Back in 2009 at the Copenhagen UN climate change conference
President Barack Obama promised to cut by 2020 U.S. planet-warming
carbon dioxide emissions by 17 percent below the level emitted in
2005. Today, the Environmental Protection Agency has announced the
president’s
Clean Power Plan that aims to cut carbon dioxide emissions by
2030 at existing electric power generation plants by 30 percent
overall. Each state will be given a specific goal and be
responsible for figuring out how to achieve its mandated reduction
goal using a mixture of policies that include switching from coal
to natural gas, building more wind and solar power, and/or pricing
emissions in carbon markets.
The EPA has crunched the numbers and assures the American public
that benefits of implementing this program will hugely outweigh its
costs. In its
regulatory impact analysis, the EPA calculates the global
climate benefits using the social cost of carbon derived from a
controversial Interagency Working Group report. That analysis found
that social cost of carbon in 2020 ranged over $13, $46, $68, and
$137 per metric ton of CO2 emissions (2011 dollars) depending on
the discount rate picked by the analysts. The discount rates used
were 5, 3, and 2.5 percent. The Working Group derived a high-end
figure of $137 per ton in 2020 by looking at the worst 5 percent of
the distribution, i.e., the less likely but possibly catastrophic
damages using a 3 percent discount rate.
With regard to deriving a social cost of carbon, the EPA’s
regulatory impact analysis does caution that …
…any assessment will suffer from uncertainty, speculation, and
lack of information about (1) future emissions of greenhouse gases,
(2) the effects of past and future emissions on the climate system,
(3) the impact of changes in climate on the physical and biological
environment, and (4) the translation of these environmental impacts
into economic damages.
Other than that, everything is evidently OK.
Depending on the discount rate selected, the global climate
benefits (not the climate benefits to the U.S.) from implementing
this 30 percent reduction in power plant carbon dioxide emissions
in 2020 will amount to $4.9 billion, $18 billion, $26 billion, or
$52 billion. By 2030, the global benefits would rise to $9.5
billion, $31 billion, $44 billion, or $94 billion. These are just
the benefits from lowering future increases in global average
temperatures. The vast majority of the benefits have nothing
directly to do with cutting carbon dioxide emissions by 30
percent.
The real bang for the buck comes in the form of health
co-benefits arising from cuts in air pollutants like sulfur
dioxide, ozone, mercury, and particulates. In fact, more than 70
percent of the health co-benefits apparently result from reductions
in sulfur dioxide emissions.
The EPA calculates that the maximum cost for implementing the
new regulations amounts to $7.5 billion in 2020, while the maximum
net climate and health benefits range from $27 to $50 billion at a
3 percent discount rate or $26 to $46 billion at a 7 percent
dicount rate. On it’s face, that sounds like a pretty good deal.
But as I reported last August in my article, “The
Social Cost of Carbon: Garbage In, Garbage Out,” anyone can
pretty much conjure whatever number one wants when it comes to
cranking out the social cost of carbon through integrated
assessment models that combine econometric and climate
prognostications.
Another interesting feature is that the Obama administration’s
social cost of carbon estimate is for global benefits,
although the rules from the regulatory oversight agency, the Office
of Management and Budget specify that benefits and damages of
proposed regulations should be reported in terms of domestic
impacts, with global impacts being optional. The domestic social
cost of carbon would likely hover around $2 per metric ton which
suggests that the domestic climate benefits from the proposed EPA
regulations could actually amount in 2020 to as little as $700
million a worst case of $7.8 billion. Compare those benefits with
an estimated cost of $7.5 billion to implement them.
Finally, as the New York Times helpfully points out
today, the goal of the new EPA mandates is not to save the climate
but to “reclaim
leadership on climate change.”
More analysis of the impacts of the new Clean Power Plan to
come.
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