Obama's Anti-Social Approach to the 'Social Cost of Carbon'

There are many problems with the standard case for a carbon tax, including very dubious assumptions in the computer models used to calibrate the so-called “social cost of carbon.” Yet even if we put aside all of those principled objections, the way that the Obama Administration in practice has tried to clamp down on greenhouse gas emissions is alarming. Susan Dudley, Brian Manix, and Sofie Miller spell out the problems in a recent Reuters article.

With the failure of efforts to implement cap-and-trade or an outright carbon tax, the federal government has shifted to regulation to achieve its objectives in a stealthier manner. The Reuters article explains the skullduggery here:

The day after his 2009 inauguration, President Barack Obama committed to “creating an unprecedented level of openness in government.”

He vowed to build on “transparency [that] promotes accountability by providing the public with information about what the government is doing,” “participation [that] allows members of the public to contribute ideas and expertise,” and “collaboration [that] actively engages Americans in the work of their government.”

Despite these promises, and despite longstanding requirements of administrative law, the Obama administration is making significant regulatory decisions behind closed doors — without transparency or public involvement. Yet these new regulations could have enormous impact on Americans for generations to come.

Later on they explain exactly what they mean by their claim of “closed doors” policymaking:

Rather than working openly with experts and the public to develop this key metric, the administration quietly released a revised SCC in May as a fait accompli. The new SCC is $41 per ton — almost double the value that the administration set in 2010.

This revised social cost of carbon first appeared in a “technical support document” produced by an interagency working group. Since then, the SCC has been used to justify new regulations that the government estimates will cost Americans hundreds of millions per year — including new efficiency standards for major appliances and revised power plant rules.

Indeed. Many of us who follow climate change policy closely only learned of the new estimate of the “social cost of carbon” when it was buried in a new rule regulating the “standby mode” of microwaves. This is hardly the way to announce to the world that the estimates of the SCC had (almost) doubled in a mere three years—especially when those estimates would be used to regulate American households and industry. Even proponents of aggressive action on climate change at the time agreed that the new estimate was “[b]uried in an obscure regulation” in the “fine print.”

Whether or not one supports a federal government crackdown on carbon dioxide and other greenhouse gas emissions, certainly we can all agree that such a momentous intervention in the energy sector and the broader economy should occur with complete transparency. This will allow outside experts—as well as the general public—to see exactly what assumptions and procedures are being used to justify the new restrictions on business and higher energy prices for consumers.

The fact that the “most transparent Administration in history” resorts to regulatory fiat, disclosed under the cover of night, shows that their case for more intervention is not very strong.

IER Senior Economist Robert P. Murphy authored this post.