OMB Acknowledges (Most) of Our Comments on the Social Cost of Carbon, Engages None

by Marlo Lewis on July 6, 2015

in Blog

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Why does any sensible person even bother submitting comment letters to the Obama administration about any matter relating to climate change? I find myself asking that question again and again, because the only ‘error’ the administration will ever admit is that climate change is ‘worse than we thought’ — an implicit boast that ‘we were more right than we knew.’

The administration has a party line and no agency is allowed to deviate from it on any matter of climate science, economics, or policy, no matter how speculative or minor the point at issue.

Nonetheless, I continue to submit comments — as other skeptics and free marketers do — just to ensure that the administration’s groupthink does not go unchallenged on the record.

What brings such thoughts to mind is the Office of Management and Budget’s response to comments, posted just before the July 4th weekend, on the Interagency Working Group’s May 2013 Technical Support Document (TSD) on the social cost of carbon. The social cost of carbon (SCC) is the cumulative damage to society allegedly inflicted by an incremental ton of carbon dioxide (CO2) emissions over an immense span of time (typically out to the year 2300).

Obama officials routinely use SCC estimates to calculate the putative benefits of CO2-reducing regulations. The higher the estimated SCC, the bigger the projected value of CO2 reductions becomes. For example, the 2013 TSD increased the SCC values of an earlier 2010 TSD by roughly 60%. So in just four short years, while climate models increasingly overshot observed global temperatures, climate change somehow got 60% worse and climate regulations 60% more valuable. Your government at work!

OMB reports it received 39,000 form letters and about 150 “substantive comments” on the 2013 TSD. The latter pile includes the comment letter I submitted on behalf of eleven pro-market organizations.

Along with its response to comments, OMB has also posted a revised TSD. True to form, the revised document does not accept any of the “substantive comments.” The only changes are minor technical corrections in how agencies are to run the integrated assessment models (IAMs) they use to estimate carbon’s social cost.

As explained in a recent post and accompanying Power Point, SCC analysis is computer-aided sophistry, an attempt by would-be central planners to hide raw political preferences behind a pretense of knowledge and precision.

Today’s post will briefly identify weaknesses in OMB’s response to our comments.

Actually, everything you need to know about the OMB’s mindset may be gleaned from introductory remarks by Howard Shelanski, Director of OMB’s Office of Information and Regulatory Affairs (OIRA):

By now, just about everyone accepts that carbon dioxide emissions from burning fossil fuels are warming our planet and changing our climate in harmful ways. With growing frequency we see headlines about extreme weather events such as heat waves, polar melting, severe drought, and violent storms—a dangerous mix whose costs for our economy and environment will only grow over time.

Although Mr. Shelanski may see a “growing frequency” of headlines about extreme weather, scientists don’t measure the weather by counting headlines. Media coverage of weather events is influenced by politics and other social factors. For example, a recent study finds that the increase in reported flooding in the UK is due, not to changes in storm behavior, but rather to population growth and urbanization, which typically increase people’s exposure to floods.

Shelanski’s insinuation that climate change is increasing the frequency and violence of extreme weather conflicts with the IPCC’s 2013 Fifth Assessment Report (AR5, WGI, Chapter 2, pp. 214-220; Chapter 10, p. 913):

  • “Current datasets indicate no significant observed trends in global tropical cyclone frequency over the past century. . . . No robust trends in annual numbers of tropical  storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.”
  • “In summary, confidence in large scale changes in the intensity of extreme extra-tropical cyclones since 1900 is low.”
  • “There is low confidence in detection and attribution of changes in drought over global land areas since the mid-20th century.”
  • “There continues to be a lack of evidence and thus low confidence regarding the sign of trend in the magnitude and/or frequency of floods on a global scale.”

Unsurprisingly, OMB does not respond to our comment letter’s argument that the SCC is an unknown quantity, discernible in neither meteorological nor economic data. Numerous examples in our letter and my Power Point make the point. Consider just three.

First, there has been no trend since 1970 in the strength or frequency of land-falling hurricanes worldwide.

Weinkle et al 2012






Source: Weinkle et al. (2012)

Second, as a percentage of global GDP, global weather-related disaster losses have been declining since 1990 — a period during which roughly 42% of all industrial CO2 emissions since 1750 entered the atmosphere.

Pielke Jr Global Weather Related Disaster Losses as a Proportion of Global GDP (1990-2012)





Source: Prof. Roger Pielke, Jr.

Third, since 1920, deaths and death rates related to drought, historically the most lethal form of extreme weather, have declined by a spectacular 99.8% and 99.9%, respectively. During 1930 to the present, roughly 90% of all industrial CO2 emissions since 1750 entered the atmosphere.

Goklany Death and Death Rates from Drought Reason Study







Source: Goklany (2011)

Clearly, there is no ‘carbon footprint’ or ‘greenhouse fingerprint’ in the foregoing data. OMB’s response to comments ignores our threshold argument, based on such data, that carbon’s social cost is unknown and, in all likelihood, unknowable.

