By Marianne Lavelle
The Trump administration didn’t put much value on lowering carbon emissions.
In fact, it calculated that the benefits of action on climate change added up to as little as $1 per ton of carbon dioxide, and it set policy accordingly. Almost any steps to reduce greenhouse gases seemed too costly, given the paltry potential gain for society.
President Joe Biden’s White House is moving forward on a crucial first step toward building back U.S. climate policy and is expected to direct federal agencies to use a figure closer to $52 per ton as their guidance for the so-called “social cost of carbon” number on a temporary basis.
That figure, applied during the Obama administration, is likely to serve as a baseline while the Biden administration works on developing its own metric amid calls by climate-focused economists for a value that is at least twice as high.
Michael Greenstone, a University of Chicago economist who served as chief economist for Obama’s Council of Economic Advisers, was a co-author of a working paper last month that put the social cost of carbon at $125 per ton or more.
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The metric was part of the cost-benefit analysis for all of the Obama administration’s climate actions to curb greenhouse gas emissions, including its power plant rules and vehicle fuel economy standards. And when the Trump administration set out to dismantle those rules, it justified its actions with a new calculation for the social cost of carbon—$1 to $7 per ton.
To arrive at such a low range, the Trump administration’s economists applied a hefty “discount rate” to the value, a process used in economics to account for the concept that a dollar saved in the future will not buy as much as a dollar spent today.
Although most economists agree that some discounting of future benefits is a sound approach, they say the discount rate should be low at a time of low inflation and low interest rates. Tamma Carlton, an economist at the University of California, Santa Barbara and a co-author, with Greenstone, of last month’s working paper on the social cost of carbon, said that one key change they made in arriving at their $125 per ton figure was applying a lower discount rate than was used during the Obama years, when inflation and interest rates were higher.