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Obama’s Fuel Economy Mandate Threatens the American Dream of Mobility

WASHINGTON – Today the American Energy Alliance released a new video highlighting the consequences of the Obama administration’s Corporate Average Fuel Economy (CAFE) standards. This mandate requires that America’s fleet of new cars and trucks get on average 54 miles per gallon by 2025—if EPA’s assumptions are correct.

AEA’s video, which also features an interview with Congressman Mike Kelly, tells the story of Nelcy Grande, whose ability to buy a car allowed her to start and grow her own cleaning business and send her daughters to college. Nelcy was able to achieve her dream, but the CAFE standards could prevent millions of people from purchasing a vehicle and achieving theirs.

Watch the video below:

Research shows that the CAFE standards are already making cars and trucks more expensive. A study from the Heritage Foundation shows that new vehicles are more than $6,000 more expensive than they would be if auto price trends remained the same since 2008.

AEA is also directing its activists to submit comments to the EPA for the midterm review of the CAFE standards.


What Congress is doing about EPA’s heavy-handed methane regulations

Last week, the House Science Committee Environment Subcommittee held a hearing regarding the Environmental Protection Agency’s new methane regulations. The hearing highlighted the dangers of these regulations and the Administration’s continuing attacks on domestic natural gas and oil production.

The EPA finalized new source performance standards for methane emissions earlier this spring. Unsurprisingly, the rule has a hefty price tag. EPA pegged the cost at $530 million in 2025 (using a 7 percent discount rate). The American Petroleum Institute explains that this rule could costs motorists $550 in higher gasoline costs over the course of a year and cost the average family an additional $1,337 in disposable income.

While the natural gas and oil sector has been reducing methane emissions for years, the Independent Petroleum Association of America explains that “parts of the EPA’s final rules appear to remove flexibilities for producers and could actually undermine industry’s progress” in lowering methane emissions on their own. The National Association of Manufacturers also stated that the methane rule would jeopardize access to reliable energy for businesses across the economy.

Congress seems to have gotten the message. The Subcommittee hearing focused on the intense burdens the rule would place not only on the energy industry, but ultimately on American families.

Most central to the debate surrounding the methane rule is just how little it will actually do for the environment. In reality, oil and gas production has increased 26 percent since 2005, while methane emissions from such production has decreased 38 percent. The energy sector has already made strides in reducing methane emissions on its own and will continue to do so. That’s because methane is the largest component of natural gas, and allowing methane to escape results in a lost profit opportunity. Further regulation is not only unwarranted and unnecessary, but economically damaging.

Congress has taken some strides in combatting this harmful regulation. In addition to the hearing, Rep. Jenkins introduced H.R. 5668, the Transparency and Honesty in Energy Regulations Act. This bill would prohibit agencies from using the so-called social cost of methane metric, a scientifically dubious and arbitrary metric that the EPA used to justify its methane rule. Congress should also look to introduce a Congressional Review Act bill, similar to what they did with the Waters of the United States rule.

While progress has been made in fighting the methane rule at the Congressional level, more should be done. Congress should continue to oppose the rule and fight to keep energy affordable, reliable, and accessible.

The Obama Administration’s Political Attack on the Dakota Access Pipeline

The Dakota Access Pipeline is a 1,170 mile pipeline project currently under construction in the northern plains. The pipeline, spanning four states, would transport oil from North Dakota, through South Dakota and Iowa, onto its terminus in Patoka, Illinois. However, what should be a standard, albeit significant, infrastructure project, has come into the national limelight as a hot button debate over energy transportation.

Announced in 2014, the DAP was intended to be a safe alternative to rail transportation. If completed, the pipeline would be able to safely send roughly a half-million barrels of oil every day. Dakota Access, LLP, explains that the pipeline would not only increase energy security as it disperses oil from the wildly productive Bakken production area, but would also have a major contribution to local economies. They found that 8,000 to 12,000 jobs would be created for construction and $55.5 million in state revenues in 2017 alone. Not to mention the increase in affordable, reliable energy to the entire nation.

