Energy Scorecard

This week, Congress will consider amendments to H.R. 2282, FY 2016 Interior, Environment, and Related Agencies Appropriations Bill. An amendment offered by Rep. Polis removes an important policy rider that prevents agencies from using the Social Cost of Carbon (SCC) in rulemakings or guidance documents until estimates are revised and made public.

The Social Cost of Carbon should not be used to make policy because it is a completely arbitrary metric and because the administration ignored their own guidelines when they calculated it. Furthermore, the administration uses the Social Cost of Carbon instead of calculating actual climate impacts such as temperature change and sea level rise in regulation that affect carbon dioxide emissions.

According to MIT economics Professor Robert S. Pindyck, the models used to create the Social Cost of Carbon as “close to useless” and “create a perception of knowledge and precision, but that perception is illusory and misleading.” Furthermore, he explains that “these models can be used to obtain almost any result one desires.” Nothing this arbitrary should be used to make federal policy.

In 2013, Dr. Robert Murphy, an Institute for Energy Research Senior Economist, testified before Senate Environment and Public Works Committee about the issues with the Social Cost of Carbon, specially addressing these two issues.

Regarding the discount rate he stated:

“…it is very significant that the Working Group explicitly disregarded OMB’s clear guidance that a discount rate of 7 percent should be used to provide one of the estimates. We can’t know for sure without seeing their full data, but simply adjusting this parameter and using a 7 percent discount rate would probably produce a social cost of carbon close to zero—in which case the administration’s rationale for limiting emissions would collapse.”

And regarding the use of global benefits:

“OMB also requires that cost/benefit analysis be reported in terms of domestic impacts, with global impacts being optional. Yet the official reports of the social cost of carbon ignored this clear guideline, and instead used global figures.”

Using these two assumptions potentially could show not a social cost of carbon but a social benefit. This has serious policy ramifications and would significantly undermine a number of the Obama administration regulatory assaults since a significant amount of the benefits of their regulations are derived from their dubious Social Cost of Carbon calculations. Stripping this important provision in the Interior bill would be a mistake.

The American Energy Alliance urges members to vote NO on the Polis amendment. It will be included in our American Energy Scorecard. NO is the pro-good government, pro-consumer, pro-transparency vote.

The amendment offered by Rep. Polis would strike section 437 of the bill:

SOCIAL COST OF CARBON

SEC. 437. None of the funds made available by this or any other Act shall be used for the social cost of carbon (SCC) to be incorporated into any rulemaking or guidance document until a new Interagency Working Group (IWG) revises the estimates using the discount rates and the domestic-only limitation on benefits estimates in accordance with Executive Order 12866 and OMB Circular A-4 as of January 1, 2015: Provided, That such IWG shall provide to the public all documents, models, and assumptions used in developing the SCC and solicit public comment prior to finalizing any revised estimates.