EPA analysis reveals lower estimate of climate change cost

Agency now calculating toll of carbon only within U.S., rather than worldwide

WASHINGTON — The U.S. Environmental Protection Agency on Tuesday released a detailed 198-page proposed analysis of the costs and benefits of its move to repeal the Clean Power Plan, suggesting the administration plans to greatly decrease the government’s estimates of the cost of climate change.

The document explains the consequences of scrapping the Clean Power Plan, a set of rules for power plants aimed at reducing U.S. contributions to climate change. In the document, the EPA calculated the cost of one ton of emissions of carbon dioxide, a major greenhouse gas, to be between $1 and $6 in the year 2020. That’s down from the Obama administration’s central (inflation adjusted) 2020 estimate of $45 — “a reduction of 87 percent to 97 percent,” according to a comparison by the think tank Resources for the Future.

The wildly divergent numbers arise in significant part because the agency is now calculating the cost of carbon only within the United States, rather than around the globe — a key change that could be of major consequence.

The “social cost of carbon” is a very influential figure that helps policymakers weigh the value of moves aimed at stopping climate change. If the social cost of carbon is lower, that shrinks the estimated benefits of such moves, making it more likely that policymakers will find those benefits not worth the costs.

“The most important single economic concept in the economics of climate change is the social cost of carbon (SCC). At present, regulations with more than $1 trillion of benefits have been written for the United States that use the SCC in their economic analysis,” Yale University economist William Nordhaus wrote in a 2016 study.

Similar analyses could show up in other Trump administration regulatory decisions, experts said.

Critics say that in its “Regulatory Impact Analysis,” the Trump administration is manipulating the math to justify predetermined conclusions. The EPA analysis is “a radical departure from established science and economics,” charged attorney David Doniger of the Natural Resources Defense Council.

“My read is that the political decision to repeal the Clean Power Plan was made, and then they did whatever was necessary to make the numbers work,” added Michael Greenstone, a professor of economics at the University of Chicago who worked on climate policy during the Obama years.

These critics were responding to a prior leaked draft that summarized the longer impact analysis, but the new version seemed largely consistent with it.

The EPA defended the approach Tuesday, arguing that it was the Obama administration that had done the math in a questionable way.

“The facts are that the Obama administration’s estimates and analysis of costs and benefits was, in multiple areas, highly uncertain and/or controversial,” an agency spokesman, who responded on the condition of anonymity, said by email.

“The previous administration compared domestic costs against its estimate of global climate benefits,” the spokesman continued. “The proposed repeal also presents a scenario looking specifically at domestic climate impacts. EPA is tasked with protecting the environment and human health of this nation, and our alternative analysis reflects that. This administration also returns to longstanding OMB practice by using appropriate discount rates to compare apples to apples when estimating the current value of future scenarios.”

The new EPA document is a proposal rather than a final analysis. And it presents a variety of scenarios and assumptions, broadly explaining the uncertainties involved in such complex calculations and citing the need for “transparency” in its analysis. Still, critics say the way the analyses are built involves a considerable departure.

The EPA’s changes — which could become central to ongoing litigation over how the agency addresses climate change — reflect a long, complicated debate over how the government justifies regulatory decisions, particularly with respect to climate change.

In 2009, the Obama administration created the Interagency Working Group on the Social Cost of Carbon, a panel designed to assess the economic damages from climate change. The body proceeded to use a complex brew of economic and scientific analyses to figure out the toll, in dollar terms, of a ton of carbon dioxide emitted to the atmosphere.

That estimate — which varies based on a variety of assumptions, but was recently put at $45 (adjusted for inflation) in 2020 in one central scenario — then fed into regulatory analyses that helped Barack Obama’s EPA conclude that the benefits of the Clean Power Plan would greatly exceed its costs.

But the EPA’s approach has long been the target of conservative critics, and shortly after Trump’s election, the new administration moved to reverse it. In a March executive order, Trump disbanded the working group and said that its reports and findings “shall be withdrawn as no longer representative of governmental policy.”

Now, the EPA appears to have begun to unveil a different way of calculating the social cost of carbon and other aspects of its cost-benefit calculations related to pollution — one that could have sweeping implications.