During the permit process, the North Dakota Public Service Commission held public meetings to explain the pipeline and route, and to gain public input. Dakota Access met with the Standing Rock Sioux tribe beginning in September 2014 to explain the route and process. The Standing Rock Sioux, however, did not protest nor did they file written testimony in opposition to the pipeline. The opposition came only after the permits were issued.

After all of the public meetings and outreach, and after the permits to build the pipeline were issued, some Native American tribes claimed the pipeline infringed on sacred tribal lands. However, the Army Corps of Engineers approved permits for construction in late July, which should have assuaged any remaining questions as to pipeline compliance. While tribes have been protesting since early 2016, the construction process has continued.

After state and federal permits were issued, environmental activists started to get involved. These groups are trotting out celebrities and politicians to stop the pipeline, furthering their goal of keeping natural gas and oil in the ground. Their hope is to discourage natural resources development by limiting access. In light of the protests, the Department of Justice, Department of the Interior, and Army Corps of Engineers recently decided to stop construction as they review the permits they already issued.

This is hypocritical. As The Wall Street Journal notes:

Dakota Access went above and beyond the law’s requirements to mitigate its environmental impact. This meant devising the route to avoid sites on the National Register of Historic Places as well as those identified as potentially eligible for listing. Archaeologists conducted cultural surveys including visual reconnaissance and “shove-test probes” to examine historic sites. The pipeline was modified 140 times in North Dakota alone to avoid potential cultural resources. Around Lake Oahe, the pipeline will run adjacent to the Northern Border Gas Pipeline that was completed in 1982, which reduces the likelihood that construction would harm intact tribal features.

It does not take a legal or environmental expert to see this stoppage is the federal government capitulating to anti-energy activists. This has nothing to do with the environment whatsoever; those concerns have already been ameliorated. The WSJ further notes that, while Democrats have been harping for the need for increased infrastructure investment, that apparently does not apply to pipelines designed to more safely transport commodities. Hypocrisy abounds.

The administration’s actions are a transparently political attack on an already-approved pipeline project. If the opposition to the DAP was not enough during the comment period to convince the Army Corps of Engineers to not issue permits, then why are the protests now enough to order a stoppage? This whole saga is nothing but an attack on energy.

Labor Takes a Hit Under Obama’s Anti-Coal Policies

In 2008, President Obama famously said “…if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them…” With Labor Day earlier this week, it’s a reminder of how President Obama’s anti-energy policies have affected employment.

The Daily Caller reports that since President Obama came into office, America has 83,000 fewer coal jobs with the coal mining sector having lost nearly 11,000 jobs in 2015 alone. In addition, The Daily Caller also reports that 400 mines have shuttered during the Obama years.A study from the American Action Forum shows that the number of jobs lost could actually be much higher– estimating that over 180,000 miners have lost their jobs since 2008. While President Obama talks about helping working class families, the reality is that a torrent of regulations from Washington have stifled much needed growth and killed jobs.

These job losses come from regulations of all different shapes and sizes. AAF found that the Clean Power Plan alone could close 66 coal-fired power plants and kill an additional 125,800 jobs. Other disastrous regulations include the Interior Department’s coal moratorium, the Mercury and Air Toxics Standards, Regional Haze regulations, the Stream Buffer Rule, and the lingering Cross State Air Pollution Rule. Combined, all of this red tape leads to huge job losses.

Energy is an important engine of the American economy and still has the potential to power the grid and job growth in the future. Policymakers should realize this and work towards sensible regulation instead of punishing American workers by bankrupting power plants. Hopefully our next President will be serious about economic growth and will roll back some of these policies for a more reasonable approach to energy.

Paris Climate Pact Remains Non-Binding, Meaningless

President Obama will likely “join” the Paris Climate Agreement during his upcoming trip to China. What does this mean? In reality, not much. That’s because the administration knew that a binding climate treaty would need to be voted on in the Senate. Instead, they worked hard to create a non-binding agreement, which they argue would not need to be ratified by the Senate (despite President Obama’s recent attempt to portray the agreement as a treaty). However, non-binding agreements by their very nature are non-binding for future administrations.