Nor does OMB respond to our core argument that when used to make public policy, SCC analysis is computer-aided sophistry — a game in which modelers can fiddle with non-validated climate parameters, made-up damage functions, and below-market discount rates to make fossil energy look unaffordable no matter how cheap and renewables look like a bargain at any price.

Our comment letter and several others cite MIT Prof. Robert Pindyck, who finds that IAMs “have crucial flaws that make them close to useless as tools for policy analysis” and that their use in public policy creates “a perception of knowledge and precision” that is “illusory and misleading.” Rather than engage Pindyck on the merits, OMB quotes the opposing view of Weyant (2014):

While Pinkyck’s observations are worthy of careful study, the conclusion that IAMs are therefore useless fundamentally misconceives the enterprise. IAMs and the SCC are conceptual frameworks for dealing with highly complex, non-linear, dynamic, and uncertain systems. The human mind is incapable of solving all the equations simultaneously of different factors. The models have provided important insights into many aspects of climate-change policy.

Of course computers can solve equations that exceed the computational ability of the human mind; and, yes, IAM-based “if . . . then” analyses may yield interesting insights. Pindyck does not deny that. His point, rather, is that IAM outputs depend on too many arbitrary inputs to guide climate policy:

The modeler has a great deal of freedom in choosing functional forms, parameter values, and other inputs, and different choices can give wildly different estimates of the SCC and the optimal amount of abatement. You might think that some input choices are more reasonable or defensible than others, but no, “reasonable” is very much in the eye of the modeler. Thus these models can be used to obtain almost any result one desires.

OMB gives no reason to think otherwise.

DICE and PAGE, two of the three IAMs on which the administration relies, have little-to-no CO2-fertilization benefit, estimated by Craig Idso at $3.2 trillion in enhanced agricultural production during 1961-2011. Hence, our comment letter argued, those models are biased and, for that reason alone, should not be used in regulatory development or justification.

OMB suggests it’s a wash because “none of the three IAMs fully incorporates all climate change impacts, either positive or negative.” Besides, says OMB, “there is uncertainty as to the magnitude” of CO2 fertilization benefits, and in studies of various crops and regions “negative impacts of climate change on crop yields have been more common than the positive impacts.”

None of that addresses, much less negates, the abundant empirical information Idso used to calculate CO2 fertilization benefits. Nor does it justify the use of models that ignore literally thousands of laboratory and field observations demonstrating the positive effect of CO2 enrichment on crop yields. CO2 fertilization is indisputably real and more rigorously quantified than any potential CO2-related climate change impacts.

CO2 Sour Orange Trees








Source: CO2Science.Org

Even if warming-induced crop damages eventually exceed CO2 fertilization benefits, climate change impacts would be even worse if rising CO2 concentrations did not boost crop yields, improve water-use efficiency, and help plants resist environmental stress. So there is no defensible reason for models to exclude CO2 fertilization benefits. What we know at this point is that despite allegedly ‘unprecedented’ global warming, yields of wheat, soy, and corn are up more than 100% since 1960.

Spencer global-grain-yields






Source: Roy Spencer

Our comment letter argued that even if SCC analysis were based on solid science and economics, it would still be biased (one-sided) unless paired with a serious assessment of the economic and social benefits of carbon energy and the corresponding social costs of carbon mitigation. The latter include fuel poverty, higher consumer energy prices, and slower economic growth. Worse, popular CO2 reduction targets may be impossible to meet without perpetuating deadly energy squalor in developing countries.

OMB counters that the benefits of carbon energy “are not relevant to the SCC itself. The SCC is an estimate of the net economic damages resulting from CO2 emissions, and therefore is used to estimate the benefit of reducing those emissions.” But that’s exactly our point: SCC analysis looks at only one side of the ledger. It purports to quantify climate risk while turning a blind eye to climate policy risk.

Given current and foreseeable technologies, reducing CO2 emissions chiefly requires reducing access to fossil fuels, which supply nearly 87% of global commercial energy. OMB says the “SCC is just one component of a larger analysis that includes consideration of many other potential impacts.” But those other impacts are never considered in the same depth or detail. There is no Interagency Working Group on the economic benefits of affordable energy and none on the social costs of carbon mitigation. Rather, Obama officials like EPA administrator Gina McCarthy talk as if the administration’s so-called Clean Power Plan were a big fat business opportunity for the U.S. economy.

Our comment letter faulted the 2013 TSD for ignoring multiple recent studies that indicate a lower climate sensitivity than estimated in the IPCC’s 2007 Fourth Assessment Report (AR4). Lower sensitivity means less warming for a given increase in CO2 concentrations, hence (other things equal) smaller climate impacts. OMB responds that AR4 was still “authoritative” when the 2013 TSD was released. So the Interagency Working Group won’t ever challenge the IPCC, regardless of issues raised by subsequent research. Thanks, OMB, for fessing up to that.

