July 19, 2013

Carbon-Cost Change Seen by Republicans as Adding to U.S. Prices

From: BusinessWeek

Republican lawmakers criticized the administration of President Barack Obama for raising its estimated cost of climate change, a step they said will increase prices for fuel, electricity and appliances.

The adjustment to the so-called social cost of carbon was slipped into a regulation on the efficiency of microwave ovens.

“The cost just shifted for quite a few things in America, based on a microwave-oven rule,” Republican James Lankford, the chairman of a panel of the House Oversight committee, said at a hearing today. “Americans did not have large-scale input on this.”

The cost estimate of $38 a metric ton in 2015, raised from $23.80, reset the calculation the government uses to weigh costs and benefits of proposed regulations. The figure is meant to approximate losses from global warming such as flood damage and diminished crops. It rose because of changes in the outside models used by the government to estimate these costs.

With the change, government actions that lead to cuts in emissions — from new mileage standards to clean-energy loans –will appear to be more valuable in cost-benefit analyses. Lawmakers questioned both the magnitude of the change, and the way the analysis was released late May 31 without seeking outside comment and review.

“Why wouldn’t this be subject to input from the general public?” Representative Jackie Speier, a California Democrat, said at the hearing.

Comment Opportunity

The administration defended its process, and said that this estimate will be open for review when used as part of the cost-benefit analysis for new regulations.

“There will be an opportunity for people to weigh in,”Howard Shelanski, head of the Office of Information and Regulatory Affairs, said today at the hearing. Shelanski’s office is responsible for reviewing proposed regulations. “This number comes from models that are available.”

The administration’s new carbon cost is key to a wide range of policies, which are subject to cost-benefit analysis by OIRA. As part of a climate effort announced last month, Obama is considering more energy efficiency standards for everything from buildings to vending machines. In addition, the Environmental Protection Agency will issue rules to cap greenhouse-gas emissions from power plants.

In each case, the carbon costs would help determine if the administration would act, and how far to go.

“There is no doubt that the social cost of carbon will be used in a number of economically significant rules,” Shelanski said.

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