As of now, only 23 members of the United Nations Framework Convention on Climate Change have ratified the agreement/treaty, representing a mere 1 percent of total global CO2 emissions. For the agreement/treaty to go into effect, 55 members of the United Nations Framework Convention on Climate Change, representing 55 percent of total global emissions, must ratify.

The problems with the Paris agreement are legion (as noted hereherehere, and here). These problems aside, whatever President Obama agrees to in China (or elsewhere during his Pacific Rim trip) won’t be binding for the United States. Here’s how legal expert David Wirth has explained the agreement:

The Executive Branch has indicated its intention to cement President Obama’s climate legacy by submitting its instrument of acceptance for the Paris Agreement by the end of this year.  As of this writing, that has not occurred. But even if it does, the U.S.’s crucial emissions reduction undertaking is still only a non-binding aspiration not governed by international law.

As far as this and other non-binding goals articulated under the Paris Agreement, President Donald Trump, who has voiced scepticism about anthropogenic climate change, need not go through a formal withdrawal process, as required by the Agreement and international law.  Instead, he need only say, “The United States changed its mind.” [Emphasis added.]

The bottom line is, for the agreement to actually have any force, it must be a treaty. Treaties must be ratified by two-thirds of the Senate (Article II, Section 2, U.S. Constitution). Any sort of legal or linguistic gymnastics have failed to assuage criticism and confusion both at home and abroad.

The Paris agreement is non-binding, carries no legal requirements for the United States, and should not be taken seriously.



Greens’ shady legal tactics to lock up American energy

Last week, activist groups WildEarth Guardians and Physicians for Social Responsibility (PSR) filed a lawsuit seeking to force the Bureau of Land Management (BLM) to review nearly 400 oil and gas leases on federal lands. If successful, the lawsuit would advance the radical “keep it in the ground” movement via shady legal tactics and further impair the nation’s fiscal health and energy security.

The lawsuit, filed in the D.C. District Court, challenges 397 oil and gas leases in Colorado, Wyoming, and Utah, covering 379,950 acres of land. WildEarth Guardians and PSR state that the BLM and the Department of Interior violated the National Environmental Policy Act (NEPA) by failing to account for the climate impacts of approving said oil and gas leases. This suit follows recent assaults on energy development, namely the DOI’s decision to place a moratorium on coal leases on federal lands.

Plain and simple, this suit is an attempt to block federal lands from natural resources development, despite the fact that the Federal Land Policy and Management Act (FLMPA) specifically provides for “multiple use” of public lands (including energy development). These groups want to end all oil and gas development, and not just on federal lands. To do so, they turn to extra-legal tactics to circumvent conventional legal avenues. Kathleen Sgamma of the Western Energy Alliance summed it up perfectly: “WildEarth is trying to force the government to violate the law…It’s much easier to just file a frivolous lawsuit than it is to change the law through Congress.” The prospect of a “sue and settle” situation is troubling in this instance, given Interior’s prior inclination to prohibit natural resource development with the federal coal moratorium.

If successful, this suit could severely damage energy development, the U.S.’s already precarious fiscal situation and harm states’ economies, as well. Last week, the Congressional Budget Office (CBO) released its updated budget outlook. CBO found that the federal deficit will grow compared to the FY2016 deficit and is larger than previously predicted, specifically citing decreased revenues. Blocking off federal land from resource development would only worsen the deficit by foregoing revenues from bids, lease payments, and royalties, and the reduced employment from energy development on federal lands would also mean more joblessness and fewer taxes.

Additionally, federal land ownership requires upkeep and funding to maintain the lands, as well as payment in lieu of taxes to the affected communities and localities. Conversely, opening up federal lands to greater resource development would result in tens of billions in revenues over the near term and hundreds of billions down the road. Not to mention the potential $20.7 trillion in added GDP and roughly 3 million new jobs over the long term.
America has vast reserves of oil and gas, which can not only be produced in an environmentally sensitive way, but also have the potential to support millions of jobs and contribute to the fiscal health of the federal government. Attempts to block energy development on these lands, like this suit from the WildEarth Guardians, is nothing more than a ploy to advance an ideological goal. Policymakers should see this suit for what it really is — a litigious attempt to hinder economic growth under the guise of environmental conservancy. This attempt, and other lawsuits like it, should be understood for what they are.

