosperity during the 20th Century was largely propelled by the internal combustion engine and other such innovations, almost all using CO2-emitting fossil fuels.

A May study by University of Sussex economist Richard Tol found that while there is a social cost to burning CO2, the private benefit of doing so was “much higher.” On average, the private benefit of CO2 was $411 per ton — more than eight times larger than the Obama administration’s estimate.

Greenstone and his co-authors went after two specific objections to the SCC cited by the Trump administration — the discount rate and use of global benefits.

Greenstone and company argued the Obama administration was correct in using a 2.5 to 5 percent discount rate, instead of a higher one. They say a higher discount rate would make future damages from global warming seem less.

“National Academies of Sciences and the U.S. Council of Economic Advisers strongly support a 3% or lower discount rate for intergenerational effects,” they wrote.

“A 7% rate based on private capital returns is considered inappropriate because the risk profiles of climate effects differ from private investments,” Greenstone and his co-authors wrote in their letter.

Greenstone also took on the criticism that the SCC estimated global benefits to domestic regulations. Not only did the authors argue taking international damages into account was appropriate, they admitted “current models cannot accurately estimate a domestic-only share of the social cost of greenhouse gases.””

So, is there any chance the Trump administration will re-adopt the SCC? Administration officials are reportedly “working on something coming in the not-too-distant future,” according to an official.

But don’t expect it to be a guidepost for a policy like in the Obama administration.

Some states are using the SCC in energy policy decisions, which make adopting green policies more economically viable on paper.

Both Colorado and New York require utilities to consider the SCC when planning electricity generation. New York went further and used the metric to set subsidy rates for ailing nuclear power plants.

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Comments (16)

  • Avatar

    Al Shelton

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    The first thing this ignoramus must realize is that CO2 does NOT cause global warming, hence climate change.
    All his SCC calculation are meaningless.

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  • Avatar

    4TimesAYear

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    Total fabrication. Hokum then,Hokum now.

    Reply

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      Sonnyhill

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      The social cost versus the private benefit. WOW! I’d like to see the Venn diagram for that.
      Calculate this one: I burn some diesel fuel growing organic potatoes for personal profit. A trucker burns some diesel fuel hauling those spuds to the city, again for personal profit. City denizens buy those organic beauties, drive ’em home, cook ’em and eat ’em. Utility company makes a profit selling them the energy for the stove.
      Seems to me it’s all personal benefit, every step of the way. Who suffers a ” social cost”?

      Reply

  • Avatar

    Spurwing Plover

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    CO2 is not a polutant its a plant food plants need it to survive and reproduce if it was to be eliminated becuase of Junk Science and lies like they did with DDT then the planet would die becuase the plant would die off first then he herbavors the the carnivors and humans

    Reply

    • Avatar

      Sonnyhill

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      Spurthing, nobody is going to eliminate CO2.
      99% of it is produced by nature.

      Reply

      • Avatar

        JayPeeIdiot

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        Man-made CO2 has fundamentally changed the atmospheric mixture. There has been a 40% increase of CO2 because of man since 1880.

        Reply

        • Avatar

          Sonnyhill

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          Right, Drew. That’s why we’re all gasping for oxygen like fish out of water.

          Reply

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            JayPeeIdiot

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            Depends on how bad the coal pollution is where you live. Beijing now sells cans of air – seriously. HOWEVER, the point was that the atmosphere now has 40% more energy-trapping CO2 than 140 years ago and far less carbon sinks (old growth forests) thanks to man.

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            Sonnyhill

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            Old growth forests are better at absorbing CO2? Bull sh!t, idiot.

          • Avatar

            JayPeeIdiot

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            Educate yourself moron -https://www.nature.com/nature/journal/v455/n7210/full/nature07276.html

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            Sonnyhill

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            You’re referring to an article from 2008. A study was published in Nature February 11, 2016. Lead author of the study, Lourens Poorter, found that secondary growth forests have up to 11 times the carbon uptake of old growth forests. 1500 forest plots were used in the study.

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    Spurwing Plover

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    Time to maroon the enviroemntal wackos on some far distant planet and let them fend for themselves lets see how long they would last on a planet who dont care for granola bar munchers and tree huggers

    Reply

    • Avatar

      Sonnyhill

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      Rainman, why waste a Mars mission on “enviro -whackos” ? Fire them at the Sun.

      Reply

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    David Lewis

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    Let’s not lose focus on the reason the Social Cost of Carbon was invented. The cost of following the “solution” that the climate change movement insists we do is extreme. One way to justify the costs is to come up with a phony cost to the emissions of carbon dioxide. Both the problem and the justification of the solution are based on fraudulent calculations.

    Reply

  • Avatar

    Spurwing Plover

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    What ever happened to Global Cooling at the New Ice Age which tat very same liberal rag TIME was blabbering off about back in the 1970’s as much as they were lying about Global Warming in the 1990’s I mean TIME,ROLLING STONE and the now defunked NEWSWEEK lied to their readers and they need to be taken to task for this all

    Reply

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    David Lewis

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    It doesn’t matter what the trees do. A 40% increase in carbon dioxide is a non-issue. There is very poor correlation between carbon dioxide and the earth’s temperature. The most compelling is that 40% of the warming blamed on man occurred between 1910 and 1941 when the carbon dioxide levels were relatively low and raising very slowly.

    Another very compelling study that was just released by a German group and unlike the IPCC models, correlates to real word data as far back as the Roman warming period. The correlation of the model to data is 0.84, which is quite high. In the model carbon dioxide only has a minor effect. In addition, we can expect climate cooling for the next 50 years.

    https://climatechangedispatch.com/new-study-by-german-physicists-concludes-we-can-expect-climate-cooling-for-next-50-years/

    I’m only talking about carbon dioxide. The non-carbon dioxide pollution that they have in China is a problem.

    Reply

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