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Biden administration restores Obama-era carbon cost estimate, plans 2022 update

26 February 2021 Karin Rives

The US government's estimated price tag for greenhouse gas emissions, or the "social cost of carbon" jumped from $1 to $51 per metric ton of carbon dioxide emissions after an interagency working group decided on 26 February to temporarily return to an inflation-adjusted figure used by the Obama administration.

The 14-agency group, tasked a month ago by newly elected President Joe Biden to present an interim carbon cost figure, said it will have an updated estimate for carbon dioxide emissions based on the latest science in January 2022. This final estimate will be vetted through a public process.

The working group also set separate interim social costs for two other potent greenhouse gases, methane at $1,500 per metric ton and nitrous oxide at $18,000 per metric ton. The majority of nitrous oxide comes from agriculture, while methane is released during the extraction of fossil fuels.

The group is charged with estimating and regularly updating the number used to calculate economic impacts on farm productivity, human health, natural disasters, migration and more when greenhouse gases are added, ton for ton, to the atmosphere and climate change worsens. The Trump administration disbanded the group and its estimates in 2017 under an order seeking to promote fossil fuel projects and energy independence.

By returning to the Obama-era estimate of about $52 per metric ton for carbon dioxide, the interagency working group acknowledged that agencies will be operating with an outdated figure, but said it will support scientifically more accurate rulemaking for now.

"This update reflects the immediate need to have an operational [carbon cost estimate] for use in regulatory benefit-cost analyses and other applications that was developed using a transparent process, peer-reviewed methodologies, and the science available at the time of that process," the 14-agency working group said in its report Friday.

But critics said the group could have done better than to just resort to an estimate that is seven years old, while others blasted it for being a thinly veiled "carbon tax."

"Given the magnitude of the climate crisis and the timeline we face, we will need to spend significantly more than $51 per ton to address climate change effectively," said James Goodwin, a senior policy analyst with the Center for Progressive Reform.

Meanwhile, Sen. John Barrasso, Republican-Wyoming, ranking member of the Senate Committee on Energy and Natural Resources warned that the higher carbon cost estimate will bring higher energy costs for consumers and red tape for industry.

"Since the president can't rationalize the crippling costs of his climate policies, he needs to exaggerate the benefits," Barrasso said in a terse statement Friday evening. "It's a move straight from the Obama administration's playbook. No one will be fooled this time."

Scientists, however, have long used the social cost of carbon in their research, and several states have continued to use the Obama-era estimate in their policymaking. Richard Revesz, a professor at New York University School of Law and director for Institute for Policy Integrity, said whatever comes out of the working group going forward will be reviewed by leading economists and other experts.

"It sets forth a blueprint for the computation of final values, incorporating recent developments in science and economics and the input of the National Academies of Science, Engineering, and Medicine," he said.

The next update in 2022 will likely be significantly higher since research shows the interim estimate of $51 is too low, he added.

In a paper published in the U.S. National Bureau of Economic Research earlier this month, Joe Stiglitz of Columbia University and Lord Nicholas Stern of the London School of Economics argued that the social cost of carbon need to be around $100 to make sure policies align with the goals of the Paris Agreement.

Under Trump, the US Environmental Protection Agency and other federal agencies used an estimate that ranged from $1 to $7 and showed a much smaller cost from greenhouse gas emissions. It arrived at that figure by, among other things, only counting U.S. impacts even though climate change is a global problem.

Revising the cost downward helped agencies justify policies such as the decision to roll back the Obama-era Clean Power Plan in 2019, and in January to issue the nation's first airline emission rule. The aircraft rule had no impact since the industry had already met its new emission requirements.

Posted 26 February 2021 by Karin Rives, Senior Journalist, IHS Markit

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