The EPA Owes Us a Reason for Killing Clean Power Plan
When a company emits a ton of carbon dioxide, what damage has it caused, exactly? The answer is called the “social cost of carbon,” which may be the most important number that you’ve never heard of.
If the number is large, regulation of greenhouse gas emissions will be amply justified. If it is small, not so much.
In proposing to scrap the Obama administration’s Clean Power Plan, the Environmental Protection Agency recently announced that the social cost of carbon is close to zero. Well, a bit higher than that, but not a lot.
More remarkably still, the EPA offered hardly any reasons for its decision. As Ring Lardner once put it: “Shut up, he explained.”
Here’s the background. In 2009, the Obama administration set up a technical working group to produce a social cost of carbon. (Disclosure: At the time, I was administrator of the Office of Information and Regulatory Affairs, and I helped to convene the group.) Over many months, the working group pored over scientific and economic research. There was no political interference with the mind-numbingly technical process. As the General Accounting Office later confirmed, the group “relied largely on existing academic literature and models to develop its estimates.”
One of the group’s key decisions was to take into account the harm done by U.S. emissions to people in other nations, not just in the United States. In explaining that decision, the group noted that climate change is a “global public good”: Emissions by any country inevitably affect other countries. It added that if every nation considers only domestic damage, all nations, including the U.S., will end up losing. The only way to solve the problem is to establish a general norm or practice, by which China, India, Russia and other nations take steps to prevent damage outside their borders, not just at home. So use of the global measure will ultimately help Americans.
In 2010, the group produced a central value of $21 for the social cost of carbon. By 2016, new research resulted in an update, yielding a figure of $36.
For policy, that number matters, because it can play a big role in deciding on whether to go forward with numerous regulations -- and in producing the chosen level of stringency. The group’s estimate was also upheld in court.
But science and economics continue to evolve. A more recent estimate, by Yale economist William Nordhaus (often mentioned as a candidate for the Nobel Prize), finds that the $36 figure is just a bit too high; he favors $31.
Other experts think that $36 is far too low, with estimates ranging to $200 or higher.
The EPA’s figure under President Donald Trump? Maybe $1. Maybe as high as $6.
How did it get there? The EPA knew enough not to deny that climate change is occurring. The major driver behind its low number was its decision to consider only damage to the U.S. -- and to ignore damage to people in every other nation on the face of the planet.
Ironically, the EPA could have proposed exactly what it wants to do -- to jettison the Clean Power Plan -- without saying that it will ignore the harm that American companies do to people in other nations. Its proposal depended on its interpretation of the Clean Air Act, not on slashing the social cost of carbon. It could easily have made that proposal while offering a range of numbers and acknowledging that with a global damage measure, the benefits of emissions reductions would be higher.
It’s true that reasonable people have argued against use of the global measure. In their view, American regulators should focus only on damage to Americans. And the Trump administration, which is rightly concerned with the costs of regulations, is perfectly entitled to disagree with, and ultimately to reject, the judgments of the Obama administration.
But if the EPA is going to alter its position, to ignore harm to those outside our country, and to treat the social cost of carbon as close to zero, it owes the American people, and the world, some kind of explanation. In a nation that is committed to giving reasons for its actions, rather than exercising naked political will, it is required -- by sound policy and also by law -- to produce some substantive justification for its shift.
The EPA didn’t do that. It essentially said, “This is what we are going to do,” without offering reasons for its reversal of course.
That’s the essence of arbitrariness. It is deeply sad, and a real puzzle, that the agency’s lawyers, the Department of Justice and the many excellent analysts within the federal government allowed that to happen.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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Katy Roberts at email@example.com