Congress Should Reform Antiquities Act; Rein in Executive Branch

This week, the White House announced that it was designating 87,000 acres of land in northern Maine to as a national monument, once again demonstrating the Obama administration’s anti-democratic tendencies and their disdain for the wants and wishes of state and local leaders.

The new Katahdin Woods and Waters monument surrounds Baxter State Park and Mt. Katahdin in rural northern Maine, bordering the Penobscot River. These lands were gifted to the federal government by a private donor. Surrounding these lands are thousands of acres of deep forests and riverways used for fishing and hunting and is home to many local businesses. In particular, the forests have supported Maine’s paper and timber industries for hundreds of years.

The private owner of the land wanted it made into a National Park. However, national park designations require Congressional action. Maine’s Congressional delegation broadly disapproved of such action because Mainers are concerned, given the federal government’s track record, of reduced economic activity and a loss of jobs. Locals strongly opposed such a designation and the Maine Legislature even passed a bill disapproving of this measure.

These concerns effectively killed the possibility of designating these lands a National Park. In the end, White House ignored the state and local officials and unilaterally chose to designate it as a National Monument via the Antiquities Act.

National Parks and National Monuments differ in a few ways. Parks are administered by the National Parks Service (NPS), while Monuments can be administered by the NPS as well as a handful of other agencies. Ultimately, the end result is the same — these lands fall under the control of the federal government. The administration has used this tactic in Western states to cordon off land that would otherwise be used for energy and natural resource development. For example, the federal government owns nearly 70 percent of land in Utah, blocking oil and gas development on much of it.

Herein lies the issue: the landowners and the administration knew Congress would never designate this land a Park given Mainers’ concerns of increasing the federal estate in Maine, so the administration simply designated the land a National Monument under the Antiquities Act. The Antiquities Act allows the President “to declare by public proclamation historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest that are situated upon the lands owned or controlled by the Government of the United States to be national monuments.” Frequently, this results in the annexation of land that could be used for natural resources development or other commercial enterprise.

Both donating this land to the federal government and designating it a Monument is unnecessary and counterproductive, and only serves to further the narrative that the federal government can and should block off more and more land from private development. Mainers have a strong history of private landownership and conservation. If the owner wished to allow the public to use this land in perpetuity, that was certainly possible. This Monument designation will worsen the stewardship of the land and add to the growing — and disgraceful — backlog of NPS maintenance deferrals. Consider the fate of the San Gabriel Mountains National Monument as reported by the L.A. Times:

Visitors to the San Gabriel Mountains can be forgiven if they see overflowing trash bins, broken marijuana pipes, graffiti and road kill and wonder what became of President Obama‘s vision for the wilderness.

Nearly a year after he upgraded Southern California’s mountainous backyard to national monument status, with a promise of a cleaner and safer wilderness, little has changed.

Last week, Abby McCrea, 34, a marriage and family therapist who rides her bike in the mountains at least once a month, looked at the surrounding landscape and wondered aloud, “New monument? Where is it?”

Trash, broken beer bottles and other blight were present in abundance. Porta Potties and interpretive signs were covered by graffiti. Ravens pecked at dead snakes and squirrels that had been run over by drivers along a two-lane road.

Designating land as a National Monument does not mean that the land will be better cared for, or that there will even be money to care for the land. This has been a much-used tactic by the current administration to block land from energy and natural resources development, under the guise of stewardship. Contrary to the belief of this administration, land preservation and environmental stewardship is better done at the state and local level. In fact, states have proven far more effective at protecting and preserving the wilderness than the federal government. The Antiquities Act gives the President far too much power to designate lands with little thought for how they will be cared for. This also continues the trend of the federal government prohibiting lands from being used for private enterprise, particularly prohibiting energy development. Congress should look to reform the Antiquities Act in order to rein in the Executive’s power over our nation’s lands.

Congress shouldn’t rubber-stamp the LWCF

This summer, both chambers of Congress have been working towards a conference agreement between two energy bills, H.R. 8 (the base package) and S. 2012. The House passed its bill in late 2015, while the Senate agreed on its version this past April. The House then passed an amended version of the Senate bill, setting up the conference process that began in July.

