Cass R. Sunstein: Biden climate regulation is about to get tougher

It’s the most important number you’ve never heard of, and President Joe Biden is about to change it as he resets U.S. environmental policy.

It’s the social cost of carbon, a figure that helps determine the stringency of federal regulations governing cars, trucks, power plants, refrigerators, microwave ovens, washing machines, vending machines and much more.

ADVERTISING


The social cost of carbon is a monetary figure that is meant to capture the damage done by a ton of carbon emissions to health, property and agricultural productivity, among other things. (It has two siblings, the social cost of nitrous oxide and that of methane.) Because federal agencies often base their decisions on cost-benefit analysis, a high social cost of carbon means aggressive regulation of greenhouse gas emissions and a low one will produce modest regulation.

Under President Barack Obama, the social cost of a ton of carbon was set at about $50 by a technical working group.In 2016, the analysis of the working group was upheld in court. But in one of his first actions, President Donald Trump disbanded the working group and essentially sliced the social cost of carbon to a range of $2 to $7. That low number played a large role in justifying significantly weaker regulation of emissions from cars, power plants and more.

How did Trump come up with that number? He ordered federal agencies to consider only the damage done in the U.S., and to ignore the damage done to the rest of the world. If greenhouse gas emissions from power plants in the U.S. harmed people in Canada, France and South America, that harm would be ignored.

In contrast, a Biden executive order on public health and climate change, issued last week, directs agencies to “capture the full costs of greenhouse gas emissions as accurately as possible, including by taking global damages into account.” It emphasizes that doing so “supports the international leadership of the United States on climate issues.”

That can be taken to reflect two points. The first is that if every nation used the domestic cost of carbon, the U.S. would be a big loser, because China, India, Germany, Canada and others would not consider the harm they do to U.S. citizens. What Americans need is an international agreement to use the global figure — and if the U.S. does that on its own, it is a lot more likely to spur such an agreement.

The second is that for moral reasons, as well as for reasons of international diplomacy, the U.S. should not ignore the damage that its companies inflict on others. If greenhouse gas emissions from New York, Ohio or California hurt people elsewhere, the nation’s regulators ought to take that into account.

Recognizing the importance of cost-benefit analysis, Biden’s order also creates a new interagency working group, to be led by the directors of the Office of Science and Technology Policy and the Office of Management and Budget, along with the chair of the Council of Economic Advisers.

Within 30 days, the working group is directed to produce an interim social cost of carbon. That’s important, because Biden’s agencies will be getting to work right away on new climate regulations — and they will need a number.

What should that number be? The simplest answer would be to adopt the analysis of the Obama administration, and thus to land at $50. But to take account of the latest science and economics, there is a reasonable argument for quickly adjusting that figure upward.

Whatever the working group chooses for its interim figure, Biden’s order requires it to come up with a final number by January 2022, and to do so after considering public comments, the advice of ethics experts and an important 2017 report from the National Academies of Science, Engineering and Medicine. Ignored by the Trump administration, that report, alongside other recent research, offers something like a road map for incorporating the latest science and economics.

For the Biden administration, there are serious risks as well as opportunities. A few months ago, Trump’s social cost of carbon was struck down in court, in part because it was calculated without consideration of global harm. Biden’s number will also be vulnerable, subject to skeptical scrutiny not only by researchers, but also by Republican critics and by federal courts (potentially including the Supreme Court, with three Trump appointees).

ADVERTISING


In the coming months, a highly professional process, emphasizing the best available science and economics rather than politics, advocacy groups and partisan preferences, is not merely dictated by Biden’s order. For the American people and indeed the world, it is also the right thing to do — and the best way to avoid judicial invalidation.

Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “Too Much Information” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.