Carbon (And Practically Everything Else) Just Got More Expensive

COMMENTARY Environment

Carbon (And Practically Everything Else) Just Got More Expensive

Jul 13th, 2013 3 min read
David W. Kreutzer, Ph.D.

Senior Research Fellow, Labor Markets and Trade

David Kreutzer researches and writes about labor markets and trade.

The Department of Energy (DOE) finalized a rule at the end of May that mandates the amount of energy microwaves can use on standby mode starting in 2016. The DOE tries to legitimize the rule by saying that the alleged social cost of carbon (SCC) is more than it was in 2011—in fact, almost 50 percent more.

According to the EPA’s website, the SCC is a broad estimate of economic damages associated with global warming from emitting one ton of carbon dioxide in a year. Lawmakers use it to assess the costs and benefits of new regulation.

The range and volatility of the estimates show just how speculative SCC calculations are. Some scientists argue that the benefits of carbon dioxide (increasing agricultural productivity, for instance) are undercounted and that unlikely negative impacts are given undue weight.

According to the models used by the White House, the impacts of global warming supposedly caused by carbon emissions are now more costly. This huge increase can have significant impacts on cost-benefit analyses of other much more costly federal decisions, such as approval of the Keystone XL Pipeline.

In 2010, the Obama Administration calculated SCC to be $22 per ton for the year 2013. Their new calculations say it’s actually $36 per ton. Saying the cost of carbon is higher means that the “benefits” of carbon-cutting regulations, such as the microwave rule, are also greater. This also means that the federal government has created a way to make more expensive global warming rules (reaching well beyond microwaves) seem like a good deal.

Burying this regulation in an obscure rule is all too consistent with the behavior of this opaque Administration. Even economist and author Frank Ackerman, a prominent supporter of carbon restrictions, questioned this process: “This is a very strange way to make policy about something this important.” He added that the Administration “hasn’t always leveled with us about what is happening behind closed doors.”

This large bump in SCC estimates is especially ironic, as climate researchers have shaved back the expected warming due to carbon dioxide since the previous, lower value was calculated.

Regardless of the overwhelming evidence that carbon-centric policy approaches to global warming thus far haven’t made environmental or economic sense, one need look no further than the White House’s reappraisal of the costs of carbon to realize that regulating the economy based on the price of carbon is madness.

By 2020 the White House’s models say SCC will range from $12 to $129 per ton of carbon; the old version of the models projected a range of $7 to $81 per ton. If the wide range of carbon pricing weren’t enough to dissuade a policymaker, the mere fact that the pricing models have changed after only three years should serve as another big red flag. Either the models don’t work or we don’t know near enough about global warming to make effective—let alone reliable—policy (or both).

At this point, the red flags telling policymakers and regulators to think twice about the effectiveness of regulating carbon couldn’t be more numerous or bigger.

This piece originally appeared in The Daily Signal