Social Cost of Carbon - new NAS report (on methodology - not values of)

[Ronal W. Larson]

List:

1.  I listened to a webinar today by the panel that put a (free , huge @394 pages) new report together.  Here is part of the first page, showing how to download the full report:

  http://www.nap.edu/24651 

   394 pages | 6 x 9 | PAPERBACK ISBN 978-0-309-45420-9 | DOI: 10.17226/24651

'Valuing Climate Changes: Updating Estimation of the Social Cost of Carbon Dioxide”

2.    The slides used today are at:  http://sites.nationalacademies.org/cs/groups/dbassesite/documents/webpage/dbasse_176580.pdf

3. Part of the history and a little of the methodology is captured in this part of slide 13 (out of 26):

4.  This figure is available on page 5 of this much shorter August US Interagency document

 https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc_tsd_final_clean_8_26_16.pdf

5.       Nothing here at any of these three sites on geoengineering or CDR, and only the few numerical values given, but still likely important new data in justifying future Geo costs.

Ron

[ro...@ultimax.com]

Actually, they did project a range of values on the screen, strongly dependent on discount rate.

They did "thousands of runs" to develop three asymmetric bell curves of SCC values per tonne, one for each discount rate, colored RGB.

Each of those curves had a peak way to the left, and a long tail to the right, rather like like Wien's Law.

for 5% (green), the reported average was $12.

for 3% (blue), the reported average was $42. 

for 2.5% (red), the reported average was $62.

Notable on the far right of the red bell curve was a 95%-ile "high-impact" value of $123 per tonne.

The values seem to me a tad high for tonnes of CO2, rather closer to what I would expect for tonnes of *carbon*.

They did ask one of the questions I emailed in, so I was happy about that.

The moderator didn't pose the other one, which was, why not consider a 1% discount rate? (Since the world is at historically low rate regime, almost deflationary.)  3% and 2.5% are too close to each other to get a feel for first-order SCC as f(i).  However, was interesting to see second-order sensitivity: a half-point decrease in discount rate (i.e. - 50 basis points) yielded a $20 increase (5000 basis points!!) in SCC!  You'd expect the sign change, but the magnitude surprised me.  That's why I was so interested in what the effect of 1% discount rate would be. 

In my opinion, a 1% discount rate would not only preserves those very-long-term future benefits, which conventional economic analysis methods are incapable of recognizing, but the choice is entirely defensible on straight-up financial grounds.  For example, there are large pools of ultra-low-interest (1 or 2%) money available in so-called "revolving funds" to pay for public-benefit clean-water/clean-energy infrastructure projects.

If you're into this stuff, there's a good theoretical treatment of discount rates published by the British Crown's Treasury, that is based on the "social time preference rate" method.

You will see that "L" (long-term catastrophic risk) and "delta" (pure time preference) terms sum to 1 or 2%.

The product of the third term, "mu" (elasticity of marginal utility of consumption) and fourth term "g" (long-term real growth per capita) also works out to 1.5-3%, in the developed world.

The resulting discount rate appropriate for the developed world varies from a low of 2.5% to a high of almost 5%, just like the NAS presenters showed.

Here's a link: https://www.gov.uk/government/uploads/system/...data/.../green_book_complete.pdf 

Robert

--

Robert G. Kennedy III, PE

www.ultimax.com

1994 AAAS/ASME Congressional Fellow

U.S. House Subcommittee on Space

[ro...@ultimax.com]

over the transom from my fellow AAAS Fellows [Fellows Energy Climate digest] (which is also a Google Group) -- there's a hearing today in the House Science Committee about this subject:

Social Cost of CO2 hearing 

*Tuesday, February 28*       *Social Cost of Carbon*   *House Science, Space and Technology — Subcommittee on Oversight*   Subcommittee Hearing   *Add to my calendar* <http://www.cq.com/openeventcalendar/363654>   Environment Subcommittee and Oversight Subcommittee holds a joint hearing on "At What Cost? Examining the Social Cost of Carbon." ------------------------------   *Date*   *Tuesday, Feb. 28, 10 a.m.*   *Place*   2318 Rayburn Bldg.   *Witnesses*   Ted Gayer, vice president and director of economic studies at the Brookings Institution   Kevin Dayaratna, senior statistician and research programmer in the Heritage Foundation Center for Data Analysis   Michael Greenstone, professor in economics in the Harris School of Public Policy, director of the Interdisciplinary Energy Policy Institute and director of Energy and Environment Lab in the University of Chicago's Urban Labs   Patrick Michaels, director of the Cato Institute's Center for the Study of Science

[Greg Rau]

Thanks, Robot.

