The Social Cost of Carbon Under Executive Order 12,866

Executive Order 12,866 is the current mandate under which federal executive-branch agencies must prepare regulatory impact analyses (RIAs, which are basically a form of cost-benefit analysis or CBA) when proposing major new rules or rule modifications. On March 9, 2010, the Department of Energy published (here) in the Federal Register (75 Fed.Reg. 10874-10948, Mar. 9, 2010) a new final rule (codified at CFR Part 431) on energy conservation standards for small electric motors. The new rule's regulatory impact analysis includes a discussion of the social cost of carbon, which is based on a document attached as Appendix 15A to the final rule. That document, "Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12,866," is the result of an interagency consultative process involving the Environmental Protection Agency, the Councils of Economic Advisors and Environmental Quality, the Departments of Agriculture, Commerce, Energy,  Transportation, and Treasury, the National Economic Council, and the Offices of Energy and Climate Change, Management and Budget, and Science and Technology Policy.

The interagency cost estimates are summarized in the following table:

Table 15A.1.1  Social Cost of CO2, 2010-2050 (in 2007 dollars)

Discount Rate
5%
3%
2.5%
3%
Year
Avg
Avg
Avg
95th
2010
4.7
21.4
35.1
64.9
2015
5.7
23.8
38.4
72.8
2020
6.8
26.3
41.7
80.7
2025
8.2
29.6
45.9
90.4
2030
9.7
32.8
50.0
100.0
2035
11.2
36.0
54.2
109.7
2040
12.7
39.2
58.4
119.3
2045
14.2
42.1
61.7
127.8
2050
15.7
44.9
65.0
136.2
Source: Interagency Working Group on Social Cost of Carbon, United States Government, “Appendix 15A: Social Cost of Carbon for Regulatory Impact Analyses Under Executive Order 12,866” at 2.

I have not yet had occasion to work through the 53-page analysis to assess the quality of the social cost of carbon (SCC) estimates - needless to say, they are inherently contestable - but they appear at first blush to be fairly consistent with other estimates I've read of the social cost of carbon. According to the table, the new auto fuel efficiency standards EPA set at the end of last week (and about which I blogged here) would seem to be cost-justified, at least using a 3% discount rate.

What is not clear is why the interagency estimates of the social cost of carbon (SCC) have been kept so secret. They have not been separately published, or even publicized. As far as I am aware, the only place one can read them is (here) in the appendix to the March 9, 2010 Department of Energy (DOE) rule referenced  above. I only learned about their existence last night, when Dan Farber (Boalt Hall, Berkeley) forwarded me a copy of the appendix from the DOE rule.

I may have more to say about the interagency SCC estimates later, after I've had a chance to read through the entire analysis. I may also blog once again about why I think precise SCC estimates are not nearly as important at this point in time as establishing  institutional structures to start moving carbon dioxide emissions in the right direction to stabilize the climate.

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