Back in 2015 -- when the Obama EPA put out regulations, euphemistically called the "Clean Power Plan," intended to extirpate fossil fuels from the generation of electricity in the United States -- they justified that initiative with a concoction called the "Social Cost of Carbon." Here is something titled the "Regulatory Impact Analysis for the Clean Power Plan Final Rule," dated October 23, 2015, that was the document that accompanied the CPP and attempted to prove that it was a net financial positive. Basically the idea was to use phony climate models to predict catastrophe some time in the very distant future; then put some arbitrary monetary cost on the catastrophe; and then discount that cost back to the present at a low interest rate to claim a present-value "saving" from forcibly transforming electricity generation today. If we force you to shut your perfectly good power plant today, then Manhattan won't flood in the year 2106! That'll "save" $1 trillion! Count it as a $200 billion "saving" today! Or something like that.
Anyway, I would definitely not recommend reading that 2015 RIA. It's well over 200 pages of bureaucratic double-speak. The bottom line was that they calculated this so-called Social Cost of Carbon thing at around $51 per ton of CO2 emissions. At about 7 billion tons of CO2 emissions in the U.S. per year, that would make around $350 billion of annual SCC. So just think about how much we could "save" by forcing you to freeze in the dark! In a post in June 2016 titled "Annals Of Government Fraud: The 'Social Cost Of Carbon,'" I had a good time making fun of the absurdity. Here are some excerpts from that post:
Suppose that you even believe some of the worst case scenarios projected by the most alarmist of the climate models, and you are then given the task of doing a cost-benefit analysis for the use of fossil fuels by mankind. . . . I hope that your . . . reaction would be, this is not even remotely close. On any conceivable scale of measurement, the benefits to mankind from the use of fossil fuels have to outweigh the negatives by a factor of hundreds if not thousands. The benefits so wildly exceed the costs that the whole effort to try to quantify and weigh the two can't really even be justified. Even if you hugely minimize the benefits and exaggerate the costs, there couldn't possibly be any way to make the use of fossil fuels by mankind into a net negative. Indeed, if you need a reasonable proxy for the positive benefits of carbon-based energy, a pretty good start would be 100% of GDP. For the U.S. that's around $17 trillion per year. After all, without carbon-based energy GDP would be a very small fraction of what it is. Maybe you could knock off a couple of tril for the part produced by nuclear and hydro, the infinitesimal part produced by wind and solar, and the even more infinitesimal part that you could produce by your own backbreaking human labor in the absence of an energy boost from something else. So a good estimate of what we might call the Social Benefit of Carbon, or alternatively the Negative Social Cost of Carbon, would be around $15 trillion per year.
That's how you would approach the problem if you were honest, or if you had even a smidgeon of integrity. But remember, this is the government, and their power is at stake.
Now fast forward to the new Trump administration. You probably know that a couple of weeks ago the restaffed EPA announced the impending repeal of the CPP. What you may not know is that the announcement of the proposed repeal was accompanied and supported by a new Regulatory Impact Analysis that, among other things, re-analyzed this "Social Cost of Carbon" gizmo. Here is a link to the new RIA. By the way, it's not a lot shorter than the previous version.
What's remarkable to me about the new RIA is that it fails to take direct aim at the core absurdity of the prior RIA, namely the whole idea that use of fossil fuels -- what we used to call "fire" -- by mankind could possibly be a net negative in any conceivable rational calculation. Instead, what the new RIA does is to make just a couple of relatively minor tweaks to the prior version. An article from yesterday's S&P Global pinpoints the tweaks:
The new value has been narrowed to only consider the domestic impacts of carbon, while the Obama administration's version also took into account the global impacts. . . . And in contrast to the Obama administration, which assumed a 3% discount rate, the new value assumes a 7% discount rate. . . .
Both of those two tweaks are eminently justifiable, although perhaps they could be debated. But with just those two tweaks, the SCC suddenly goes from $51 per ton of emissions to -- $1! And at a lousy $1 per ton, you will quickly see that virtually any cost that you are going to incur to shut down existing power plants and build new wind turbines or solar collectors is going to far exceed any supposed "benefits" from the reduced carbon emissions. A chart at page 21 of the new RIA gives "avoided compliance costs" from undoing the CPP for the year 2030 of $14.4 billion, while "forgone domestic climate benefits" are only a lousy $400 million, leading to a net benefit from getting rid of the CPP of $14 billion.
I guess this is OK as far as it goes, but the central absurdity -- really, "fraud" is probably a more accurate word -- of the whole Social Cost of Carbon construct remains. For God's sake look at the big picture, guys! You haven't even started to consider the most important points. For example:
- You have ridiculously low estimates for how much it will cost to replace existing fossil fuel power plants with so-called "renewables" like wind and solar. Where do you possibly get the idea that you can just build wind turbines or solar panels of equivalent capacity (or even a multiple of the capacity) of your dispatchable coal or natural gas plants and get an equivalent amount of usable power for a functional electrical grid? How much excess capacity will you have to build? How much back-up fossil fuel power capacity will you need to keep around for times of dark and calm? What are you going to do with all the excess power when the wind and sun are at full strength? What are the costs for these things?
- How much storage will you need? Where are the hundreds of billions of dollars that you will need for batteries if you think you can obviate or forbid the fossil fuel backup?
- What about the environmental costs of wind and solar energy? What have you included for the millions of birds that get chopped by wind turbines or fried by solar collectors? What are the costs for the millions of acres that get occupied by these hideous things? How about the health effects from the powerful low-frequency vibrations put out by wind turbines? What about the environmental impacts of disposing of millions of these massive things when their useful lives run out in maybe 15 years (or less)?
- And what have you included for the environmental benefits of increased CO2 in the atmosphere, particularly, particularly improved plant growth from the fertilization effect?
And all of these questions only relate to the Social Cost of Carbon as it applies to the electrical sector. The majority of the use of fossil fuels does not occur in the electrical sector, but rather in areas like transportation (automobiles, planes), industry (farms, manufacturing) and home heating.
When you start considering those things, you quickly realize that my prior statement that the majority of the whole economy depends on fossil fuels is not far off the mark. First, let's stop calling it the Social Cost of Carbon, and recognize that it is the opposite, the Social Benefit of Carbon. What is a realistic estimate of the Social Benefit of Carbon for the U.S.? If you figure that about two-thirds of the economy depends on fossil fuels with no reasonable alternative on the horizon, that's around $14 trillion per year. Annual emissions of CO2 are around 7 billion tons per year. Dividing, you get about $2000 per ton, Social Benefit of Carbon. Sounds about right to me.
So the new Social Cost of Carbon is a little improved, a little less fraudulent than it used to be. But come on, can't we do a real and honest estimate and recognize the huge benefits here?