In two recent partial dissents, Cheryl LaFleur, currently the longest-serving member of the Federal Energy Regulatory Commission, issued partial dissents to FERC rulings on gas pipeline approvals. She was joined by Richard Glick, the most junior FERC commissioner, in one of those dissents.
In both cases, a key to the dissent was the commission’s rejection of using the “social cost of carbon” in assessing the environmental impact of a natural gas pipeline that FERC had approved and the U.S. Court of Appeals for the D.C. Circuit had remanded to the commission.
LaFleur’s most detailed critique came in the approval of the Sabal Trail environmental impact statement. LaFleur wrote:
“Today’s order generally finds that the Social Cost of Carbon cannot meaningfully inform our decisions on proposed pipeline projects. Further, the order claims that the Social Cost Carbon is not an appropriate tool for evaluating the significance of downstream GHG emissions. I disagree. That is precisely the use for which the Social Cost of Carbon was developed—it is a scientifically-derived tool to translate tonnage of carbon dioxide or other GHGs to the cost of long-term climate harm.11 I have drawn the simplistic analogy of human food consumption and diet. It would be convenient for a person to say “I guess it is fine to eat this donut, because there is simply no way to assess if it will make me fat.” But there is such a tool, in the form of calories, which have been scientifically derived to translate the consumption of a specific food item to impact on weight gain. Similarly, we are able to estimate what the long-term consequence of a ton of carbon dioxide emissions is likely to be, by use of the Social Cost of Carbon tool.”
Yet there is a strong argument supporting the FERC majority that the social cost of carbon (SCC) is a useless yardstick to measure environmental impacts. It is not science, the critics assert, but a social and economic construct built on a shaky foundation of assumptions.
One of the clearest critiques of the social cost concept comes from economist Robert P. Murphy at the conservative Institute for Energy Research in Houston. He writes that LaFleur’s donut analogy “is utterly flawed” and based on the faulty idea that the SCC “is a scientifc unit of measurement, just like calories.”
Murphy argues that if the social cost of carbon was the equivalent to a calorie count for a donut, “it would mean that two different nutritionists could make the calories in a donut today add up to 2 or 2,000, just by adjusting their forecasts about how many donuts a grandkid will eat. This would be nonsense, of course; the calories in a donut are an objective fact, and don’t have anything to do with our expectations of the future.”
But the social cost of carbon calculations “depend on our plans for the future, and they also critically depend on the discount rate we use to compare future to present dollars.” He adds that “we can make the SCC very high, moderate, or close to zero by adjusting these other parameters.”
“Policymakers,” Murphy said, “have been seduced by the scientific allure of the technical-sounding ‘social cost of carbon,’” while the calculation is “driven entirely by (largely arbitrary) non-scientific judgments.” He cites MIT economist Robert Pindyck, a supporter of a carbon tax, that the social cost of carbon is “illusionary and misleading.”
The origins of the social cost of carbon (dioxide) date back about two decades, when environmental groups, led by the Natural Resources Defense Council, began heavily promoting the idea that government policy should explicitly price environmental externalities. That argument never got much traction, but showed up again in the Obama White House, following a 2009 federal appeals court ruling that the government should account for the economic consequences of global warming in its regulatory cost-benefit analyses.
In 2009, the Obama Environmental Protection Agency created a working group of agencies to develop a consensus way to measure what may be unmeasurable: the costs of global warming caused by man-made carbon dioxide emissions around the world. That work resulted in three integrated assessment models that have become routine ways to make the cost calculation. The models, and the assumptions behind them, can produce wildly different cost estimates.
Environmental groups argue that the current consensus cost estimate, around $40/ton, is too low. Business groups and conservative economists say it is too high.
The Trump administration has downplayed the social cost issue, reflecting not only its skepticism about climate change science, but also its view that the SCC calculation is a weak analytical tool.
— Kennedy Maize