An oil pump jack operates under a partial moon in the Permian Basin in Stanton, Texas. David Goldman/AP Photo
CLIMATEWIRE | EPA’s draft social cost of greenhouse gases excludes key factors that could eventually lead the agency to place an even higher value on avoiding emissions, according to peer reviewers tapped to review the key climate metric.
Seven economists and scientists weighed in on the draft metrics, which assign a dollar value to the societal damage of each ton of emitted carbon, methane or nitrous oxides. The figures are important regulatory tools, allowing EPA to tally up the cost of avoiding climate change when it considers a rule, just as it would for other economic impacts like industry compliance costs.
In a May letter, the peer reviewers lay out their feedback on the proposed values EPA released last year. While there was general agreement that it improved on past versions of the social cost of greenhouse gases, several reviewers said that EPA could have provided a clearer picture of the range of possible risks in its draft report on the social cost of greenhouse gases. But the reviewers also acknowledge the scientific and economic uncertainties that prevented EPA from fully accounting for climate damages.
“The resulting [social cost of carbon] presented here can only be described as a ‘partial’ estimate, with a potentially long upper tail,” wrote Gernot Wagner, a climate economist at Columbia Business School and one of the peer reviewers. “That fact needs to be clear and consistently presented throughout the report.”
EPA’s so-called central figure for the social cost of carbon is $190 per ton. As data improves, experts say, that will likely increase — perhaps by a lot. Several reviewers urged the agency to more explicitly highlight the range of risks and uncertainties, including in the executive summary of its report on the metric that tends to garner the most media attention.
Environmental scientist Michael Oppenheimer, another member of the peer review panel, said EPA only includes costs of damages in its current metric for which research has established a formula for how rising temperatures will contribute to that damage. That allows it to factor in some impacts, like the effect of higher average global temperatures on sea-level rise or heat-related deaths.
But in his comments, Oppenheimer, a Princeton University professor, called the breadth of the damage that EPA doesn’t include “rather startling.”
“They defend this by arguing that this allows them to provide a consistent way to calculate damages across diverse sectors and that it means their SCC should be interpreted as a lower limit,” he said in an email to E&ENews.
But it also means that some of the worst climate-linked damages are excluded — like changes to precipitation patterns.
“Look at what just happened in New England, or in 2021 from Hurricane Ida, or in Pakistan with a large part of the country shut down a couple of years ago due to flooding,” he said.
Oppenheimer recommended that EPA in its final version “provide a better representation of uncertainty” by giving estimates for the categories it now leaves out.
But reviewers also said EPA's approach to calculating the metrics was an improvement over the method used during Obama administration. In the new version, the agency adopted recommendations from a 2017 National Academies of Sciences, Engineering and Medicine committee report that experts say will allow it to more easily update its models with new scientific findings from a range of disciplines.
EPA quietly released its draft social cost figures last November, as part of a proposed rule for oil and gas methane emissions. The move leapfrogged a parallel process by the White House, which has adopted an interim figure that values carbon at $51/ton as its interagency group prepares a final estimate.
The governmentwide process led by the White House Office of Management and Budget is widely perceived to be stalled. When EPA’s draft metrics are final other agencies could opt to use it.
The White House said “that work continues” on a final set of metrics.
“We look forward to sharing more information about the [working group’s] work in the future,” OMB said in an email to E&E News.
EPA used the White House interim figure — and not its own $190 estimate — in its May proposal to limit carbon emissions from power plants.
In an email to E&E News, EPA noted that the draft social cost of greenhouse gases estimates were undergoing peer review — which ended the same day the power plant rule was unveiled. The agency said it will use its new social cost of carbon metric in the final power plant rule, if the metric is finalized by then.
“We are in the process of reviewing the recommendations from the peer reviewers, and we are reviewing the public comments received within the docket for the Oil and Gas supplemental proposed rulemaking [on methane],” EPA said. “The rule is expected to be finalized later this year.”
'Known unknowns'
EPA acknowledges in its draft that the new social cost metrics still have some holes to fill. It just contends that it can’t fill them yet.
The agency states in last year’s report that “in principle” the social cost figures should reflect all of the positive and negative impacts of climate change, from human health effects to property damage to disruptions in energy systems.
“In practice, because of data and modeling limitations, which prevent full representation of harmful climate impacts, estimates of the SC-GHG [social cost of greenhouse gases] are a partial accounting of climate change impacts and, as such, lead to underestimates of the marginal benefits of abatement,” EPA states.
Important impacts that EPA’s draft metrics leave out besides rainfall patterns include damaged ecosystems and fisheries, threats to livestock, and lost labor productivity. Only partial estimates are given for factors like sea-level rise due to melting ice sheets and changes in crop production.
Oppenheimer, a leading contributor to the Intergovernmental Panel on Climate Change, the United Nations' climate science body, since its inception, said in his comments that reticence about how to deal with uncertainty has always plagued climate science.
“In the long history of the climate change problem, it is this very arena, almost by definition, that has continued to provide surprising results and outcomes that force policy makers to update their approaches.”
In an apparent bid to show that the metrics are conservative, Oppenheimer said, EPA makes some arbitrary decisions about what scenarios to model and what to leave out. For example the agency’s draft social cost includes what EPA calls “an optimistic assumption that optimal, lowest cost adaptation opportunities will be realized globally under perfect foresight about [sea-level rise].” But EPA doesn’t model a less-rosy scenario about coastal adaptation, and he notes it doesn’t explain why.
In an interview, Columbia Business School's Wagner said the “known unknowns” of climate change are part of the story and shouldn’t be written out of a climate accounting just because they involve uncertainty.
“We need to make sure that we are not just adding up the dollars and cents that we can currently calculate, but that we basically proxy for the risks that we cannot calculate,” he said.
The way to do that, he said, is to highlight the “fat tail” of the distribution of damages — the outcomes that have high cost but low probability. The White House-led effort on the social cost of greenhouse gases did that by disclosing a “95th percentile” estimate to show what climate damages could look like under a more extreme scenario. EPA didn’t do that.
EPA struggled to model climate damages in some areas partly because the social cost metrics reflect global, rather than U.S., impacts, experts say.
“There's a lot of detailed modeling about air quality in the U.S., but that doesn't mean that you can just plug that in or do a simple extrapolation to the globe, because other countries have different air quality issues, different degrees of exposure, and so on and so forth,” said Brian Prest, a fellow at Resources for the Future.
RFF and others are working to quantify additional impacts in ways that could facilitate the development of more complete social cost metrics in future years. Some of those impacts might be beneficial — like cheaper heating bills or advancements in adaptation.
But each successive revision of the social cost of greenhouse gases is likely to show a steeper cost to heat-trapping emissions as new impacts like biodiversity loss, wildfire and ocean health are quantified and can be included, Prest said.
Drawing attention to the gaps in this year’s edition will “set the stage for people," he said. "So if the number goes up in the future as more things are incorporated that isn't a surprise."
Jean Chemnick
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