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Study Finds Rise in Economic, Social Costs of Carbon Emissions Used to Analyze Rules

Tuesday, June 4, 2013

By Andrew Childers  

 

WASHINGTON, D.C.--Updated modeling has increased the social and economic impact of carbon dioxide emissions federal agencies will use to calculate the costs and benefits of regulations, according to a recent analysis.

At a 3 percent discount rate, the social cost of carbon dioxide would be $43 per ton in 2020 as calculated in 2007 dollars and as high as $71 per ton in 2050, according to the Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, released May 31.

Other modeling approaches in the document suggest the cost carbon dioxide emissions could range between $12 per ton and $65 per ton in 2020 and between $27 per ton and $98 per ton by 2050. Under the most extreme scenarios considered, carbon dioxide could cost as much as $129 per ton in 2020 and $221 per ton by 2050.

The technical support document was prepared by a federal interagency working group that included representatives from the Environmental Protection Agency, Transportation Department, Office of Management and Budget, Council of Economic Advisers, Council on Environmental Quality, and other federal agencies. Federal agencies will use the updated social costs of carbon dioxide, such as changes in agricultural productivity, effects on human health, and property damage from increased flood risk, and other environmental and social impacts caused by climate change, as part of their cost and benefit analysis of regulations.

Executive Order No. 13,563, issued in January 2011, requires federal agencies to more stringently review all pending and existing regulations for costs, benefits, and other factors (11 ECR, 1/18/11).

Costs Increase With Better Modeling

Updated modeling has increased the projected costs of carbon dioxide since the working group issued its previous analysis in 2010. In that assessment, 1 ton of carbon dioxide had an estimated social cost of $26.30 for 2020 with a discount rate of 3 percent in 2007 dollars. The cost was projected to increase to $44.90 per ton in 2050. The earlier analysis said the price of carbon dioxide could be as low as $6.80 per ton in 2020 or as high as $41.70 per ton with a range of $15.70 per ton and $65 per ton in 2050. Under the most extreme modeling scenarios, the social cost of carbon dioxide reached $80.70 per ton in 2020 and $136.20 per ton in 2050.

The interagency working group conducted the analysis using the most recent versions of the federal government's DICE, PAGE, and FUND integrated assessment models. All of the models have been updated since 2010 to include more complex carbon cycle models and to better reflect the damage caused by sea level rise.

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