By Marlo Lewis, Jr. of CEI. Excerpts:
"The House Science Subcommittees on Environment and Oversight yesterday held a joint hearing titled “At What Cost? Examining the Social Cost of Carbon.” Four witnesses testified. I will review some hearing highlights, but first a bit of background.
The social cost of carbon (SCC) is a monetary estimate of the damages
supposedly caused by an incremental ton of carbon dioxide emitted in a
given year. Discernible in neither economic nor meteorological data,
social cost values are guesstimates produced by computer programs
called “integrated assessment models” (IAMs). What IAMs “integrate” is a
speculative model of how carbon dioxide emissions will change the
climate with a speculative model of how climate change will affect
consumption, GDP, and health.
Social cost estimation is inherently speculative for two reasons.
First, IAMs forecast climate change and the associated economic impacts
over immense timespans vastly exceeding the limits of empirical
validation. For example, to compute social cost of carbon values, the
Obama administration’s Interagency Working Group (IWG) ran three
models—known as FUND, DICE, and PAGE—out to the year 2300.
Second, modelers have wide latitude in choosing the inputs that
determine model outputs. By fiddling with non-validated climate
parameters, made-up damage functions,
and discount rates, modelers can get just about any result they desire.
What they seem to desire are big, scary numbers to justify costly
regulations. Indeed, if they produce a social cost estimate high enough,
modelers can make fossil fuels look unaffordable no matter how cheap,
and renewables look like a bargain at any price.
And during the second Obama administration, social cost of carbon
estimates rose dramatically.
Values in the Interagency Working Group’s 2013 Technical Support Document were about 60 percent higher than those in the equivalent document in 2010—as
if somehow in just four years climate change had become 60 percent
worse, and carbon dioxide regulations 60 percent more valuable. Skeptics
accused the administration was running a politically-motivated GIGO exercise.
Okay, on to the testimonies.
Ted Gayer of the Brookings Institution agreed with a common criticism of the Interagency Working Group. OMB Circular A-4,
a directive from the White House Office of Management and Budget on how
agencies should estimate regulatory costs and benefits, states:
Your analysis should focus on benefits and
costs that accrue to citizens and residents of the United States. Where
you choose to evaluate a regulation that is likely to have effects
beyond the borders of the United States, these effects should be
reported separately.
The IWG did exactly the reverse. In both the 2010 and 2013 Technical
Support Documents, they reported the optional global social cost values
but not the required domestic values. That matters because, thanks to
America’s superior adaptive capabilities, any domestic damage from an
incremental ton of carbon dioxide is bound to be much smaller than the
global damage. By reporting only global but not domestic estimates, the
IWG not only allows but requires agencies to dramatically inflate the
perceived benefit-cost ratio of their regulations. Gayer explains:
The difference between global and domestic
benefits of greenhouse gas regulations is significant, as the global
measure is 4 to 14 times greater than the estimated domestic measure.
For example, for its proposed regulations for existing power plants, the
EPA estimated climate benefits amounting to $30 billion in 2030.
However, the estimated domestic climate benefits only amount to $2-$7
billion, which is less than EPA’s estimated compliance costs for the
rule of $7.3 billion. The use of a global social cost of carbon to
estimate benefits means that agencies will adopt regulations that could
cost Americans more than they receive in climate-related benefits. This
approach could be especially problematic if U.S. actions simply shift
emissions overseas.
Kevin Dayaratna
of the Heritage Foundation explained how the government’s models are
“extremely sensitive to very reasonable changes to assumptions,”
allowing them to be “manipulated to produce a wide range of costs.”
Examples:
- Reducing the models’ hubristic attempt to project climatic and
economic interactions 300 years into the future to a somewhat less
unrealistic time horizon of 150 years reduces some social cost estimates
by as much as 25 percent.
- Using updated, empirically-based estimates of climate sensitivity
(how much long-term warming results from a doubling of atmospheric
carbon dioxide concentration) reduces the IWG’s cost estimates by up to
200 percent.
- Running the models with a 7 percent discount rate, as required by
OMB Circular A-4 but omitted by the IWG, reduces the estimated cost by
75 percent compared to a 3 percent discount rate. Other things equal,
the lower the rate used to discount the present value of future climate
damages, the higher the cost.
- Under some reasonable alternative assumptions, the FUND model has a
70 percent probability of generating “negative SCC values,” meaning that
carbon dioxide emissions produce net benefits.
Asked by Rep. Randy Weber (R-TX) why the IWG refused to use
updated climate sensitivity estimates, Dayaratna opined that it’s
because the results conflict with the administration’s agenda. With the
updated analysis, IAMs generate “negative SCC values” (net carbon
dioxide benefits) even when run with a 7 percent discount rate.
Using a clone of the Energy Information Administration’s (EIA)
energy-market model, Dayaratna estimates that a carbon tax based on the
IWG’s cost estimates would, by 2035, reduce U.S. employment by 400,000
jobs, decrease the cumulative income of a family of four by $20,000,
increase electricity prices by 13-20 percent, and reduce aggregate GDP
by $2.5 trillion. The benefit? By 2100, less than a 0.2°C reduction in
global temperatures and less than a 2 cm reduction in sea levels."
"Although 2016 was the warmest year in the instrument record, much of
that warming was due to a very strong El Niño, which has subsided. There
has been little net warming since the previous big El Niño in 1998. The
warming slowdown (“pause”) during the past 20 years is observable in
both the University of Alabama Huntsville satellite record and the
Hadley Center Climate Research Unit surface record. The data suggest the
divergence between the modeled climate and the real climate will start
to grow once again."
"Michaels also discussed the IWG’s reliance on models that are
structurally biased because they lack a significant carbon dioxide
fertilization benefit. Based on crop yield data from carbon dioxide
enrichment experiments and Food and Agriculture Organization economic
data on 45 major food crops, Craig Idso estimates
that carbon dioxide fertilization added $3.2 trillion to the value of
global agricultural output since 1961. The FUND model also includes a
significant, albeit much smaller, carbon dioxide benefit. However, the
DICE and PAGE models have virtually no fertilization benefit. “Had the
more comprehensive CO2 fertilization benefit identified by Idso (2013)
been incorporated in all the IAMs, the three-model average SCC used by
the IWG would have been greatly lowered, and likely even become negative
in some IAM/discount rate combinations,” Michaels argued."
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.