By Abby Smith
President Biden is directing his team to retool the values the government uses to assess the costs and benefits of combating climate change in a move that could ultimately help his administration justify stricter emissions controls.
As part of a climate executive order issued on Wednesday, Biden directed federal agencies to review and update the so-called “social cost of carbon” in an effort to reduce climate pollution.
The metric was initially developed by the Obama administration to quantify the costs of global damages caused by rising temperatures. Federal agencies would then use that value as they assess the overall costs and benefits of regulatory actions. Regulations that curb greenhouse gas emissions, therefore, would produce benefits by avoiding climate-related damages.
Without the social cost of carbon to account for the costs of greenhouse gas emissions and the benefits of reducing them, “you’re actually missing a big piece of that analysis and missing some of the real benefits of costs of the actions you might take,” said Kevin Rennert, who directs the think tank Resources for the Future’s social cost of carbon initiative.
Biden’s team will almost certainly scrap the changes made by its predecessor. His administration will also undoubtedly face pressure to ratchet up the social cost of carbon value to reflect more recent research that finds the economic damage from climate change could be significantly worse.
For example, Michael Greenstone, former chief economist in the Obama White House who led development of the initial social cost of carbon, recommended in research published earlier this month that the Biden administration quickly set an interim value of $125 per ton, using a 2% discount rate.
A jump in value that sharp could raise eyebrows, especially among industry groups that will be fighting more aggressive emissions mandates from the Biden administration.
“If they adopt a number of $125, that justifies a lot of efforts,” said Jeff Holmstead, a partner with Bracewell LLP who led the Environmental Protection Agency’s air office during the George W. Bush administration. “If that’s used throughout the federal government, that can have a huge impact.”
Biden also suggests in his executive order he’d use the social cost of carbon beyond regulatory calculations, calling for agencies to provide recommendations by September about where the metric should be applied, including in budgeting and procurement decisions. On the campaign trail, Biden promised to leverage the government’s procurement power to boost renewable energy, electric cars, and other clean technologies.
Beyond setting an interim value, Biden is also asking the interagency working group to conduct a comprehensive review of the social cost of carbon and produce an updated value by January 2022.