Barrasso amendment would prevent use of flawed estimates for social cost of carbon

Senator Barrasso (R- Wyo.) introduced an amendment this week that would prevent the Administration from relying on revised estimates for the social cost of carbon (SCC) that did not go through formal rulemaking or review. Barrasso attached the amendment to S. 1392, the energy efficiency bill sponsored by Sens. Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio), which hit the Senate floor on Wednesday.

Flawed, hidden process for developing new estimate

On September 4, ACC and six other trade groups petitioned the Office of Management and Budget under the Information Quality Act noting a number of concerns about the process and data used to develop technical documents supporting the Social Cost of Carbon (SSC) for Regulatory Impact Analysis Under Executive Order 12866. The petition requests that the technical documents be withdrawn.

The SCC is an estimate of the “economic damages” associated with a small increase in CO2 emissions and is used by EPA and other federal agencies to weigh the benefits of rulemakings. In 2010 it was estimated at $23 per metric ton. It was revised earlier this year, without clear explanation, to $38 per metric ton.

According to the letter, the SCC estimates are the product of an “opaque process” which fails “in terms of process and transparency” and does not “comply with OMB guidance for developing influential policy-relevant information under the Information Quality Act.” Among the other issues raised in the letter: no peer review of the estimates or subsequent analysis, an unacceptable range of accuracy and a limited utility of the SCC for use in benefit cost analysis and policy-making.

This ambiguity in the rule-making process could set precedent for U.S. EPA and other agencies to justify future rules that would create undue burdens for the energy and manufacturing sectors, the joint letter explained.

SCC estimate under increased scrutiny

The new estimate and the process by which it was developed continue to receive increased scrutiny. As Greenwire reported last week, a noted MIT economist examined the models used for the new SCC estimate and found them to “have crucial flaws that make them close to useless as tools for policy analysis.”

Senator Barrasso’s amendment to S.1392 would impose a “time out” until these flaws are corrected. It would prohibit the Secretary of Energy from relying on the Administration’s technical support documents for SCC when implementing S. 1392 until the Secretary of Energy conducts an advanced notice of proposed rulemaking and promulgates a proposed and final rule on the social cost of carbon.

Balanced, transparent regulations for businesses

To protect health and the environment while encouraging innovation and high-skilled, high-paying jobs in the business of chemistry, federal agencies must use consistent, sound and transparent information and consider true costs to the economy and jobs when creating regulations. The SCC estimates fail to meet this standard.

As ACC members continuously improve our own environmental performance, we will also continue to advocate for cost-effective laws and regulations that improve our nation’s overall environmental performance and provide clear direction for American manufacturing.

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