Hill Heat: Testimony of White House OMB OIRA Administrator Howard Shelanski on Social Cost of CarbonScience Policy Legislation Actiontag:www.hillheat.com,2005:TypoTypo2013-07-18T00:05:02-04:00Brad Johnsonurn:uuid:f25667da-1709-4ec7-b8e3-a2922ddcd46b2013-07-17T20:27:00-04:002013-07-18T00:05:02-04:00Testimony of White House OMB OIRA Administrator Howard Shelanski on Social Cost of Carbon<p>On Thursday, July 18, Howard Shelanski, White House Office of Management Budget’s Administrator for the Office of Information and Regulatory Affairs, will testify before a <a href='http://oversight.house.gov/hearing/examining-the-obama-administrations-social-cost-of-carbon-estimates-2/'>hearting</a> of the House Committee on Oversight and Government Reform, on <span class="caps">OIRA</span>’s “social cost of carbon” calculations. The social cost of carbon has been used in recent rulemakings by the Department of Energy and other agencies to estimate the economic damages from future carbon pollution. Below and attached is his <a href='http://oversight.house.gov/wp-content/uploads/2013/07/Shelanski-OIRA-Testimony-SCC-7-18.pdf'>prepared testimony</a>:</p>
<blockquote>Thank you for the opportunity to appear before you today. I was recently confirmed as the Administrator of the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB), and I am honored to be serving in this role. I look forward to speaking with you about the social cost of carbon.
<p>When I refer to the “social cost of carbon” (SCC) I mean the values used to calculate the monetary costs and benefits of incremental changes in the volume of carbon emissions in a given year. The social cost of carbon includes, for example, changes in net agricultural productivity and human health, property damage from increased flood risk, energy system costs, and the value of ecosystem services lost because of climate change.</p>
<p>Executive Orders 12866 and 13563 direct agencies to use the best available scientific, technical, economic, and other information to quantify the costs and benefits of rules. Rigorous evaluation of costs and benefits has been a core tenet of the rulemaking process for decades through Republican and Democratic Administrations. This fundamental principle of using the best available information underpins the Administration’s efforts to develop and update its estimates of the social cost of carbon. Indeed, cost benefit analysis better informs decision makers if it takes into account the current and future damages from carbon pollution.</blockquote></p><p>On Thursday, July 18, Howard Shelanski, White House Office of Management Budget’s Administrator for the Office of Information and Regulatory Affairs, will testify before a <a href='http://oversight.house.gov/hearing/examining-the-obama-administrations-social-cost-of-carbon-estimates-2/'>hearting</a> of the House Committee on Oversight and Government Reform, on <span class="caps">OIRA</span>’s “social cost of carbon” calculations. The social cost of carbon has been used in recent rulemakings by the Department of Energy and other agencies to estimate the economic damages from future carbon pollution. Below and attached is his <a href='http://oversight.house.gov/wp-content/uploads/2013/07/Shelanski-OIRA-Testimony-SCC-7-18.pdf'>prepared testimony</a>:</p>
<blockquote>Thank you for the opportunity to appear before you today. I was recently confirmed as the Administrator of the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB), and I am honored to be serving in this role. I look forward to speaking with you about the social cost of carbon.
<p>When I refer to the “social cost of carbon” (SCC) I mean the values used to calculate the monetary costs and benefits of incremental changes in the volume of carbon emissions in a given year. The social cost of carbon includes, for example, changes in net agricultural productivity and human health, property damage from increased flood risk, energy system costs, and the value of ecosystem services lost because of climate change.</p>
<p>Executive Orders 12866 and 13563 direct agencies to use the best available scientific, technical, economic, and other information to quantify the costs and benefits of rules. Rigorous evaluation of costs and benefits has been a core tenet of the rulemaking process for decades through Republican and Democratic Administrations. This fundamental principle of using the best available information underpins the Administration’s efforts to develop and update its estimates of the social cost of carbon. Indeed, cost benefit analysis better informs decision makers if it takes into account the current and future damages from carbon pollution.</blockquote></p>
<blockquote>In 2009, the Administration launched a process to determine how best to quantify the net benefits from reducing carbon dioxide emissions. The purpose of this process was to ensure that agencies were using the best available information and to provide consistency in economic analysis associated with the rulemaking process across agencies. During the previous Administration and at the beginning of this Administration, agencies used a range of social cost of carbon values when evaluating the costs and benefits of rules.
