White House underestimated carbon’s social cost — analysis

Source: Jean Chemnick, E&E reporter • Posted: Friday, March 14, 2014

The Obama administration’s controversial social cost of carbon underestimates the economic damage done by carbon dioxide emissions by ignoring some of warming’s effects on health and resource availability, according to a report released today by New York University’s Institute for Policy Integrity, the Natural Resources Defense Council and the Environmental Defense Fund.
The¬†paper¬†seeks to refute industry allies’ charges that the Obama administration inflated costs when it revised the tally sharply upward last year.The estimate released last May put the SCC at $37 per ton of CO2, up from an estimated $24 a ton in 2010.”While some have questioned the increase in the SCC as too high, a thorough examination of the latest scientific and economic research shows that $37 should be viewed as a lower bound,” report author Peter Howard said. “This is because the studies available to estimate the SCC omit many climate impacts — effectively valuing them at zero.”

For example, the report says the administration’s modeling gave short shrift to the health impacts of climate change. None of the three models used by the interagency working group to develop the new SCC factored in all of those effects, which include the greater prevalence of waterborne diseases due to higher temperatures, heat and cold stress, and respiratory illness due to more smog.

While the modeling attempts to capture the cost of natural disasters, it does not properly estimate those disasters’ effects in driving population migration, which can also have an effect on availability of goods and services, the report says.

These and other “costs” that aren’t incorporated into the estimate may mean it doesn’t reflect the true economic hit of man-made emissions, the report says.

The estimate is used in cost-benefit analyses for regulations that have an effect on carbon emissions. Industry allies on and off Capitol Hill have argued that the SCC does not properly value the benefit to society of fossil fuel use, and that it gives too much value to unknown effects of human-caused warming. They have also argued that the interagency working group overvalued costs incurred in the future as a result of warming and undervalued the expense in the near term of avoiding that warming.