Source: American ThinkerAmerican Thinker

by Fred Singer

Nothing wrong with cost-benefit analysis ? but it should not be misused to support ideological goals.

Using Executive Order 12866 (Regulatory Planning and Review, issued by President Bill Clinton back in 1993), the White House Office of Management and Budget (WH-OMB) has published numerical estimates for the ?Social Cost of Carbon? (SCC).  In Public Comments, we have challenged these OMB numbers in three respects: use of outdated climate science; internal inconsistency; omission of CO2 benefits.  These miscalculations — whether politically inspired or innocently overlooked — could end up costing the American public hundreds of billions in higher dollar  costs, as well as millions of lost jobs.

OMB?s announced purpose is to arrive at validated and consistent dollar figures that can be used in OMB Regulatory Impact Analysis.  However, I strongly suspect that the real purpose of the White House is to establish a de facto carbon tax.  Such a scheme would usurp the authority of Congress and likely violate the US Constitution, since all tax bills must originate in the House of Representatives.

Adding to my suspicion is the sneaky way in which the White House is going about this exercise.  With a minimum of notice, and without publicity, OMB assembled an Interagency Working Group (IWG), which arrived at a cost of about $12 per ton of emitted carbon, based on a Technical Support Document (TSD) of Feb 2010.  This TSD was updated in May 2013, upping the SCC to about $36 per ton — and rising over time.  The Dept of Energy (DOE) then promptly used this figure in setting an efficiency standard for microwave ovens.

In June 2013, the Landmark Legal Foundation, a public-interest group, unsuccessfully petitioned the DOE, stating:  “DOE’s unannounced, dramatically increased, and improperly altered ?Social Cost of Carbon? (?SCC?) valuation presented for the first time in this microwave oven regulation will certainly become the standard by which all other agencies will place a purportedly beneficial economic value on new carbon regulations.?   [For details, see Federal Register, Vol 78, No. 251, Dec 31, 2013]

Subsequently, in Aug 2013, the House passed two bills (H.R. 367 and H.R.1582) — which would block a carbon tax and also aimed to enjoin the EPA from using SCC.  However, the Senate never scheduled a debate and vote, and the WH has threatened a veto.  The next session of Congress may have more success.

The White House effort is fundamentally prejudiced; an unbiased study would have allowed for the a priori possibility that the so-called ?cost? is in fact a ?benefit.?  Instead, the OMB studies implicitly assume that the rise of atmospheric carbon dioxide, a known greenhouse gas, will inevitably lead to adverse climate impacts.   Here we critique this facile assumption and also describe major positive consequences.  We conclude that the historic increase of CO2 in the past 200 years has benefitted humanity and will continue to do so in future.

Outdated Climate Science:

The most fundamental problem with the TSDs is the absence of any empirical evidence for significant climate effects of rising CO2 levels.  [We note in particular a lack of global warming over the past 17 years!]  The only ?evidence? comes from (so far) unvalidated climate models that disagree even with each other, and from unsubstantiated claims of anthropogenic global warming (AGW) in successive UN-IPCC (Inter-governmental Panel on Climate Change) reports.  [For details, see reports of the more credible NIPCC (Non-governmental International Panel on Climate Change) at www.NIPCCreport.org .  A critique of the latest (2013) IPCC Summary can be accessed at http://heartland.org/sites/default/files/critique_of_ipcc_spm.pdf]

Internal Inconsistency:
The TSD estimates for SCC are based on the arithmetic average of three integrated assessment models (IAMs): DICE, FUND, and PAGE.  Each IAM has its own damage function, based on estimated economic and non-economic damages for each sector (such as agriculture, sea level rise, etc).  Not surprisingly, dollar figures for ?damage per sector? disagree among the three models, reflecting the wide choice of assumptions by the three model builders.  More seriously, however, the integrated damage figures diverge in sign (!) for modest increases in global temperature: below 3 degC; FUND shows benefits, while DICE and PAGE show costs; see Fig. 1 of the 2010 TSD  <http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf>; the 2013 TSD  <http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf does not show or discuss this significant inconsistency.  MIT Prof Robert Pindyck has prepared a detailed critique of the IAMs [NBER, Working paper 19244, July 2013]; he says they are flawed and useless for policy purposes.

There has been much debate about the proper choice of discount rate in the final calculation.  There is no need to enter into this debate here; we only note that the OMB uses 7% as its standard for project calculations and that the IWG rejects the near-zero rate used by Lord Nicholas Stern, which yields huge values for SCC.

Three Benefits of Rising CO2 Levels

1.  Even under the popular but unproven assumption that there will be a modest global-mean warming caused by increasing CO2, the overall economic effect may well be beneficial, mainly for agriculture.  This is the conclusion of Yale economist Prof Robert Mendelsohn and 23 collaborating economists.  Their study was published in book form in 1994 by Cambridge University Press.

Their beneficial results can be further amplified as follows:
**All IAMs over-estimate damages from future sea level rise; but the rate of sea-level rise does not seem to depend on CO2 at all.
**Climate forcing increases only slowly, as the logarithm of CO2.  In any case, the US contribution to global CO2 values is becoming ever smaller over time and may soon be negligible.
**Climate models suggest that warming increases with latitude; therefore, a warmer ?mean? might result in Siberian winter nights at -35 degC instead of -40 degC.

