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1 1 (June 7, 2021)

handle is hein.crs/govedoc0001 and id is 1 raw text is: ®Infrmin the eiltv eaesne11 0 June 7, 2021 Social Cost of Greenhouse Gases: Issues for Congress On January 20, 2021, President Biden issued Executive Order (E.O.) 13990, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis. It contains directives to update the social cost of greenhouse gases (SC-GHG), a tool that agencies have typically used to estimate the benefits of GHG reductions. SC-GHG estimates have informed decisionmaking on federal actions, including GHG-related rules, since 2008. Members of Congress have taken divergent views on the adequacy and use of the SC-GHG. Some Members of Congress have questioned whether the SC-GHG methodology was consistent with federal guidance. Others have raised concerns that the SC-GHG estimates are outdated and that they underestimated climate benefits. The SC-GHG remains a topic of interest in the 117th Congress as the Biden Administration updates the estimates and implements its climate change directives. What Is the Social Cost of Greenhouse Gases (SC-GHG)? The social cost of a specific GHG is a monetary estimate of the economic impacts associated with emitting an additional ton of that GHG in a given year. Conversely, this dollar figure represents the benefit of a one-ton reduction. The social cost of carbon dioxide (SCC) includes net changes in agricultural productivity, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. Similarly, the social cost of methane (SCM) and the social cost of nitrous oxide (SCN) estimate the monetary value of impacts from marginal changes in methane and nitrous oxide, respectively, in a given year. Each SC-GHG is typically presented as dollars per metric ton of a GHG in a given year. Hereinafter, SC-GHG refers collectively to estimates of the SCC, SCM, and SCN. How Is the SC-GHG Calculated? SC-GHG values are calculated using models that translate changes in emissions into economic impacts through a multistep process. As with any scientific or economic analysis, there are limitations and uncertainties associated with the calculation of the SC-GHG estimates. One limitation is that the underlying models do not include all potentially significant climate change impacts. The sources of uncertainty associated with the SC-GHG estimates include the quantification of the physical effects of GHG emissions (e.g., the way that the models estimate changes in global average temperature), socioeconomic factors (e.g., population and economic growth), projected GHG emissions, translation of physical and climate impacts into economic impacts, and the role of adaptation. Another source of uncertainty is discounting, which occurs in the last step of the SC-GHG calculation. Discount Rate Discounting, which is standard practice in benefit-cost analysis, allows for apples-to-apples comparisons of economic impacts that occur at different times. It helps answer the question about how much future benefits and costs are worth today (present value). It adjusts future values based on the observation that people usually prefer a value today compared with the same amount in the future. Higher discount rates give less present value to benefits or costs that accrue in the future, and lower discount rates give more present value. Given the long time horizons analyzed, SC-GHG estimates are highly sensitive to the discount rate. Discount rate selection is particularly challenging in climate change analyses because GHG emissions remain in the atmosphere for a long time-e.g., hundreds of years- which means the GHG impacts span generations of people. Observed market rates can inform this selection, but current markets do not capture intergenerational rates. There is no consensus on the appropriate discount rate to choose in estimating the SC-GHG. Geographic Scope Another methodological consideration is whether the SC- GHG should measure global or domestic impacts. While most published estimates of the SC-GHG have measured global impacts, some have called on federal agencies to use domestic values in benefit-cost analysis. Those recommending use of global SC-GHG values have concluded that there is no clear distinction between domestic and global climate change impacts and that a domestic SC-GHG understates the benefits to the United States because climate impacts that occur outside U.S. borders may affect the welfare of U.S. citizens and residents. Reciprocity-whether U.S. mitigation policies motivate other countries to likewise reduce GHGs-may also justify use of global values, given that reductions (or increases) by other countries benefit (or harm) those within U.S. borders. Others disagree with a focus on global values, expressing skepticism about the likelihood of complete reciprocity and a view that federal analyses should focus on domestic impacts. These stakeholders also noted that while federal guidance allows consideration of international impacts, it requires consideration of a domestic perspective. How Is the SC-GHG Used? Federal agencies have primarily used the SC-GHG to estimate the climate benefits of GHG reductions from proposed rules. The social cost of each gas is applied to changes in that gas (e.g., the SCC is applied to changes in ittps://crsreports.congress.gt

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