OMB notes that AR5 cites several post-AR4 studies, and although the IPCC lowered the bottom end of the climate sensitivity range from 2°C to 1.5°C, it “retained the high end of the range at 4.5ºC.” Well, of course, it did. If climate sensitivity is as low as reported in some recent studies, the alleged planetary emergency and associated moral imperative for ‘climate action’ go poof. Federal agencies are major sources of funding and expertise to the IPCC. Why can’t they calculate a second set of SCC values using non-IPCC sensitivity estimates from the peer reviewed literature? Oh wait, I answered that query in the preceding paragraph.

One reason SCC values are higher in the 2013 TSD than in the 2010 TSD is that the updated DICE model assumes oceans are reaching saturation as a carbon sink. Yet, as our comment letter notes, empirical studies find that the percentage of CO2 emissions retained by the atmosphere (known as the “airborne fraction”) has held constant despite model predictions. OMB’s response to comments acknowledges our criticism but does not address it. Instead OMB reaffirms that using three IAMs assures the fullest range of relevant issues will be considered.

Another reason SCC values are higher in the 2013 TSD is that the updated FUND model assumes a more rapid rate of warming for any given sensitivity estimate. Accordingly, higher temperatures are reached sooner and discounted less than in the previous version of the model. Our comment letter found this a bit weird, since warming is occurring more slowly than predicted, not faster.

Monckton RSS pause 18 years six months




Source: Christopher Monckton

In response, OMB engages in a bit of hand waiving, essentially denying that the ‘pause’ has any scientific relevance:

With regards to comments on the temperature response function, the past 15 years of observed atmospheric temperatures cannot be compared directly to climate model simulations because (1) observed temperatures were influenced by volcanic eruptions that were not included in simulations because the timing and spatial distribution of eruptions are not known in advance; and (2) the last 15 years of atmospheric temperatures have been strongly influenced by natural climate variability due to oceanic fluctuations, such as the El Niño Southern-Oscillation; models include this variability, but no attempt is made to synchronize the timing of this variability with observed variability. In other words, while the models incorporate variability around a trend over time, they cannot predict how that variability affects measured temperatures in a specific year.

Whether or not the two factors OMB cites explain (or explain away) the warming slowdown or plateau of the past 18.5 years is irrelevant to the point we were making. To wit, over the past 36 years, independent satellite and weather balloon datasets show far less warming in the bulk atmosphere than predicted in state-of-the-art climate models.

Christy Models vs Observations 1979 - Mar. 2015, Figure 1






Source: John Christy

What empirical evidence is there, then, that previous studies low-ball the warming rate for any given climate sensitivity estimate? OMB does not say.

Like many other comment letters, ours faulted the Interagency Working Group for ignoring OMB Circular A-4’s instruction to agencies to use discount rates of both 7% (the “average before-tax rate of return to private capital” in the U.S. economy) and 3% (the average rate of return on long-term government bonds) when estimating the costs and benefits of regulation. The 2010 and 2013 TSDs both use discount rates of 2.5%, 3%, and 5%. Through the miracle of compounding, those rates yield much higher SCC values than would a 7% discount rate. Economist Anne Smith finds that using a 7% discount rates reduces the administration’s “central” SCC estimates, which use a 3% discount rate, by more than a factor of 10.

The TSDs cite A-4’s statement authorizing agencies to use discount rates lower than 3% as “part of a further sensitivity analysis” when estimating “intergenerational” costs and benefits. Similarly, OMB’s response to comments states that A-4 allows agencies “to consider a further sensitivity analysis using a lower but positive discount rate in addition to calculating net benefits using discount rates of 3 and 7 percent” (emphasis added).

But Circular A-4 clearly requires the use of a 7% discount rate in regulatory analysis. OMB’s response to comments invokes ethical and technical economic considerations for preferring lower discount rates, but provides no justification for flouting the plain language of A-4 and excluding SCC calculations based on a 7% discount rate. Apparently, OMB does not like the results, namely, small (non-alarming) SCC estimates.

Under Circular A-4, presentation of “domestic” regulatory costs and benefits is mandatory while presentation of “global” costs and benefits is optional. The TSDs, however, present only the optional global SCC values.

This creates a pro-regulatory bias in debates on U.S. climate policy. Because U.S. adaptive capabilities far exceed the global average, the 2010 TSD guessed that the U.S. domestic SCC is only 7%-23% as large as the global SCC. Thus, presenting only the optional global SCC values inflates the perceived domestic benefit of CO2 reductions, making the benefit-cost ratio of domestic CO2 reductions look much better than is in fact the case.

Our comment letter and many others took the Interagency Working Group to task for failing to present the mandatory domestic values.

As in the TSDs, OMB offers several political and policy-related reasons for presenting global SCC values. But the only explanation that goes to the merits is that the size of the U.S. domestic SCC compared to the global SCC is “approximate, provisional, and highly speculative.” Well, the exact same thing can be said about SCC estimation in general!

It is hard to avoid the suspicion that the Interagency Working Group does not present domestic SCC values, does not use a 7% discount rate, and does not use updated climate sensitivity estimates for the same reason. Calculations using those values would upend the global warming movement’s dogma that the costs of “inaction” vastly outweigh those of “action.”



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