This week, the US Government Accountability Office (GAO) published a report reviewing the Trump administration’s use of the social cost of carbon (SCC)—an estimate, in dollars, of the economic damages that would result from emitting one additional ton of greenhouse gases into the atmosphere. GAO initiated its review in 2017 at the request of several US Senators, in response to the Trump administration’s sharp downward revision of SCC estimates in regulatory analyses, from the prior central value of roughly $50 per ton of carbon dioxide used in the Obama administration to a range of $1–$7.
Because the SCC is an estimate of the economic benefits of reducing greenhouse gas emissions, using a lower value for the SCC lowers the total benefits estimated in regulatory impact analyses of policies that reduce greenhouse gas emissions. The Trump administration has used the lowered SCC values to support the repeal of several policies that were previously calculated to be net beneficial—like the Obama administration’s Clean Power Plan—on the grounds that such policies are now estimated to have net costs.
A key finding of the GAO report is that the Trump administration has taken no action—and has no plans to take action—to implement the comprehensive set of recommendations provided in 2017 by a National Academies of Sciences (NAS) panel (co-chaired by RFF’s Richard G. Newell and Maureen L. Cropper) for improving the scientific basis and transparency of the SCC estimates. GAO’s recommendation was that the US Office of Management and Budget (OMB) identify a federal entity to implement these recommendations.
Though the federal government is not implementing SCC updates per NAS recommendations, GAO highlighted that RFF experts and collaborators are doing so as part of RFF’s Social Cost of Carbon Initiative. RFF’s SCC Initiative is implementing the complete set of near-term NAS recommendations to update the SCC through a process that ensures the highest levels of scientific quality and transparency and builds the scientific foundation for future estimates.
To improve the scientific basis of the SCC models, RFF’s SCC Initiative is working to update all parts of the SCC modeling process: the socioeconomic assumptions, climate modeling, economic damage functions, and economic discounting framework. Researchers at RFF are producing long-run projections and joint probability distributions for key socioeconomic variables—population, GDP, energy use, and emissions—to address the NAS recommendation that advises a move away from a scenarios-based approach toward one with a more robust quantification of uncertainty. Researchers are also undertaking a vast review of the literature that quantifies the economic impact of climate change on various sectors of the global economy to inform up-to-date damage functions in the SCC models. RFF has implemented an updated climate model, as recommended by the NAS, and a Ramsey discounting framework, for which research is being carried out to estimate key discounting parameters.
In addition to making these key updates and delivering up-to-date SCC values, researchers at RFF have also created an open-source modeling platform to improve transparency and better facilitate collaboration within the modeling community. The 1.0 version of this modeling platform, Mimi.jl, was released last week and provides key features recommended in the NAS report that allow for greater quantification of uncertainty and for researchers to more easily work on different parts of the models in isolation.
The GAO report notes that the Trump administration’s lowered SCC values were produced with the same models used for previous estimates by the federal Interagency Working Group on the Social Cost of Greenhouse Gases (IWG)—a working group disbanded by an executive order issued by the Trump administration. Two critical adjustments were responsible for lowering the SCC estimates: increasing the economic discount rate, and accounting for damages that occur solely within US borders instead of total global damages.
