Hill Heat

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.

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 SCC 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 SCC estimates in their rulemakings.

Since the release of the SCC values in February 2010, numerous rulemakings have used those values for the social cost of carbon. Agencies using the SCC 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 SCC estimates. As explained in the February 2010 Technical Support Document, the SCC methodology rests on three integrated climate change assessment models: the FUND, DICE, and PAGE 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 SCC. The SCC 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.

Recognizing that the underlying climate change impact models would evolve and improve over time as scientific and economic understanding increased, the 2010 SCC documentation committed to regular updates, and set a goal of updating the SCC 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 SCC 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 FUND, DICE, and PAGE 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 FUND, DICE, and PAGE 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 SCC 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.

Entities outside of the Federal government are using estimates that are similar to the updated SCC values. For example, these updated estimates are consistent with the SCC 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 SCC 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.

Thank you for your time. I would be happy to answer any questions.

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