The conference committee is now tasked with passing a package addressing a broad range of energy issues, including infrastructure and permitting reform, energy security, efficiency, and federal land policy, among others. While both bills cover a variety of policy areas, so far the negotiations have yet to significantly move the needle in the energy policy sphere.

However, one important policy provision is set to cause significant debate. The Land and Water Conservation Fund (LWCF) uses offshore drilling royalties to fund federal land acquisition projects. The LWCF expired at the end of FY2015, yet was reauthorized for three years in the FY2016 Omnibus negotiations. The Senate bill contains a permanent reauthorization of the LWCF, while the House amendment does not.

This impasse will likely tie up negotiations. Many environmentalists are pushing for permanent reauthorization, while a number of Republicans, led by Natural Resources Committee Chairman Rep. Bishop, oppose such a reauthorization. Rep. Bishop has long advocated for reforms to the LWCF before any reauthorization and strongly opposes permanent reauthorization. Indeed, the LWCF has strayed far from its original mandate by improperly managing its holdings and locking Americans out of more than one billions acres of land.

By and large, federal lands are poorly managed. For example, according to the Property and Environment Research Center, Montana, Idaho, New Mexico, and Arizona bring in on average $14.51 for every dollar spent on state trust lands. However, the U.S. Forest Service and Bureau of Land Management loses 27 cents per dollar spent on federal land management. Furthermore, since 2010 oil production is up 113 percent on private and state lands, but up a measly 0.8 percent on federal lands.

Rubber-stamping the LWCF will only perpetuate the federal government’s inefficient land management and would be an abdication of Congressional responsibility. Whatever the House and Senate agree on should not contain a permanent reauthorization of the LWCF, and both chambers should work to reform the program to account for inefficiencies in the management of funds.

California’s Mandate Madness

Next week, Advanced Energy Economy (AEE)—a group co-founded by billionaire environmental activist Tom Steyer—will host its annual event titled “Pathway to 2050.” The name of this conference is in reference to California’s renewable energy mandate that requires the state generate 50 percent of its electricity from renewable sources by the year 2050. California already has high electricity rates and rates are only going to increase.

California already has high electricity rates

 California already has very high electricity rates, compared to the national average and compared to its neighbors. California electricity rates are 69 percent higher than Oregon’s, 88 percent higher than Nevada’s, 38 percent higher than Arizona’s, and 48 percent higher than the national average. Retail electricity rates tend to reflect the policy choices made by the states in the past, and California has made expensive choices. Moving to 50 percent renewable will be even more expensive.

Retail Electricity Rates


Wind and solar are expensive

A new study from the Institute for Energy Research (IER) shows why the 50 percent goal will come at a huge cost to California ratepayers.

IER’s study, conducted by Tom Stacy and George Taylor, shows the cost of shutting down existing power sources—nuclear, coal, and natural gas—and attempting to replace them with new wind and solar power. On average, electricity from new solar is nearly five times as expensive as electricity from existing nuclear plants and over three times as expensive as electricity from existing coal and natural gas plants.

The numbers are similar for new wind power, which produces electricity that is on average over 3.5 times as expensive as electricity from existing nuclear plants and around three times as expensive as electricity from existing coal and natural gas plants.

The high cost of wind and solar might come as a surprise to some. After all, we’re constantly told that the wind and sun are “free fuel.” The wind and sun are indeed “free,” but the facilities to capture energy from the wind and sun and convert it to usable electricity are not free—not even close. Not only that, but because of wind and solar power’s intermittency issues (the sun isn’t always shining and the wind not always blowing) they impose severe costs on the power grid that result in higher electricity costs.

For the power grid to work, supply and demand need to be in balance at all times. Wind and solar power cannot satisfy this need because their output rises and falls with the weather, not with demand. In the case of solar power, it just so happens that as electricity demand peaks in the evening, solar power’s output begins to decline. IER Vice President Dan Simmons explained this in a recent Congressional testimony:

One of the biggest challenges in keeping the lights on and the electricity grid stable is making sure the electricity grid has sufficient electricity during times of peak demand. Because solar is non-dispatchable and dependent on the weather and time of the year, it cannot necessarily help meet times of peak demand.

