In a new report, Heritage Foundation analysts Kevin Dayaratna and David Kreutzer examine one of the three main computer models the EPA uses to calculate the social cost of carbon (SCC).
The SCC is an estimate of how much economic damage an incremental ton of carbon dioxide (CO2) emissions allegedly does over time periods as long as 300 years. The model examined by the Heritage analysts is called Dynamic Integrated Climate-Economy, or DICE. Dayaratna and Kreutzer find it to be “flawed beyond use for policymaking.” Fittingly, they title their report: Loaded DICE: An EPA Model Not Ready for the Big Game.
The SCC estimates generated by DICE “shift substantially” — that is, are much lower — when reasonable alternatives are substituted for just a few of the assumptions made by the EPA. Specifically:
- Using a discount rate (a measure of the time value of money) mandated by the Office of Management and Budget (OMB) that the EPA omitted reduces the 2020 estimate of SCC by more than 80 percent;
- An updated estimate of the equilibrium climate sensitivity distribution (ECS)—a measure of CO2’s temperature impact—reduces the 2020 estimate of SCC by more than 40 percent; and
- With an updated ECS distribution, a time horizon up to 2150,* and with the omitted discount rate, the 2020 estimate of SCC falls by nearly 90 percent, from $37.79 to $4.03.
The two Heritage analysts also note that the DICE and similar models’ damage functions are inherently speculative. No one today can forecast what humanity’s technological capabilities will be 50, 100, or 150 years hence. Which means no one knows how humanity’s adaptive capabilities will develop in a warming world. So even if scientists could accurately forecast future warming, projections of future damages would still be guesswork.
Dayaratna and Kreutzer conclude:
Since moderate and defensible changes in assumptions lead to such large changes in the resulting estimates of the SCC, the entire process is susceptible to political gaming. This problem exacerbates the model’s more fundamental and more serious shortcomings in estimating damages in the first place. While running the DICE model (and similar integrated assessment models) may be a useful academic exercise in anticipation of solving these very serious problems, the results at this time are nowhere near reliable enough to justify trillions of dollars of government policies and burdensome regulations.
* The EPA had picked a time horizon out to 2300, as if anyone has a clue how a ton of CO2 emissions today will affect people almost three centuries from now.