<p>To determine how best to quantify the net benefits from reducing carbon dioxide emissions, the Administration first conducted a preliminary assessment of existing literature in order to set interim social cost of carbon values while it worked on a more comprehensive analysis. Agencies began using these interim values in rulemakings and solicited public comments on the proposed rules in which the values were used. Informed by public comments received on the interim values, the Administration developed and released improved <span class="caps">SCC</span> estimates in February 2010 in conjunction with a Department of Energy (DOE) appliance efficiency-standard rulemaking for small electric motors. Other agencies subsequently used these <span class="caps">SCC</span> estimates in their rulemakings.</p>
<p>Since the release of the <span class="caps">SCC</span> values in February 2010, numerous rulemakings have used those values for the social cost of carbon. Agencies using the <span class="caps">SCC</span> values in rulemakings received extensive public comments, many of which focused on the discount rates chosen and the three peer-reviewed academic models used to develop the <span class="caps">SCC</span> estimates. As explained in the February 2010 Technical Support Document, the <span class="caps">SCC</span> methodology rests on three integrated climate change assessment models: the <span class="caps">FUND</span>, DICE, and <span class="caps">PAGE</span> models.These models combine climate processes, economic growth, and interactions between the climate and the global economy into a single modeling framework. These are by far the most widely cited models that link physical impacts to economic damages for the purposes of estimating the <span class="caps">SCC</span>. The <span class="caps">SCC</span> estimates rely on a common set of inputs to each model and equally weigh the outputs of the three models, as described in detail in the 2010 technical document.</p>
<p>Recognizing that the underlying climate change impact models would evolve and improve over time as scientific and economic understanding increased, the 2010 <span class="caps">SCC</span> documentation committed to regular updates, and set a goal of updating the <span class="caps">SCC</span> estimates within two years or after updated versions of the underlying models became available. Since the February 2010 estimates were released, the three models that underpin the interagency social cost of carbon estimates have been all significantly updated and subsequently used in peer-reviewed studies. Many public comments urged the agencies to update the estimates based on the latest models. It is important to note that the only changes made in May 2013 to the <span class="caps">SCC</span> estimates reflect the refinements made to the underlying models. In other words, all of the changes to the social cost of carbon values were the result of updates to the <span class="caps">FUND</span>, DICE, and <span class="caps">PAGE</span> models that were made by the model developers themselves. The Federal Government inputs, such as the discounts rate, population growth, climate sensitivity distribution, and socioeconomic trajectories used to develop the 2010 estimates remain unchanged. As explained in the 2013 Technical Support Document, the updates to <span class="caps">FUND</span>, DICE, and <span class="caps">PAGE</span> reflect, among other things, improvements in the way economic damages from climate change are modeled. The net result of these updates to the three peer-reviewed models was to increase the <span class="caps">SCC</span> estimates. These net changes reflect many specific changes within the three models, some of which increased the estimates and some of which decreased them. For example, for 2015 emissions and using a 3 percent real discount rate, the social cost of carbon value rose from $24 per metric to $38 per metric ton (in 2007 dollars). The technical support document provides a range of estimates using different discount rates.</p>
<p>Entities outside of the Federal government are using estimates that are similar to the updated <span class="caps">SCC</span> values. For example, these updated estimates are consistent with the <span class="caps">SCC</span> values used by other governments, such as the United Kingdom and Germany. Major corporations, such as ExxonMobil and Shell, have also used similar estimates to evaluate capital investments. The Administration will continue to investigate ways to improve the social cost of carbon estimates. The current estimates will be used in the economic analysis ofrulemakings, and we fully expect comments on the <span class="caps">SCC</span> values in the context of future rules. We will consider those comments to ensure that we use the best available information to evaluate the costs and benefits of our regulation.</p>
<p>Thank you for your time. I would be happy to answer any questions.</blockquote></p>
<p>Download the <a href='/files/Shelanski-OIRA-Testimony-SCC-7-18.pdf'>testimony (PDF)</a>.</p>