For example, the best time of the year for solar is during the summer and the best day of the year should be the summer solstice. This year the solstice occurred on June 20th. In California on the summer solstice, peak electricity system demand occurred at 5:50 pm with demand of 44,550 MW. Solar peak production occurred at around 1 pm at 6,922 MW and by 6:00 pm near the time of peak demand solar production had fallen to 4,491 MW. By 7:00 pm, when system demand was still 44,000 MW, solar production had fallen to 2,629. By 9:00 pm solar production was zero while electricity demand was still nearly 42,000 MW.

This means that even when solar and wind power are producing electricity, the grid still needs sources like nuclear, coal, and natural gas online to satisfy demand.

California’s renewable mandate forces reliable sources to reduce their output when wind and solar are producing electricity. This increases the costs of operating these sources, which results in higher electricity costs. Without subsidies or mandates propping up wind and solar, these extra costs would not exist because reliable sources wouldn’t be forced to cater to intermittent wind and solar power. Simply put, wind and solar power are an unnecessary and expensive burden on the power grid.

However, for California to reach its 50 percent goal, the utilities are shutting down the very sources that keep the lights on to make way for more solar power. Recently PG&E announced plans to shut down its Diablo Canyon nuclear facility. In a press release, PG&E stated that one of the reasons for its decision is to satisfy the state’s renewable energy mandate:

Reflecting California’s changing energy landscape, PG&E today announced a Joint Proposal with labor and leading environmental organizations that would increase investment in energy efficiency, renewables and storage beyond current state mandates while phasing out PG&E’s production of nuclear power in California by 2025.

Let’s step back for a moment and think about why California is on this “Pathway to 2050” in the first place, which is allegedly to reduce carbon dioxide emissions to combat global warming. However, in the case of Diablo Canyon the state is shutting down a CO2-free power plant in favor of more solar power. But because of solar power’s intermittency issues, the state will likely need to add more natural gas to provide power when the sun isn’t shining. So not only will California’s 50 percent goal result in higher electricity rates, but also higher CO2 emissions.

Even if California’s leaders and groups like AEE are serious about their commitment to reducing CO2, the state’s 50 percent mandate will have little impact on global temperatures. In fact, according to models from the U.N’s Intergovernmental Panel on Climate Change, even if the U.S. were to stop emitting CO2 altogether by the year 2050, it would limit global temperature rise by a measly 0.14 degrees Celsius by the year 2100. California’s mandate would obviously have an even less significant impact.

Exporting Unreliable Power

Included in AEE’s agenda for their “Pathway to 2050” event is a session on expanding California’s power markets to other western states. To accommodate the 50 percent goal, California would need to rely on an accounting gimmick. California would export excess solar power to other states in times of high solar production but lower electricity demand, and it would import electricity from those same states during times of high demand and low or zero solar production. On paper, this would enable California to meet its renewable goals, but in reality the state would still depend on reliable sources of electricity generated in other states. This is akin to the “100 percent renewable” gimmick that many companies are using to market themselves as green.

In fact, California already imports electricity from coal generation in Utah, New Mexico, and Arizona. In fact, at times half of Southern California’s electricity comes from coal power in those three states.


California’s push to get 50 percent of its electricity from renewable sources will have a crushing impact on the state’s ratepayers. As IER’s study shows, electricity from new wind and solar power is much more expensive than electricity from existing sources like nuclear, coal, and natural gas. Beyond just being unaffordable, California’s renewable energy mandate is unrealistic and may actually cause CO2 emissions to increase.


Congressmen block arbitrary, unscientific regulatory schemes

Rep. Jenkins, along with Reps. Culberson, Womack, LaHood, and Mullin, recently introduced H.R. 5668, the Transparency and Honesty in Energy Regulation Act of 2016 (THERA). This bill would stop the use of the Social Cost of Carbon (SCC) and the Social Cost of Methane (SCM) in regulatory rulemaking. As explained many times before, the SCC and SCM are too flawed to be used in the rulemaking process.

