EPA “cost of carbon” analyses ignore huge benefits of hydrocarbons and carbon dioxide
Paul Driessen and Roger Bezdek
The Environmental Protection Agency, other government agencies and various scientists contend that fossil fuels and carbon dioxide emissions are causing dangerous global warming and climate change. They use this claim to justify repressive regulations for automobiles, coal-fired power plants and other facilities powered by hydrocarbon energy.
Because these rules are costing millions of jobs and billions of dollars, a federal Interagency Working Group (IWG) devised the “social cost of carbon” concept – which attaches arbitrary monetary values to the alleged impacts of using hydrocarbons and emitting carbon dioxide. SCC estimates represent the supposed monetized damages associated with incremental increases in “carbon pollution” in a given year.
With little publicity, debate or public input, in 2010 the IWG set the cost at $22 per ton of carbon dioxide emitted. Then, in 2013 (again with little notice), it arbitrarily increased the SCC to $36/ton, enabling agencies to proclaim massive, unacceptable damages from “carbon,” and enormous benefits from their regulations. Recently, the Department of Energy used the $36 formula to justify proposed standards for microwave ovens, cell phone chargers and laptops!
The SCC allows unelected bureaucrats to wildly amplify the alleged impacts of theoretical manmade climate disasters, exaggerate the supposed benefits of rules, minimize their costs, and ignore the value to society of the facility, activity or product they want to regulate. That is exactly what is happening.
Fundamental flaws in the SCC concept and process make the agencies’ analyses – and proposed rulemakings – questionable, improper, and even fraudulent and illegal. A new Management Information Services, Inc. (MISI)analysis examines this in detail.
1) Executive Order 12866 requires that federal agencies “assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” (EO 12866 was issued by President Clinton in 1993.) A recent Office of Management and Budget statement notes that careful consideration of both costs and benefits is important in determining whether a regulation is worth implementing at all. Indeed, any valid and honest benefit-cost (B-C) analysis likewise requires that agencies consider both the benefits and the costs of carbon-based fuels and carbon dioxide emissions.
Thus far, the EPA and other government agency analyses, press releases and regulatory proposals have highlighted only the alleged costs of carbon-based fuels and their supposed effects on climate change. They have never even mentioned the many clear benefits associated with those fuels and emissions.
2) EPA claims the government is “committed to updating the current estimates, as the science and economic understanding of climate change and its impacts on society improve over time.” Given the Obama Administration’s history and agenda, it is highly likely that SCC values will only increase in forthcoming updates – with literally trillions of dollars at stake.
3) The IWG methodology for developing SCC estimates is so infinitely flexible, so devoid of any rigorous standards, that it could produce almost any estimates that any agency might desire. For example, its computer models are supposed to combine climate processes, economic growth, and feedbacks between the climate and the global economy, into a single modeling framework.
However, only limited research links climate impacts to economic damages, and much of it is speculative, at best. Even the IWG admits that the exercise is subject to “simplifying assumptions and judgments, reflecting the various modelers’ best attempts to synthesize the available scientific and economic research characterizing these relationships.” [emphasis added]Each model uses a different approach to translate global warming into damages; transforming economic damages over time into a single value requires “judgments” about how to discount them; and federal officials have been highly selective in choosing which “available scientific and economic research” they will utilize. As objective outside analysts have concluded, this process is “close to useless.”
4) The differences in the 2010 and 2013 SCC estimates are so large, and of such immense potential significance, as to raise serious questions regarding their integrity and validity – especially since, prior to 2010, the “official” government estimate for carbon costs was zero!
Finally, and most importantly, the agencies hypothesize almost every conceivable carbon “cost” – to agriculture, forestry, water resources, “forced migration” of people and wildlife, human health and disease, coastal cities, ecosystems and wetlands. But they completely ignore every one of the obvious and enormous benefits of using fossil fuels … and of emitting carbon dioxide! Just as incredibly, they have done this in complete disregard of EO 12866 … and the OMB ruling that careful consideration of both costs and benefits is important in determining whether a regulation is worth implementing at all. Had they followed the law and B-C rules, they would have found that:
Hydrocarbon and carbon dioxide benefits outweigh the cost by as much as 500 to 1!
In other words, the costs of EPA and other restrictions on fossil fuel use exceed their benefits by 50:1 (using the 2013 SCC of $36/ton of CO2) or even 500:1 (using the 2010 SCC of $22/ton). The entire process is obviously detrimental to American lives, jobs, living standards, health and welfare. Yet it is being imposed in the name of preventing highly speculative “dangerous manmade climate change.”
The successful development and utilization of fossil fuels facilitated successive industrial revolutions, launched the modern world, created advanced technological societies, and enabled the high quality of life that many now take for granted. Over the past 200 years, primarily because of hydrocarbon energy, people’s health and living standards soared, global life expectancy more than doubled, human population increased eight-fold, and average incomes increased eleven-fold, economist Indur Goklany calculates.
Comparing world GDP and CO2 emissions over the past century shows a strong and undeniable relationship between world GDP and the CO2 emissions from fossil fuels. In fact, the fossil fuels that provide the vast bulk of the world’s total energy needs – and from which CO2 is an essential byproduct – are creating $60 trillion to $70 trillion per year in world GDP! That relationship will almost certainly continue for the foreseeable future. Today, 81% of the world’s energy is from fossil fuels. For at least the next several decades, fossil fuels will continue to supply 75-80% of global energy.
That means any reductions in United States fossil fuel use or carbon dioxide emissions will be almost imperceptible amidst the world’s huge and rapidly increasing levels of both. In fact, the World Resources Institute says 59 nations are already planning to build more than 1,200 new coal-fired power plants – on top of what those nations and Germany, Poland and other developed nations are already building
However, hydrocarbon use has also helped raise atmospheric concentrations from about 320 ppm carbon dioxide to nearly 400 ppm (from 0.032% of the atmosphere to 0.040%). The Obama Administration (wrongly) regards this slight increase as “dangerous.” That is an erroneous, shortsighted perception that improperly ignores the enormous benefits of this increase in plant-fertilizing CO2.
Carbon dioxide truly is “the gas of life,” the basis of all life on Earth. It spurs plant growth, and enhances agricultural productivity. Plants use it to produce the organic matter out of which they construct their tissues, which subsequently become sources of fiber, building materials and food for humans and animals.
Carbon dioxide added to the atmosphere by humans 1961-2011 increased global crop production by some $3.5 trillion, plant biologist and CO2 expert Craig Idso calculates. Human CO2 emissions will likely add $11.6 trillion in additional benefits between 2013 and 2050 – based on actual measurements of CO2-induced plant growth and crop production, not on computer models, Idso estimates.
Carbon dioxide benefits overwhelmingly outweigh the SCC – no matter which government reports are used. In fact, any estimate for “social costs of carbon” is hidden amid the statistical noise of CO2 benefits.
Prodigious amounts of fossil fuels are required to sustain future economic growth, especially in developing countries. If the world is serious about increasing economic growth, reducing energy deprivation, and increasing or maintaining living standards, fossil fuels are absolutely essential. Their benefits far outweigh any conceivable costs, and will continue to do so for decades to come.
These undeniable facts must form the foundation for energy, environmental and regulatory policies. Otherwise, regulations will be far worse than the harms they supposedly redress.
Paul Driessen is senior policy analyst for the Committee For A Constructive Tomorrow and author of Eco-Imperialism: Green power – Black death. Dr. Roger Bezdek is an internationally recognized energy analyst and President of Management Information Services, Inc., in Washington, DC.
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