The (Anti) Social Cost Of Carbon

Authored by Jonathan Lesser via RealClearEnergy,

Forty-two was the mystical number that explained “life, the universe, and everything” in Douglas Adams’ comic novel, The Hitchhiker’s Guide to the Galaxy.  Today, another mystical number, the so-called social cost of carbon (SSC), is providing the excuse for the Environmental Protection Agency and green-energy-enamored state regulators to enact crippling energy policies.

The SCC is the thumb on the scale that can justify virtually any policy aimed at eliminating fossil fuels. When the EPA first proposed its rule to reduce mercury emissions from coal-fired power plants, the agency’s cost-benefit analysis determined the benefits would be minuscule. Any putative benefits, it turns out, would come instead from reductions in carbon emissions and, here’s the key, based on a calculated value for the SCC.  The same was true for the EPA’s earlier attempt at carbon regulation via a “Clean Power Plan,” which was shut down by the Supreme Court. But here we are again with the agency’s newest rules trying to force coal plants to further reduce mercury emissions and to force both coal and natural gas-fired power plants to capture 90% of their carbon emissions. The technology to accomplish this doesn’t exist and EPA Administrator Michael Regan admitted the rule will force the closure of fossil-fuel power plants.

The SCC values used by the EPA are derived from calculations in integrated planning models (IPMs). Those models assume a simplistic linear relationship between carbon emissions and world temperature (never mind that the validity of that linear assumptions is a subject of deep debate in scientific circles). The models then assume that the resulting temperature increases cause all forms of environmental doom – rising sea levels, more disease, and declining agricultural production – for which yet more estimates are made to assign future cost consequences. Here’s the key: the IPMs project these costs out for the next 300 years (not a typo). Then, those far future costs are “discounted” to estimate a value in today’s dollars by using truly absurd assumptions about such things as inflation and economic growth.

A tongue-in-cheek forecaster’s creed is “Give them a number or give them a date. Don’t give them both.” Attempting to predict the future three centuries hence may be standard fare for science fiction writers, but basing energy policies on such predictions is insane.

Imagine someone in the year 1724 predicting life – and technology – today. Benjamin Franklin was 18 years old and working in his father’s print shop. George Washington would not be born for another eight years. The French scientist Antoine Lavoisier, who first identified carbon as an element in 1789, would not be born until 1743. The first patent on a flush toilet would not happen for another half-century. Thomas Edison would not invent the light bulb and the telephone for another 150 years. Could anyone in 1724 have imagined automobiles, mobile phones, and MRI machines? How about integrated circuits, nuclear power, and B-2 bombers?

To presume we can accurately predict, or even imagine, what the world will look like 300 years from now is just as preposterous. Yet, simplistic models and arbitrary assumptions are being used to drive energy policy decisions today. Using the SCC estimates, and assuming that new technologies will magically appear, the EPA can justify virtually any pollution control regulation, including those that effectively mandate electric vehicles. Similarly, even though offshore wind generation costs five times more than natural gas and coal, the SCC can “prove” the benefits of offshore wind exceed its costs. New York State, for example, assumes that, by 2040, thousands of megawatts of “dispatchable emissions-free generators” (the equivalent of a natural gas generator burning pure hydrogen) will provide the necessary backup for unreliable offshore wind, even though no such generators exist.

Contrary to the economic fantasies peddled by green energy advocates, policies to eliminate fossil fuels based on the supposed benefits captured by the SCC will cripple the U.S. economy. Electricity prices, coupled with ill-considered plans to electrify virtually everything, will soar. Supplies will dwindle, requiring rationing, either explicitly or through rolling blackouts, such as those experienced every day in South Africa. Rather than creating some green energy nirvana, the lack of adequate and affordable electricity will cause societal decay.

All of this based on a made-up number.

Jonathan Lesser is a senior fellow with the National Center for Energy Analytics and president of Continental Economics.