Missed the hearing, but found the website:

https://science.house.gov/legislation/hearings/subcommittee-environment-and-subcommittee-oversight-hearing-what-cost-examining

Interesting opening statement by Chair L. Smith:

"Rushing to use unreliable calculations, such as the social cost of carbon, to justify a regulation is irresponsible and misleading.

For instance, the EPA’s Clean Power Plan would cost billions of dollars every year in return for a minimal benefit on the environment. In fact, the regulation would reduce global temperatures by only 0.03 degrees Celsius and limit sea level rise by only the width of three sheets of paper."

So he's admitting that CO2 does cause GW and SLR, and implies that we need to spend way more than "billions" to have a significant mitigating effect. - it's a start ;-)

Greg

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Subject: [geo] Re: Social Cost of Carbon - new NAS report (on methodology - not values of)

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[Ronal W. Larson]

Greg, cc Robert and list

This to add a bit more (mostly discouraging), after viewing/listening to the full Subcommittee hearing on the 28th (site below). 

 I should have said when I started this thread that the Social Cost of Capital (SCC) is a vitally important part of at least biochar, and probably all of the CDR part of Geo.  The magnitude of an accepted SCC will probably be the main driver of how much CDR/NETs we see.  Unfortunately, this hearing was not helpful in advancing a larger SCC in the USA.   

A good summary of the hearing is at https://www.washingtonpost.com/news/energy-environment/wp/2017/02/28/members-of-congress-met-to-discuss-the-costs-of-climate-change-they-ended-up-debating-its-existence/?utm_term=.78840dd15570 .  The reporter,  Chelsea Harvey, said: 

First paragraph:     “A hearing held Tuesday by several House subcommittees was meant to be an examination of the methods used to calculate an oft-contested metric known as the social cost of carbon, a way of quantifying the costs — environmental, health-related or otherwise — of emitting on additional ton of carbon dioxide into the atmosphere. Yet by its close, the conversation had disintegrated into yet another debate about the extent to which man-made climate change exists. " 

Last paragraph:   “Up to this point, experts have been skeptical about the Trump administration’s ability to eliminate the social cost of carbon altogether, or even significantly reduce its value, without being struck down in court. But with members of both the Trump administration and Congress increasingly questioning its very purpose — to help account for the dangers of climate change — its future is looking ever more uncertain.”

For list members in other countries, and in some US states, who now will be fighting both the US Congress and President on the SCC,  I recommend the testimony of Dr.  Greenstone,  the  former Chief Economist for the Council of Economic Advisors, who led this effort, and is now Professor at the University of Chicago:   https://science.house.gov/sites/republicans.science.house.gov/files/documents/HHRG-115-SY18-WState-MGreenstone-20170228.pdf

The three anti-SCC witnesses did not convince me.  One was not a denier;  he (Dr. Ted Gayer of Brookings) objected to basing the SCC on international, vs US-only, data. I felt Dr.  Greenstone argued convincingly for the larger view, but this is a major problem in defending the SCC, probably as important as the optimum discount rate to be used (3% justified by Dr.  Greenstone).

Thoughts on SCC’s relationship to Geo?

.

Ron

[Robert G Kennedy III, PE]

Ron,

there should be enough keywords in this text-capture for you to navigate
over there and apply for admission. There's an email address, too. (I
think admission is still controlled.)

Message navigation
Message 5 of 1984
Subject: [Fellows Energy/Climate] Digest for
fellows_ene...@googlegroups.com - 2 updates in 2 topics
From fellows_ene...@googlegroups.com
To Digest recipients
Date Today 8:35
Contact photo
fellows_ene...@googlegroups.com

Always cool to interact with another AAAS Fellow, esp. the first class.
FYI, Barry Hyman (ASME, same class as you, '73) was on my own selection
committee in '93.

