Centralina Power Plant

U.S. regulators use a measure called the social cost of carbon to put a price tag on the damage caused by emitters, such as this power plant in Washington State.

Kid Clutch/Flickr (CC BY 2.0)

Here’s how to improve controversial carbon accounting tool that Trump allies want to gut, says U.S. science academy

The U.S. government should tweak its approach for estimating the financial impacts of carbon dioxide (CO2) pollution, which it uses in drafting new regulations, according to a report released today by the U.S. National Academies of Sciences, Engineering, and Medicine (NAS).

The new report focuses on a controversial measure called the social cost of carbon (SCC), an estimate in dollars of the economic consequences of CO2 emissions. Determining the SCC is a complex calculation that includes estimates of how much warming is created by additional CO2, the damages—such as lost agricultural productivity and human disease—that result, projections of population and economic growth, and a “discount rate” that quantifies how much society today would spend today to avoid future damages.

The current estimate for the SCC in 2020 is $42 per metric ton of CO2 added to the atmosphere. That means if a particular regulation was projected to reduce CO2 emissions in 2020 by 1 million metric tons, the estimated benefit would be $42 million, which could then be weighed against the cost of implementing the new regulation.

As required by executive orders and a 2008 court ruling, federal agencies use the SCC to inform regulators about the economic consequences of rules they adopt. To date, it’s been part of the rulemaking process for more than 100 federal regulations. But that has also made it highly controversial. Members of President-elect Donald Trump’s transition team have criticized the use of the SCC–saying it has been used to justify costly regulation–and have vowed to scrutinize how it is calculated.

NAS beat them to the punch. Their committee did not recommend a dollar figure for the SCC, nor were they asked to. Rather they laid out a strategy to strengthen the scientific basis for the estimates, reduce their uncertainties, and increase transparency of the process. The panel recommended that the models that calculate the SCC should include four separate “modules”:

  • A “socioeconomic” module would generate predictions of greenhouse gas emissions based on population and world economic output;
  • a “climate” module would translate those emissions into projected temperature changes;
  • a “damages” module estimates the impact of rising temperatures in dollars; and
  • a “discount” module would link future financial impacts into current dollar amounts.

With this arrangement each of the modules could then be evaluated with the most scientifically relevant information.

The approach “would provide a transparent articulation of the inputs, outputs, uncertainties, and linkages between the different steps,” says Richard Newell, president and CEO of Resources for the Future in Washington, D.C., and co-chair of the NAS committee that wrote the report. Using this arrangement, the panel concluded that the SCC should be updated roughly every 5 years to reflect the latest scientific information.