Opinion | The high price of scrapping the social cost of carbon

That is a technical way of signaling something simple and false: Climate change is not real. If the social cost of carbon is treated as zero, then greenhouse gas emissions inflict no damage. Regulations that reduce those emissions have no benefits, which suggests that those regulations should be eliminated.

The social cost of carbon has often been described as the most important number you’ve never heard of. The metric is meant to capture the harm caused by a ton of carbon emissions, making it a foundation of national climate change policy. A lower value would justify weaker regulations, while a higher one would warrant more aggressive policies.

Under the Obama administration, in which I served, the social cost of carbon was relatively modest: around $50. As the Government Accountability Office found, the interagency process that led to that valuation was emphatically apolitical. The calculation, whose use was upheld in federal court, helped support numerous regulations involving fuel economy, energy efficiency and power plants.

To its credit, the first Trump administration maintained a social cost of carbon. But it made significant changes. By far the most important was to adjust the metric so that it would include only domestic damage.

Naturally, the harm inflicted within the United States is a mere fraction of that imposed on the world. The $50 figure immediately fell to about $7, meaning that the benefits of emissions reductions would be a lot smaller. The Trump administration’s use of the domestic number for greenhouse gases was struck down in federal court as being arbitrary under the Administrative Procedure Act.

The Biden administration shifted back to the global number. Its Environmental Protection Agency extensively analyzed the most recent evidence of the likely harms from climate change and the “discount rate,” or the rate by which we discount future harms. With a discount rate of 2 percent, it landed on $190. That figure is not out of line with expert opinion, and many believe a higher number is more realistic.

President Donald Trump’s executive order presents a dramatic shift and a potentially lawless abandonment of the whole enterprise.

It begins by announcing that calculation of the social cost of carbon is “marked by logical deficiencies, a poor basis in empirical science, politicization, and the absence of a foundation in legislation,” immediately directing the EPA to issue new guidance within 60 days and to consider eliminating the metric from any federal permitting or regulatory decision.

It also includes a subtler (and more reasoned) direction. Before the EPA issues new guidance, agencies are required to comply with a 2003 guidance document from the Office of Management and Budget.

That sounds pretty obscure, but the old guidance has two implications. First, it shows a preference for consideration of domestic, not global, effects. Second, it suggests use of high discount rates (as high as 7 percent), meaning that harm to future generations — to our children and grandchildren — should count for much less.

The resulting valuation of a social cost of carbon, if one even exists, would be negligible — once again in the vicinity of $7.

Eliminating the social cost of carbon altogether would be irresponsible. It would probably be struck down as arbitrary and therefore unlawful under the Administrative Procedure Act. The damage imposed by a ton of carbon emissions is surely above zero. The decision whether to include global damage presents harder questions, and reasonable people can differ. But it’s hardly enough to point to a decades-old guidance document.

The simplest reason to use the global figure is moral. If one country is imposing harms on another, its policymaking should take those harms into account. Morality aside, leading economists have insisted that the global number, or something close to it, is the right choice for the United States’ self-interest, too.

Here’s why: If all of the world’s nations use their domestic figures, they all lose. Climate change does not respect national boundaries. If, for example, European countries do not consider the global impact of their emissions, Americans will face increased risks of flooding, wildfire and drought.

The general use of a global number solves that collective action problem. Sure, there is no guarantee that if the United States uses that number, other nations will follow suit. But many nations have historically taken the United States’ lead.

None of this means, of course, that the Trump administration must accept the Biden administration’s analysis. The various judgments that went into the $190 figure are hardly sacrosanct.

The Trump administration might reasonably decide that the likely damage of climate change is lower than the Biden administration projected. It might use a discount rate of 3 percent rather than 2 percent. In 2023, Nobel Prize winner William Nordhaus estimated a social cost of carbon of $66. A similar figure would hardly defy logic.

There’s a lot that can be done to rethink the social cost of carbon, but one thing is clear: The U.S. government cannot treat that number as if it is zero. Climate change is real. No president, and no federal agency, has the authority to pretend otherwise.