Robert
--
Robert G. Kennedy III, PE
www.ultimax.com
1994 AAAS/ASME Congressional Fellow
U.S. House Subcommittee on Space

On 2017-03-02 15:47, Ronal W. Larson wrote:
> Robert:
>
> Thanks for your keeping this thread alive.
>
> Interesting coincidence here. I was in the first (1973) class of (9)
> AAAS Congressional Fellows (representing IEEE) - so am greatly
> interested in your references below to
>
>> "..._fellow AAAS Fellows [Fellows Energy Climate digest] (which is
>> also a Google Group)" . _
>
> I couldn't find it with a little Google effort. Can you get me in this
> group?
>
> I am deeply involved in biochar should you ever want to dig deeper.
>
> Ron
[snippissimo]

--
Robert G Kennedy III, PE
www.ultimax.com

[Michael MacCracken]

On the Chairman's statement about likely effects, these are the claims of those suing EPA and are based on impacts in 2050 of a regulation that does not would not come into full effect until 2030, so these were arguably the impacts after only 20 years (so not equilibrium). I prepared a legal declaration for the environmental groups that intervened in the legal case on behalf of EPA (see https://www.nrdc.org/sites/default/files/leg_15120902a.pdf, starting on page B440). I'd note that, in addition, the changes were with respect, as I recall to a relatively low emission scenario. With respect to sea level, if one calculated the sea level sensitivity from paleoclimate studies (so, say, 120 meters for 6 C temperature change), it is something like 500 times as large as the sensitivity the states claimed and Smith referred to. Similarly, on the emissions reductions it carries out over time--so choosing 2050, is just very misleading.

Mike MacCracken

[Adrian Tuck]

That’ll come as a very small consolation to NOAA, see the link below. They’re politicians, look at what they do, not what they say.

https://wpo.st/nM3f2

[Ronal W. Larson]

Mike with ccs

Thanks for supplying the link to the CPP docket.  Yours seems to be the only one of about 80 similar legal declarations that covered the Social Cost of Carbon (SCC) - the subject of the House hearing.   

I assume both the CPP and SCC are as much lost causes with a full Supreme Court as with the US Congress.   Any good news on SCC - especially as relates to this list?

Ron

[Hawkins, Dave]

We expect the Trump Administration to try to abandon or radically weaken the CPP and likely the SCC too.  Both these actions will be challenged in the courts.  The legal issues will center on whether the administration has developed a sufficient rationale to justify its repeal/revisions as lawful.

Sent from my iPad

[Michael MacCracken]

Hi Adrian--Agreed, not much consolation to EPA or NOAA given Trump's choices, although the court will hopefully go through and put out its decision, hopefully supporting the plan and basically refuting the arguments of Pruitt et al. One has to go after the dumb arguments wherever they occur.

Mike

[Ronal W. Larson]

Dave  et al

I hope you are right that there is an opportunity for an SCC law suit.  I’m expecting that the SCC topic will just be ignored by all the Federal agencies.  

Re the CPP - I saw recently that a September date was likely at the Supreme Court.  With everything on hold, that would seem to be an easy thing for the new Administration to just ignore until then - with an expectation that their new ninth member is all that is needed 

Might any existing UN agency take up the SCC for Geo purposes - “exactly" as the Obama White House developed it?

Ron

[Hawkins, Dave]

On SCC, when an agency proposes a rule affecting GHG emissions (e.g., a rule that rolls back the CPP or auto CO2 limits), if it does not discuss SCC, we and others will submit comments arguing that is a failure to consider a relevant factor.  Then the agency will need to respond to those comments.  So the SCC issue cannot be ignored.  If an agency asserts the SCC is zero, it will need to defend that conclusion with an analysis.

On CPP, Trump is expected to sign an E.O. this coming week or next, directing EPA to rescind the CPP.  Then the Justice Department will likely ask the D.C. Circuit, which has the case before it, to send the current rule back to EPA for reconsideration.  We and others will oppose that request and the court will need to decide whether to send the rule back without issuing an opinion.  In any event, it is likely that the matter will not reach the Supreme Court until the next term.  If EPA does proceed with a rulemaking to rescind the CPP, the final action in that proceeding will be challenged in court. There may not be a resolution before the 2020 election.

Sent from my iPad