–The U.S. Environmental Protection Agency is crunching the numbers on the damage expected as a result of carbon dioxide, the so-called “social cost of carbon.”
–The aim of the calculations is to portray climate protection as economically unsound. This should pave the way to overturn Barack Obama's Clean Power Plan.
–Courts could still possibly challenge the government's argument.
The dollar bill is the smallest note in the U.S. In your day-to-day life, this green bill might buy you a coffee, a bar of chocolate or a newspaper with a bit of luck, but not much more. However, a dollar is also the price it would cost in Donald Trump's America to pump a ton of carbon dioxide into the atmosphere – quite the bargain. This suggestion is coming from the Environmental Protection Agency under its new secretary, Scott Pruitt. The dumping price is intended to quash the reform to the energy industry which was pushed by Former President Barack Obama.
At first glance, this move is illogical. Why should carbon dioxide emissions be quantified at all? The U.S. president and his loyal aides are well known for not taking the dangers of greenhouse gases particularly seriously. There is no mandatory tax for emissions in the U.S., unlike Europe.
What Is the Cost for the National Economy, and Will It Help the Economy To Make Cars and Power Plants More Economical?
As it happens, in Trump's America the expected damage as a result of carbon dioxide emissions does need to be quantified as an economic parameter. One reason, among several others, is a Supreme Court opinion from 2007 which ruled that greenhouse gases are a health risk. Hence, establishing a price is not the Republican's own bright idea. Since President Obama's first term, a mandatory estimate figure has been required of American government agencies; this number is known as the “social cost of carbon,” or SCC for short. It puts a figure on the consequences that the emission of a tonne of carbon dioxide has for nature and infrastructure, fields and forests, health and air quality.* The price has some influence on cost-benefit calculations, which American authorities use to make decisions on suggestions for new regulations and bill proposals. What does it cost the national economy, and will it help the economy for cars to be economical or for coal power stations to pay close attention to their emissions, for example?
Michael Greenstone, an economist at the University of Chicago, regards the SCC as pivotal for the environmental politics of the nation, going so far as to say that it is "the most important figure you've never heard of.” Almost 80 laws make reference to it, laws which not only regulate power stations, but also consumer goods such as cars, refrigerators and washing machines. Another economist calculates that the overall figure is in the order of $1 trillion. Under Obama, the amount of damage for each tonne (approximately 2,205 pounds) of greenhouse gases emitted in 2030, for example, amounted to around $50 in the most recent estimate. Trump made use of these calculations in his first official acts as president. Now that his administration has determined the expected costs of every tonne of carbon dioxide to be somewhere in the region of around $1 to $7, the math changes and so, too, does the logic behind energy and environmental politics. Under Obama's calculation, reducing carbon dioxide was profitable for the nation; under Trump, it is depicted as a losing game.
Pruitt and his EPA are using the knocked-down estimate figure as a crowbar to leverage decisive reform to the Clean Power Plan from the Obama era. The plan was intended to rejig the energy industry and curb the unrestrained greenhouse gas emissions of power plants. In doing so, America would have begun to fulfill its obligations as part of the Paris climate accord. What's more, according to the projection, the reform was estimated to bring a profit of $25 billion to $45 billion in 2030. However, Trump hopes to pull out of the Paris agreement, and to support his argument, an estimate of $25 billion in profit was turned into a $15 billion loss.
For the SCC to serve the new government's aims, Pruitt's agency has had to scrape together whatever it can. His experts have deployed several tricks. First, they are no longer doing global calculations, but rather taking into account only the damage which American emissions will cause in the U.S. The effect greenhouse gases may have in Africa is omitted completely. This constraint alone pushes the SCC down to between a quarter and a tenth of its previous value. A second trick consists of changing the so-called discount rate – with this figure, the costs expected in the future are taken into consideration in calculating today's buying power. A high rate can make the possible obligations of the coming decades seem small.
