Repairing the Social Cost of Carbon Framework: Immediate and One Year Steps for Scientifically Reliable Estimates and Use

On January 20th, 2021, President Biden issued an Executive Order which included requests for interim social cost of greenhouse gases (SC-GHG) estimates for carbon dioxide, methane, and nitrous oxide in 30 days, final SC-GHG estimates in a year, and recommendations on appropriate use of estimates. The SC-GHGs are important metrics that will be used in regulations and other federal decisions going forward in assessing proposals, justifying actions, and setting standards with significant financial and social implications. Estimates are also used by U.S. states and other countries. SC-GHG estimates are complex to calculate and use, requiring multi-century modeling of potential future global societies, climate change, sea level rise, and damages from climate change.

The SC-GHG modeling framework used by the Obama and Trump Administrations will likely be considered as the basis for the interim estimates. However, unique detailed EPRI analyses deconstructing and assessing that framework have found that it is not scientifically reliable, does not produce robust estimates, and therefore should be revised before it can be used. These analyses were a key input into the National Academy of Science, Engineering, and Medicine (NASEM) study noted in President Biden’s executive order, a study that recommended replacement of the modeling framework. Through analyses of past applications of SC-GHGs, EPRI has also found significant technical issues in how SC-GHG estimates have been applied in policy assessment that impact the scientific reliability of climate benefit and net benefit calculations.

For the Biden Administration to “capture the full costs of greenhouse gas emissions as accurately as possible,” the shortcomings in the current modeling framework and SC-GHG use need to be addressed. For interim SC-GHG estimates, this entails revising the framework to meet the minimum scientific standard for transparency, scientific basis, and plausibility, and using discount rates consistent with other federal decisions and the type of value estimated. For final SC-GHG estimates, this requires addressing critical scientific challenges and implementing a scientific and public review process appropriate for regulatory methodologies. It may also entail considering alternatives to the SC-GHGs, if robust estimates cannot be established. Finally, to ensure reliable climate benefits and net benefits calculations, guidance on SC-GHG use is needed that addresses known issues, such as avoiding pricing greenhouse gas emissions more than once.