2.  The direct benefits of CO2 as a plant fertilizer are well known; the ?greening? of the planet has been directly measured [1].  Historically, major agricultural crop varieties developed when CO2 levels were several times present values.  The slight reduction in ocean alkalinity from increasing CO2 is not considered to be a problem.  [Scientific details are fully discussed in the 2013-14 reports of the NIPCC at  <www.NIPCCreport.org>]

3.  Finally, we have a recent study (Jan 2014) that notes the striking correlation, since 1850, between the rise of both global GDP and atmospheric CO2 (i.e., through the use of concentrated energy, mostly from fossil fuels).  Even assigning only a fraction of the benefits of the industrial revolution (and modern civilization) to CO2, yields huge benefit numbers ? 50 to 500 times the typical cost estimate of the IWG?s $36 per ton of carbon.
[The study [2] is published by the American Coalition for Clean Coal Electricity]


The use of fossil fuels, and the resultant rise in atmospheric CO2, yield benefits that far outweigh any conceivable estimate of social cost; hence using an SCC does not make economic sense.  The OMB should publicize this view and encourage reasoned debate.  Beyond a possible use in allowing rational regulation, establishing an SCC as a Carbon Tax is likely unconstitutional.


 [1]  http://scienceandpublicpolicy.org/reprint/the_positive_externalities_of_carbon_dioxide.html

Dr Craig Idso, director of the Center for the Study of Carbon Dioxide and Climate Change, and a co-author of the NIPCC reports, states:  ?Advancements in technology and scientific expertise that accompanied the Industrial Revolution initiated a great transformation within the global enterprise of agriculture.  More efficient machinery and improved plant cultivars, for example, paved the way toward higher crop yields and increased global food production.  And with the ever-burgeoning population of the planet, the increase in food production was a welcomed societal benefit.  But what remained largely unknown to society at that time, was the birth of an ancillary aid to agriculture that would confer great benefits upon future inhabitants of the globe in the decades and centuries to come.  The source of that aid: atmospheric carbon dioxide (CO2).?

[2]   http://www.americaspower.org/sites/default/files/Social_Cost_of_Carbon.pdf

TSD of Feb 2010

http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf      TSD of May 2013

S. Fred Singer is professor emeritus at the University of Virginia and director of the Science & Environmental Policy Project.  His specialty is atmospheric and space physics.  An expert in remote sensing and satellites, he served as the founding director of the US Weather Satellite Service and, more recently, as vice chair of the US National Advisory Committee on Oceans & Atmosphere.  He is a senior fellow of the Heartland Institute and the Independent Institute, and an elected Fellow of several scientific and engineering organizations.  He co-authored the NY Times best-seller Unstoppable Global Warming: Every 1500 years.  In 2007, he founded and has since chaired the NIPCC (Nongovernmental International Panel on Climate Change), which has released several scientific reports [See www.NIPCCreport.org].    For recent writings, see http://www.americanthinker.com/s_fred_singer/ and also Google Scholar.


Appendix  [from The Hill]

The bill, H.R. 367, known as the REINS Act, passed by a 232-183 vote, with six Democrats crossing the aisle to join Republicans. The bill would require that Congress approve any major rule coming out of federal agencies, and a key amendment to the legislation that was approved today would specifically prohibit the Obama administration from instituting a carbon tax without congressional consent.

Congressional Democrats — who have blasted the legislation as a radical measure designed to block important health and safety rules, to the benefit of big business — took solace today in the fact that the bill isn’t likely to be taken up by the Senate and has already earned a veto threat from the White House. After the bill was passed by the House in the 112th Congress to much fanfare, it died before being taken up in the Senate.

But combined with another regulatory bill passed this week, H.R. 1582, the “Energy Consumers Relief Act,” it makes up part of a one-two legislative response by House Republicans to the highly touted Climate Action Plan to rein in carbon emissions that the White House launched in late June with President Obama’s speech at Georgetown University. H.R. 1582 included a provision that would restrain federal rulemaking when it comes to the impacts of carbon.

The amendment included in the REINS Act restricting the implementation of a carbon tax was offered by Rep. Steve Scalise (R-La.), chairman of the conservative Republican Study Committee. It ended up earning the support of a dozen Democrats, including some of the most conservative members of the party and several key targets of Republicans in the 2014 election cycle: Reps. Ron Barber (Ariz.), John Barrow (Ga.), Sanford Bishop (Ga.), Henry Cuellar (Texas), Bill Enyart (Ill.), Jim Matheson (Utah), Mike McIntyre (N.C.), Collin Peterson (Minn.), Nick Rahall (W.Va.), Kyrsten Sinema (Ariz.), Filemon Vela (Texas) and Tim Walz (Minn.).

After its passage, Scalise’s amendment was lauded by House Majority Leader Eric Cantor (R-Va.) as a way to push back against the White House’s climate effort, which Obama has said would include tighter restrictions on carbon emissions from new and used power plants.

“The president’s climate plan will impose a $2,000 annual tax on families without any impact on the climate,” Cantor said. “A carbon tax is not a fee on big business, as the president and his EPA like to rationalize it, but a tax increase on the entire energy-consuming economy. Lower- and middle-income Americans and job creators don’t need that tax, not now, not ever.”

The larger REINS Act was touted by House Judiciary Committee Chairman Bob Goodlatte (R-Va.) on the House floor last night as a way to restrain a president who is poised to unleash a “flood” of new regulations on American businesses and taxpayers.

Obama “increasingly is resorting to unilateral regulatory actions to legislate by executive fiat,” Goodlatte said. The REINS Act “puts an end to presidential end-runs around Congress through legislation cloaked as regulation.”

Republicans off Capitol Hill applauded both the REINS Act and the Energy Consumers Relief Act for unifying the party around a common message and standing up to the White House.

“The votes on the social cost of carbon and the carbon tax over the last few days mean that the Republicans have finally started to respond to the president’s rhetoric on climate. It is a welcome development,” GOP strategist and lobbyist Mike McKenna said in an email today. “Until yesterday, the only ones who had done anything were [Republicans on the Senate Environment and Public Works Committee]. … I’m glad to see that the fight is finally joined.”