The SCC is estimated using Integrated Assessment Models (IAMs). These models try to assess future climate and economic impacts of climate change. According to economists, the models are “close to useless.” Here is MIT Professor Robert Pindyck:

…I would argue that calling these models “close to useless” is generous: IAM-based analyses of climate policy create a perception of knowledge and precision that is illusory, and can fool policy-makers into thinking that the forecasts the models generate have some kind of scientific legitimacy. IAMs can be misleading – and are inappropriate – as guides for policy, and yet they have been used by the government to estimate the social cost of carbon (SCC) and evaluate tax and abatement policies. [Pindyck 2015, emphasis added.]

It turns out that neither theory nor data to back up how these models work. As Pindyck goes on to explain:

One of the most important parts of an IAM is the damage function, i.e., the relationship between an increase in temperature and GDP (or the growth rate of GDP). When assessing [the climate’s sensitivity to emissions], we can at least draw on the underlying physical science and argue coherently about the relevant probability distributions. But when it comes to the damage function, we know virtually nothing – there is no theory and no data that we can draw from. As a result, developers of IAMs simply make up arbitrary functional forms and corresponding parameter values.[Pindyck 2015, emphasis added, footnotes removed.]

The SCC is fatally flawed not only because it lacks statistical and theoretical justification, but it also violates the basic principles that the federal government has set out to produce cost-benefit analyses. The SCC fails to comply with OMB guidelines in two major and irreconcilable ways. First, OMB Circular A-4 clearly states that any regulation should assess the costs and benefits as realized domestically:

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 Interagency Working Group ignored this requirement. The Technical Support Document for the SCC states “the interagency group concluded that a global measure of the benefits from reducing U.S. emissions is preferable,” which is precisely what Circular A-4 directs not to do. The administration could have included both the domestic and global values, but they did not.

Agencies have put this into practice. In the EPA’s final Regulatory Impact Analysis (RIA) for its “Clean Power Plan” (CPP), the agency uses the SCC to assess climate benefits on a global scale, while accounting only for domestic costs. In its own breakout of benefits throughout the RIA, the agency admits “[t]he climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions.” This is an apples to oranges comparison that explicitly flies in the face of OMB guidance.

Further, agencies manipulate discount rates to produce favorable results using the SCC. Discount rates are intended to calculate the present value of regulatory action on the future economy. Essentially, it’s a way to account for costs and benefits down the road. Per OMB guidance, agencies should use a discount rate of 3 and 7 percent. Yet in the CPP RIA, the EPA admits:

…several discount rates are applied to SC-CO2 because the literature shows that the estimate of SC-CO2 is sensitive to assumptions about discount rate and because no consensus exists on the appropriate rate to use in an intergenerational context. The U.S. government centered its attention on the average SC-CO2 at a 3 percent discount rate but emphasized the importance of considering all four SC-CO2 estimates.

Again, the SCC violates Circular A-4, which states “For regulatory analysis, you should provide estimates of net benefits using both 3 percent and 7 percent.” The Obama administration’s Interagency Working Group used the 3 percent discount rate, but not the 7 percent discount rate. A 7 percent discount rate would have lowered the SCC.

This same process has been employed with the SCM metric. The SCM is very similar to the SCC, except targeted at methane emissions mainly associated with oil and natural gas development. In 2015 the Environmental Protection Agency published its final rule for emissions standards for new and modified oil and gas sources, which is the first regulation to use the SCM. In fact, the rule was justified solely using the SCM.

These metrics are arbitrary, unscientific, and misleading. It is irresponsible to use them to justify economically significant regulations, as those regulations–if abused–ultimately hurt the people they are designed to protect. Fortunately, THERA would end this practice and protect American taxpayers from further harm. By prohibiting the SCC and SCM from being deployed, and reviewing regulations that use them as justification, Congress would be taking a significant step in combatting flawed and detrimental agency overreach and overregulation.

Rep. Jenkins should be applauded for his effort to tackle this deeply flawed and damaging bureaucratic exercise. THERA should be supported by all Representatives who believe in transparency, accuracy, and a bureaucracy accountable to the American public.