Critics say ‘little science’ behind Obama admin’s social cost of carbon estimate

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Michael Bastasch DCNF Managing Editor
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The White House raised its estimates of the social cost of carbon dioxide emissions from $21 per metric ton to $35 per metric ton, but critics say that there is “little ‘science’ behind the whopping numbers.”

“The ‘social cost of carbon’ is a very malleable concept that can be inflated or deflated by turning certain wheels,” Institute for Energy Research senior fellow Robert Murphy told The Daily Caller News Foundation.

The social cost of carbon is an “estimate of the economic damages associated with a small increase in carbon dioxide (CO2) emissions, conventionally one metric ton, in a given year. This dollar figure also represents the value of damages avoided for a small emission reduction.”

It is used by federal agencies, including the Environmental Protection Agency, to craft regulations. The higher the social cost for emitting carbon dioxide, the easier it is for the Obama administration to justify stricter environmental regulations.

The EPA is set to finalize carbon emissions limits for new power plants, but environmentalists have been pushing for the administration to set emissions limits for existing power plants. This is more justifiable the more the benefits of carbon emissions reduction outweighs the costs.

However, Murphy contends that the social cost of carbon estimates vary widely depending on the discount rate that is used in the calculation. The lower the discount rate, the higher the social cost of carbon — the government uses a 2.5 percent, 3 percent, and 5 percent discount rate in its estimates.

“For example, the White House’s own Working Group reported back in 2010 that with a 5% discount rate, and averaging across all of the computer simulation outcomes, the social cost of carbon at that time was a mere $5/ton,” Murphy said.

Murphy noted that the White House estimates of the cost of carbon emissions has skyrocketed in only three years. In 2013 the social cost of carbon was estimated at $11 per metric ton using a 5 percent discount rate — a 120 percent increase from 2010.  He also noted that, estimating the social cost of carbon doesn’t necessarily help policymakers, since using it to justify regulations to curb carbon emissions would only move those emissions out of the U.S. and into other countries.

“Strictly speaking, the ‘social cost of carbon’ is directly relevant for government policy only in the context of a worldwide uniform enforcement of the penalty on emissions (such as a carbon tax),” Murphy told TheDC News Foundation. “But if, say, the estimated theoretical social cost of carbon is $20/ton, and the US unilaterally imposes a $20/ton carbon tax, then that is actually inefficient, because much of the emission activities will simply migrate to other jurisdictions.”

“In any event, the public should realize just how ‘unsettled’ the economic side of the carbon debate is,” Murphy previously wrote. “The estimates keep bouncing around all over the place, and the estimates are driven by very controversial parameter choices, not objective assessments given by physicists and climatologists.”

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