By setting the discount rate at 7 percent, EPA Secretary Pruitt is unabashedly following the specification set by the Congressional Budget Office, an office under White House control. This is a figure which independent economists consider to be absurd. However, it allows Pruitt to come to the competitive price of $1 per tonne of carbon dioxide emitted. With a discount rate of 3 percent, a tonne would have a value of $7 in 2030.
On the other side of the Atlantic, the price estimate for the damage caused as a result of carbon dioxide emissions is much higher. As a result, in the 5-year-old methodological conventions of the German Federal Environment Agency, the rate is set at approximately 145 euros (based on the purchasing power of 2010) for the year 2030 – the equivalent of around $190. The numbers in this calculation are being crunched once more and are estimated to be decidedly more than 150 euros (approximately $178) in the next version.
"Did Whatever Was Necessary To Make the Numbers Work"
The Intergovernmental Panel on Climate Change and the World Bank calculate the carbon dioxide price differently. They avoid the highly-charged discussion about discount rates. Ottmar Edenhofer, an economist from the Potsdam Institute for Climate Impact Research, had a large influence on this in his role as co-chair of Working Group III at the IPCC for its most recent report. "We take as basis how much carbon dioxide humanity can still emit if we want to hold to the 2 degree target, and calculate the price from there," he said.** Using this method, a World Bank commission recently came to a value of between $50 and $100 for every tonne of greenhouse gases which will be emitted in the year 2030. However, this price is also nowhere near being achieved in the European Union Emissions Trading System. It is closer to the Trump level of just 8 euros (approximately $9) for certified emission reductions.
Thanks to a Few Tricks, Climate Change Suddenly Turns into an Economic Profit
Computer models form the basis of the American SCC figure, connecting climatic and economic events. The complex simulations take as a given that climate change threatens economic growth and, for instance, that properties on the coast will be lost through flooding. However, the fact that climate change increases future losses utterly contradicts the ideology of climate change deniers like Pruitt. What's more astounding, the EPA recommendation even states: "Future emissions are expected to produce larger incremental damages as physical and economic systems become more stressed in response to greater climatic change." Atmospheric scientists could not put it any better themselves. However, thanks to the tricks mentioned above, climate change brings an economic profit.
This combination of scientific approval and the deathblow to the damage calculation is partially responsible for the massive criticism which has been triggered. The administration made the political decision "to repeal the Clean Power Plan… and then they did whatever was necessary to make the numbers work," said economist Michael Greenstone in The Washington Post.
At the same time, it shows the difficulties faced by the EPA in trying to find consolidated arguments against the Clean Power Plan. In an almost 200-page paper, Pruitt’s EPA attempts to show that Obama's legislation will cost the American national economy more than it would to avoid the damage. In order to provide proof of this, these bookkeeping tricks will not be enough. Moreover, the EPA authors have suddenly doubled the costs for the energy industry in comparison to previous estimates by the agency. The EPA then recalculated the knocked-down SCC figure accordingly. Despite these interventions – costs up, benefits down – the carbon dioxide emissions themselves are a real disadvantage and require further attention.
Trump's Officials Had To Massively Defy Science 4 Times for the Estimates
Salvation, from Pruitt's perspective, will be brought about in the form of one final trick; in their projection, his experts claim that improving the air quality further in places where they are making observations would not bring any more benefit to health care costs. Epidemiologists vehemently deny this. But the figures which Trump's administration desire are the result of one simple fact – abolishing the Clean Power Plan would bring Americans an increase of $10 billion to $14 billion in the year 2030. But to reach this estimate, Pruitt's team had to completely defy science four times.
Pruitt, a lawyer, possibly did not consider the effect of this calculation. "Because the EPA continues to use the logic of climate economics and is in principle taking over the procedure to produce an estimate for the Social Cost of Carbon," says Edenhofer, "they are laying themselves open to lawsuits which will examine everything."*** And the American courts have already put a stop to quite a number of schemes and initiatives from Trump's government.
*Editor’s note: A tonne in this context refers to a metric ton, a unit of mass equal to 1,000 kilograms, or approximately 2,205 pounds.
**Editor’s note: This quotation, accurately translated, could not be verified.
***Editor’s note: This quotation, accurately translated, could not be verified.