EPA and the Cost of Climate Change

To tackle climate change without the help of Congress, the Obama Administration will have to estimate how much it costs society -- in damaged crops, wildfires, floods, and a cascading list of other harms -- when a ton of carbon dioxide is released into the atmosphere

Obama's administrators estimate the cost to be $38 per ton. In a recent post on Slate, Professor Eric Posner argues that this number is based on a "dubious set of calculations." He worries $38 is so far-fetched that any rule that relies on it would be struck down in court. Recently, Republican members of Congress have joined in the criticism of what is known as the "social cost of carbon."

These attacks are off base. While the current estimate might not be perfect, it is rigorously researched and based on conservative assumptions. We need something like the social cost of carbon because it will always be possible to nix an additional ton of pollution, but at increasing cost. Without a sense of how much damage is caused by carbon pollution, we won't know what kinds of costs are justified.

EPA arrived at its $38 estimate through an interagency taskforce that included scientific and economic experts from a wide range of agencies as well as White House officials including, at the time, Cass Sunstein and Michael Greenstone (both noted academics known for restraint and intellectual rigor). The economic models used by EPA to calculate the estimates are not infallible, but they have been vetted through substantial peer review and represent the state of the art.

Posner accurately points to massive uncertainties that make predicting far-in-the-future economic conditions difficult. But he doesn't offer any alternative to the administration's approach. Should the EPA regulate without attempting to estimate the benefits? Should it arbitrarily select an emissions goal irrespective of costs? Is there any specific methodology that Posner proposes that would improve on the agency's estimates?

If the answer to these questions is "no," it isn't clear where Posner's critique leaves us, other than faced with the recognition that climate change is a hard regulatory question. That is certainly true, but cannot be allowed to paralyze the EPA.

It would be very surprising if a court tossed out climate regulation because of the uncertainties in the social cost of carbon estimate. It is a fundamental and long-standing tradition for courts to defer to agencies on these types of complex technical questions. If anything, the deep uncertainties imply that the court will grant the agency even more deference than usual. A court would have to step far outside its proper role to invalidate a rule based on an industry challenge.

In the only instance where the social cost of carbon did sink a rulemaking, it was because the agency failed to include any monetary estimate of the benefits of cutting greenhouse gas emissions. This decision, in part, spurred the social cost of carbon process that Posner criticizes. But it can't be that (as the courts have found) the agency is damned if it doesn't include an estimate and (as Posner argues) damned if it does.

Posner also makes an argument that EPA, by law, can't take global damages into account: only domestic climate change effects should count in the agency's analysis. This is not the case. Section 115 of the Clean Air Act is titled "International air pollution" and obviously contemplates international effects. So at the very least, regulation under this section can include global climate damages. This is important because if every country regulates with only domestic harms in mind, then globally, controls will be too weak to efficiently fight climate change.

We wouldn't be having this conversation if the president had his druthers: nearly everyone agrees with Professor Posner that it would be much better if Congress put a carbon-control law on the books. But it looks like polar bears will be sipping piña coladas before that happens.

Given the reality of climate change, we cannot wait until every difficult question raised by the cost of carbon has been answered before taking action. EPA's estimate is sound, reasonable, and based on decades of rigorous research -- plenty to work with as regulation rolls ahead, as it legally must.