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Climate change and the social cost of carbon

Climate change and the social cost of carbon. Greenhouse gases are a GUMP: globally, uniformly mixed pollutant. It doesn’t matter where they come from…the damage is the same and it’s global. The paleoclimatic record suggests anticipated GHG concentrations are quite unusual. [NAS, 2014].

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Climate change and the social cost of carbon

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  1. Climate change and the social cost of carbon

  2. Greenhouse gases are a GUMP: globally, uniformly mixed pollutant. It doesn’t matter where they come from…the damage is the same and it’s global.

  3. The paleoclimatic record suggests anticipated GHG concentrations are quite unusual [NAS, 2014]

  4. Problem in a nutshell: Growing GHG concentrations are correlated (& causally linked) with an increase in average global temperature [Trenberth 2009]

  5. Undesirable impacts are expected as temperature increases across a range of settings [IPPC 2007]

  6. The social cost of carbon “The most important number you’ve never heard of.” –Ackerman and Stanton

  7. IWG’s SCC estimates: 1st published in 2010, updated in 2013 [IWGSCC, 2013]

  8. According to the IWG (2010), the SCC is: “an estimate of the monetized damages associated with an incremental increase of carbon emissions in a given year” • includes (at minimum): “net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services.” (Greenstone et al. 2013). • present value: sum of the discounted stream of annual damages • expected value: the average we would expect across many stochastic simulations of the future • estimated using IAMs

  9. The tool used to estimate the SCC: Integrated assessment model (IAM) Key parameter: “climate sensitivity” Key parameter: discount rate

  10. Higher GHG concentrations map to uncertain but substantial expected changes in temperature [Pizer 2007]

  11. The climate sensitivity parameter specifies the increase in global average temp. given an increase in CO2 conc.—it is uncertain. Various climate sensitivity distributions (Roe and Baker 2007)

  12. Projected US temperature changes are substantial even for optimistic emissions scenarios From… U.S. Global Change Research Program: National Climate Assessment and Development Advisory Committee Draft Climate Assessment Report (2013). Temperature is relative to the 1901-1960 average. (USGCRP 2013, p. 20) • A2 scenario: high population growth, low economic growth, slower technology improvements and diffusion, and other factors that contribute to high emissions and lower adaptive capacity • B1 scenario: lower population growth, higher economic development, a shift to low-emitting efficient energy technologies that are diffused rapidly around the world through free trade, and other conditions that reduce the rate and magnitude of changes in climate averages and extremes as well as increased capacity for adaptation.

  13. SCC sensitive to uncertain estimates of damages and choice of discount rate. “a truly extraordinary dependence…on the choice of a discount rate” Weitzman (2011) [Revesz et al. 2014]

  14. IWG’s SCC estimates: 1st published in 2010, updated in 2013 [IWGSCC, 2013]

  15. IWG’s SCC estimates: 1st published in 2010, updated in 2013 • Some of the relevant model updates: • explicit representation of sea level rise damages in the DICE and PAGE models; • updated adaptation assumptions, • revisions to ensure damages are constrained by GDP, updated regional scaling of damages, • revised treatment of potentially abrupt shifts in climate damages in the PAGE model; [IWGSCC, 2013] [IWGSCC, 2010]

  16. An implication of discounting is that “earth-shaking—events, such as disastrous climate change, do not much matter when they occur in the deep future” Weitzman (2011) discount rate: r = 3% discount factor: The use of discounting “over the long term runs into an ethical brick wall.”  (Frank Portnay; NYT, 2013)

  17. Since the 2013 update, the SCC has become a lightening rod on both sides of the climate policy debate “The Obama administration is on the path to grossly underestimating [the Social Cost of Carbon].” –Ackerman and Stanton (2012)

  18. SCC: emerged 2009, upheld by courts, rescinded by Trump • 2008: federal appeals court remanded a rule from the National Highway Traffic Safety Administration in part because the agency failed to account for the climate-related benefits of anticipated emission reductions in its regulatory impact analysis • Agencies started to use their own calculations with differing values for the SCC. • 2009: an interagency working group recommended a set of values to improve consistency across regulations • 2016: a federal court of appeals struck down the most significant legal challenge so far to the calculation • 2017: Trump issued an executive order withdrawing the reports that provide the SCC Text taken from:

  19. Trump’s 3/28/17 executive order, regarding the SCC: …. Sec. 5.  Review of Estimates of the Social Cost of Carbon, Nitrous Oxide, and Methane for Regulatory Impact Analysis.  (a)  In order to ensure sound regulatory decision making, it is essential that agencies use estimates of costs and benefits in their regulatory analyses that are based on the best available science and economics.   (b)  The Interagency Working Group on Social Cost of Greenhouse Gases (IWG), which was convened by the Council of Economic Advisers and the OMB Director, shall be disbanded, and the following documents issued by the IWG shall be withdrawn as no longer representative of governmental policy: (i)    Technical Support Document:  Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (February 2010);  (ii)   Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis (May 2013); (iii)  Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis (November 2013);  (iv)   Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis (July 2015);  (v)    Addendum to the Technical Support Document for Social Cost of Carbon:  Application of the Methodology to Estimate the Social Cost of Methane and the Social Cost of Nitrous Oxide (August 2016); and (vi)   Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis (August 2016).  ….

  20. “…President Trump swiftly moved to rescind the social cost of carbon… (and) …tossed out guidance on incorporating climate change into National Environmental Policy Act reviews. But in two cases since, federal judges found agencies failed to adequately consider the climate impacts of fossil fuel projects in NEPA reviews. And in one of the cases — which involved a coal mine in Montana — a judge faulted an agency for not using the social cost of carbon.”

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