Social Cost of Carbon: Does EPA Rig the Game?

by Marlo Lewis on November 22, 2013

in Features

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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.

Don_E November 23, 2013 at 12:31 am

EPA CREATED AN IMPOSSIBLE COMPLIANCE SITUATION: In rough numbers per the EPA website for CO2 generation from firing bituminous coal, for every 100-ton railcar of coal burned, approximately two 100-ton railcars of CO2 must be sequestered at 40% CO2 capture, the amount mandated by EPA. A large utility coal-fired power plant (say 600 MW) may burn 30 railcars of coal per day! That means 60 100-ton railcars of CO2 must be sequestered per day! That’s over 6,000 tons of liquid CO2 per day that must be sequestered from a 600 MW coal-fired power plant. That is a tremendous amount of CO2 that needs to be sequestered for each large coal-fired power plant in the US over a projected life of 40+ years. Such CO2 capture and sequestration (CCS) systems consume approximately 30+% of the gross power generated from a coal-fired power plant just to drive the CO2 capture, compression and liquefaction process. Pumping the liquid CO2 some distance and deep underground consumes additional power. More power plants will need to be built to make up for this additional power consumption by the carbon capture plants. Furthermore, if this liquid CO2 is sequestered underground, who holds the liability if it comes bubbling up under Grandma’s basement, even when performed in accordance with DOE’s and EPA’s procedures and certified saline aquifer locations and depths? The relatively small amount of wastewater injected underground during hydraulic fracturing (fracking) of natural gas-bearing shale, has been blamed for earth tremors in Ohio and elsewhere. It seems apparent to the casual, but educated observer that CCS is an impossible task.
• In April, 1967 pesticide waste injected by a chemical plant at Denver’s Rocky Mountain Arsenal destabilized a seismic fault, causing a magnitude 5.0 earthquake — strong enough to shatter windows and close schools — and jolting scientists with newfound risks of injection, according to the U.S. Geological Survey.
• “The rising number of earthquakes in normally calm parts of Arkansas, Texas, Ohio and Colorado are linked to the underground injection of wastewater, finds a new study in the journal ‘Geology.’”
• “Disposal of Hydrofracking Waste Fluid by Injection into Subsurface Aquifers Triggers Earthquake Swarm in Central Arkansas with Potential for Damaging Earthquake”
• “The New Year’s Eve earthquake that shook Youngstown, Ohio measured 4.0 on the Richter scale. The temblor was the largest of a series of quakes that had been rocking the area around Youngstown for several months and are blamed on a deep injection well.”

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