OIRA works quietly on updating social cost of carbon

Source: Hannah Hess, E&E News reporter • Posted: Friday, June 16, 2017

Not far from the White House, some of the federal government’s most influential number crunchers are still working on the social cost of carbon.

President Trump’s executive order on energy independence effectively signaled “pencils down” on federal work to estimate the monetary damage of greenhouse gas emissions, disbanding the interagency working group that calculated the dollar value on the effect of greenhouse gas emissions on the planet and society.

But his order didn’t eliminate the metric entirely.

The Office of Information and Regulatory Affairs’ Jim Laity, a career staffer who leads the Natural Resources and Environment Branch, said yesterday his office is “actively working on thinking about the guidance” Trump gave in March.

With the Trump agenda focused on regulatory rollback, federal agencies haven’t yet issued rules that require valuations of carbon emissions, “although they are working on something coming in the not-too-distant future,” Laity told an audience attending the National Academy of Sciences’ seminar on valuing climate change impacts.

Employees from U.S. EPA, the Interior Department and the Department of Energy were in the crowd, along with academics and prominent Washington think tank scholars.

Greens fear the Trump administration could wipe out the social cost of carbon valuation, currently set around $40 per metric ton of carbon dioxide, as part of what they portray as a war on climate science. Revisions to the White House estimates have raised hackles among Republicans and conservatives, who allege they are part of a secret power grab.

Laity would play a key role in that effort as top overseer of energy and environmental rules.

Addressing the summit via webcast yesterday, Laity walked the audience through a decade of actions related to the calculation and influential feedback, including from a 13-member panel of the National Academies of Sciences, Engineering and Medicine. He stressed the outcome is still uncertain.

The Trump administration “looked at the work we had done, and they looked at the criticisms, and they decided we needed to have a pause to kind of rethink what we were doing a little bit in this area,” Laity said, previewing the executive order that was praised by the oil and gas industry.

The metric flew under the radar during President Obama’s first term. However, a significant jump in values in 2013 set the stage for a clash between then-OIRA Director Howard Shelanski and Republican lawmakers who alleged the estimate was the product of a closed-door process (E&E Daily, July 19, 2013).

A few months after the hearing, OIRA announced it would provide opportunity for public comment on the estimate. Critics took issue with the discount rate the government used to account for damage and expressed concern that the finding, though based on peer-reviewed literature, had not been peer-reviewed.

“I think we also realized that we needed to pay more attention to some of these issues than maybe we had in the past,” Laity said.

OIRA received 140 unique comments, and some 39,000 letters, which Laity said mostly supported having some kind of cost-benefit analysis of the cost to society of each ton of emissions in property damage, health care costs, lost agricultural output and other expenses.

“We took some of those concerns to heart,” he said.

In July 2015, the White House slightly revised its estimate. It also announced that the executive branch would seek independent expert advice from the National Academies to inform yet another revision of the estimate, though federal agencies would continue to use the current figure in their rulemakings until that revision could be made (Greenwire, July 6).

Part one of the two-phase study, released in January 2016, blessed the figure. It found the White House did not need to review its estimates in the short term. Part two, released a few weeks before Obama left office, recommended a new framework for making the estimate and more research into long-term climate damage.

Within three months, the Trump administration formally disbanded the interagency working group that would have implemented those recommendations. The executive order also formally withdrew the technical support documents OIRA had used in the past.

The think tank Resources for the Future recently announced the start of an initiative focused on responding to the scientists’ recommendations (Greenwire, June 9).

Guidance for OIRA

Laity noted that the next paragraph of Trump’s executive order acknowledged agencies would need to continue monetizing greenhouse gas emissions damage in their regulations, to the extent that the rules affect emissions.

As an interim measure, the order directed OIRA to offer some guidance about how to do that, directing that any values that were used would be consistent with the guidance of a document published by the Office of Management and Budget in September 2003, Circular A-4.

There are two main areas of concern: the discount rate and the global focus of the current estimate.

“A-4 has very specific advice,” Laity explained. The document says pretty unequivocally that the main factor in weighing regulations should be cost and benefits to the U.S. If a regulation does have significant impacts outside the U.S. that are important to consider, these should be “clearly segregated out and reported separately,” he said.

Economists clashed during a recent hearing of the House Science, Space and Technology Committee on how best to estimate the figure.

Former Obama administration official Michael Greenstone, who attended yesterday’s summit and gave a presentation, argues the benefits of emission reductions play out in part in international politics.

Greenstone, chief economist for the Council of Economic Advisers in 2009 and 2010, has warned that reverting to a social cost of carbon that only considers domestic benefits of emission reductions is “essentially asking the rest of the world to ramp up their emissions” (E&E Daily, March 1).

Said Laity: “All I can say right now is that we are actively working on thinking about the guidance that we have been given in the new executive order and, sort of technically, how best to implement that in upcoming … rulemaking.”