Coal miners wave signs as Republican presidential candidate Donald Trump speaks during a rally in Charleston, W.Va.

President-elect Donald Trump has promised to aid the coal and other fossil fuel industries, in part by rolling back climate regulations.

Associated Press

Trump team targets changes to key metric that calculates social cost of carbon

President-elect Donald Trump has made no secret of his intention to dramatically reshape U.S. climate and energy policy. He has said he intends to name staunch allies of the fossil fuel industry to lead the Environmental Protection Agency and the state, interior, and energy departments, and promised to walk away from international climate agreements. And last week a provocative leaked memo hinted at another likely element of the incoming administration's plan for weakening climate regulations: tweaking an obscure but increasingly utilized economic measure that tallies the costs and benefits of controlling carbon pollution.

The memo, which included 74 questions from Trump's Department of Energy (DOE) transition team to agency officials, caused a stir because it asked for the names of agency employees involved in developing climate policy. The transition team was silent on why it asked for the names, DOE officials ultimately refused to provide them, and Trump's team ultimately disowned the questionnaire, saying it was "unauthorized." But the move spurred fears that the new administration would seek to fire or punish those employees, and it drew condemnation from science advocacy groups and some lawmakers in Congress. "It harkens back to an era when politicians sought out individuals for partisan politics with little basis of any wrongdoing," said Representative Bill Foster (D–IL), a physicist who spent 22 years at DOE's Fermi National Accelerator Laboratory in Batavia, Illinois. "These Cold War–era tactics threaten to undo the decades of progress we have made on climate change and to dissuade a new generation of scientists from tackling our world's biggest problems."

Many of the other questions have a technical flavor, asking about DOE's role in developing the nitty-gritty statistical and economic data that often underpin regulatory efforts. One set of inquiries, for example, focuses on an economic measure called the social cost of carbon (SCC), which attempts to quantify the economic damage associated with carbon emissions and the climate change they drive. It is meant to tally the cost of impacts such as coastal erosion, reduced harvests, and increased disease, and it provides crucial guidance about how much society should pay now to avoid future damage from carbon emissions. As economist Michael Greenstone of the University of Chicago in Illinois, who served as a senior economic official in the Obama administration, puts it, "If you want to be hostile to climate regulations, the SCC is kind of a pivot joint."

As a result of a 2008 court case, federal agencies typically consider the SCC in analyzing the costs and benefits of new regulations. And although the SCC alone doesn't determine whether a new rule moves forward, the measure has played a role in developing some 100 new regulations. They address issues including vehicle fuel efficiency, pollution from coal-fired power plants, and energy efficiency standards for home appliances. The SCC "has become increasingly important in the federal regulatory arena because carbon emissions are pervasive throughout the economy," says Richard Newell, president of Resources for the Future, a think tank in Washington, D.C., and the co-chair of a panel at the National Academies of Sciences, Engineering, and Medicine that will soon issue a report on the measure.

That report is likely to confirm that calculating the SCC, which melds projections about likely impacts of climate change with economic assumptions, isn't easy. Government and academic scholars have debated the best methods for years, and researchers have developed three major computer models dedicated to the task. In 2010, a working group assembled by President Barack Obama's administration recommended that agencies set the SCC at $21 per ton of carbon, and in 2013 the administration boosted the number to $36 per ton, citing increasingly dire predictions about the global impacts of climate change.

Not surprisingly, opponents of regulation have accused the Obama administration of manipulating SCC values to justify costly new rules. For example, critics have panned the administration's estimate that its Clean Power Plan to reduce power plant pollution would produce climate benefits of up to $29 billion in 2030, compared with costs of just $8.4 billion. One of the leading SCC skeptics—Thomas Pyle, president of the Institute for Energy Research, an industry-affiliated think tank in Washington, D.C.—is leading the DOE transition team that asked questions about how the measure is developed and used. Shortly before being named to that post, Pyle predicted in a statement that, under Trump, "the SCC will likely be reviewed and the latest science brought to bear. If the SCC were subjected to the latest science, it would certainly be much lower than what the Obama administration has been using."

There are at least two major ways a new administration could tweak the SCC to produce lower values, analysts say. One is to change the discount rate—a value, expressed as a percent, that attempts to quantify what society would spend today to avoid damage in the future. "The discount rate is the most important question," but it is also "extremely controversial," says William Nordhaus, an economist at Yale University, who has written extensively about the SCC. Currently, the Obama administration asks agencies to calculate the SCC using a range of discount rates, from 2.5% to 5%, and it has tended to rely on the lower rates, which produce higher SCC values. For example, in 2020 the SCC is $62 per ton at a 2.5% rate, but $12 per ton at 5%. So moving to a higher rate makes rules appear less beneficial.

Another is to change the geographic scope of the calculation. Currently, the Obama administration takes into account the potential global benefits of any new regulation, not just the benefits within the United States. It says that's because climate change is a global problem. But some economists question that approach, arguing it overstates the benefits. An effort to narrow the scope of the SCC could fit in with Trump's nationalistic leanings, notes Ted Gayer, an economist at the Brookings Institution in Washington, D.C., who has been critical of the global approach. "If you put it in the perspective of the Trump campaign and ‘America first,’ it makes sense," Gayer says.

Although a Trump administration could tweak the SCC, it is unlikely to be able to completely eliminate it, Greenstone says. "This is not the first time people have come hunting for the social cost of carbon," he says. Industry groups have challenged it in court, but judges have tended to find the concept sound. "For reasons of law and science, it looks like a very bumpy, windy road to me to greatly reduce the social cost of carbon."