Doomed Legislative Challenge to Social Cost of Greenhouse Gases Risks Misinforming Public

More often than not, Senate bills are destined for the legislative abyss.

So, if a bill fails without reaching the Senate floor, does it — like the proverbial tree in the forest — make a sound?

A recently introduced bill aiming to prevent federal agencies from considering the Social Cost of Greenhouse Gases highlights the role some bills play in informing — and sometimes misinforming — the public. Though almost certainly destined to fail, the bill presents faulty and misleading criticisms that could have chilling effects on important policy evaluation efforts.

The bill introduced by Senator James Lankford of Oklahoma attempts to prohibit federal agencies from considering the Social Cost of Greenhouse Gases in mandatory cost-benefit analyses, rulemakings, guidance documents, and agency actions. It is the latest challenge to agency use of the scientifically backed and rigorously tested economic metric.

In February, the U.S. District Court for the Western District of Louisiana issued an injunction prohibiting many federal agencies from considering the Social Cost of Greenhouse Gases. The Fifth Circuit stayed the injunction a few weeks later, and in May, the Supreme Court declined to intervene, effectively allowing agencies to continue using the tool.

The Social Cost of Greenhouse Gases (SC-GHG for short) provides an estimate of the damages from the emission of one additional ton of greenhouse gases — carbon dioxide, methane, and nitrous oxide — into the atmosphere. The SC-GHG assigns a monetary value to the effects of climate change on human health and mortality, agriculture, energy use, and the economy. Federal (and some state) agencies then use this metric in cost-benefit analyses to calculate the monetary value of projected climate-related costs and benefits of proposed policies. This enables a more holistic view of the effects of a particular policy choice.

While the Republican-backed bill is destined to fail due to a lack of support from the Democratic majority, sponsors justify its introduction based on several erroneous claims about the validity and reliability of the SC-GHG metric. These claims quickly fall apart under scrutiny.

The Interagency Working Group that developed the SC-GHG ensured a high level of transparency by basing its estimates on peer-reviewed models, issuing regular updates, and soliciting public comments.

Opponents of the SC-GHG wrongly decry the process through which scientists and economists developed the metric, claiming a lack of transparency in arriving at monetary estimates of climate damages. In fact, the Interagency Working Group (IWG) responsible for developing the SC-GHG operated under the highest standards of scientific rigor and public transparency.

The IWG’s formation in 2009 followed a Ninth Circuit decision requiring consideration of climate impacts in an economic analysis of fuel efficiency standards. The expert group was tasked with formulating a scientifically rigorous methodology for agencies to use when weighing the monetary costs of limiting carbon pollution against the benefits of curbing climate change. The IWG incorporated scientific and economic models that have not only undergone intense scrutiny but, in one instance, led to a Nobel Prize in Economics. Since its formation, the IWG has published numerous technical documents, held a public comment period, and issued updates to ensure the SC-GHG remains in line with the best available science.

The SC-GHG’s use of a global estimate of climate damages adheres to OMB guidance advising agencies to consider impacts “that accrue to citizens and residents of the United States.”

Critics sometimes argue that the SC-GHG’s use of a global estimate of climate damages violates an Office of Management and Budget (OMB) guideline requiring that global cost estimates appear separate from domestic cost estimates. But the use of a global estimate of the costs of climate change does in fact align with OMB guidance.

Sponsors of the proposed bill mischaracterized the guidance, which counsels agencies to consider impacts “that accrue to citizens and residents of the United States.” U.S. interests are directly affected by climate change occurring beyond domestic borders due to the increasingly interconnected nature of global markets, reliance on international reciprocity in mitigating the effects of climate change, and international legal commitments the U.S. has made to “ensure global benefits at the lowest possible cost.”

The SC-GHG translates future costs into present values in line with OMB guidance.

The SC-GHG reflects the costs that climate change will impose on future generations by incorporating discount rates that translate those future costs into present values. A higher discount rate produces a lower present value, while a lower discount rate yields a higher present value.

Critics argue that use of 2.5, 3, and 5 percent discount rates in the SC-GHG violates OMB guidance requiring agencies to utilize 3 and 7 percent discount rates. This glosses over the guidance’s prioritization of a 3 percent discount rate when a regulation primarily affects consumption, which is the case with climate regulations. Further, due to uncertainty about the appropriate value of discount rates in the longer term, not to mention concerns for intergenerational equity, extensive economic research advises against using a 7 percent discount rate for calculating long-term effects.

While opponents of the SC-GHG continue to push forward litigation and legislation aimed at undermining its use, the fact is that the SC-GHG provides a scientifically rigorous, relatively conservative, and necessary means for agencies to account for damages related to climate change.

The Senate bill opposing the SC-GHG will likely die in committee, without a broad audience to witness its demise. Still, the misinformation advanced by the bill risks coloring public perception and, as a result, making some agencies more reluctant to utilize this important and impartial policy evaluation tool. The prominence of these arguments made at the national level presents a real threat to agencies’ ability to consider climate consequences in the face of public perception that is often susceptible to misinformation.