Tamar Hallerman
GHG Monitor
09/21/12
The U.S. government “significantly understates” the potential benefits of mitigating carbon emissions, a study published this week in the Journal of Environmental Studies and Sciences contends. In their report, authors Laurie Johnson of the Natural Resources Defense Council and Chris Hope of the University of Cambridge argue that the government’s model for estimating the social cost of carbon (SCC)—or the monetized value of the future damages caused by each ton of CO2 emitted today—is flawed and underestimates the negative impacts of climate change on future generations. In 2009, an interagency task force comprised of officials from six cabinet agencies and six executive branch offices determined that the SCC is $21 per metric ton of CO2. The benefit of having such a figure, according to the Obama Administration, is to calculate a consistent figure that can be used by all federal agencies when formulating policy and regulations.
Johnson and Hope said that one of the key flaws in the government’s model surrounds its calculations of discount rates—an economic tool used to translate how much future damages that occur as a result of climate change will cost in today’s values. The pair argued that the rate the government used is far too high, particularly when looking at a problem that could affect multiple generations of people. When the two did their own calculations using a shrunken discount rate, they said that the SCC is 2.6 to 12 times higher than the government’s estimate, falling in the range of $55 to $266 per ton of CO2, according to the study. “Our results suggest that regulatory impact analyses that use the government’s limited range of SCC estimates will significantly understate potential benefits of climate mitigation,” the study says.
In an interview this week, Johnson, chief economist for the Natural Resources Defense Council’s Climate and Clean Air program, said that while several factors went into the government’s SCC modeling, discount rates are the easiest to alter and could provide a good starting point for modifying the figure to reflect the real costs of climate change. “We have to start somewhere with getting this number right, and because it’s so hard to quantify many of these costs, it’s much easier to start with this flaw in the model because it doesn’t involve going out and doing a bunch of whole new and costly studies. So that’s why we started there,” Johnson said.
Report: Gov’t Underestimates Risk of Fossil Fuels
The study says that as a result of the SCC figures, the government model underestimates the possible risks of using fossil fuels today on future generations. The authors argue that once their revised SCC is taken to account, the real price of unmitigated fossil fuel-fired is much higher than clean energy sources after accounting for pollution damages. “While natural gas might appear to be the cheapest generation option for new power plants, using renewable sources or advanced fossil fuel generation with pollution capture technology is more cost effective in the long run than building new conventional plants using either natural gas or coal, with real economic benefits accruing quickly and increasing over time,” Johnson said in an accompanying blog post. She added that in many cases it would also be more economic to replace some existing fossil generation with cleaner sources rather than continue to operate them under that scenario.
Johnson said it is unclear whether the government will look to revise its SCC modeling as a result of the study. “I don’t know what the internal workings are of what the government will do. That’s why we did this. We want to push them to do this,” she said. Requests for comment from the Environmental Protection Agency and the White House’s Office of Management and Budget, which both were on the interagency task force, were not returned.
