Efficiency Gatekeepers, the Social Cost of Carbon, and Post-Trump Climate Change Regulation

Abstract

In a series of headline-grabbing and controversial moves, the Trump administration reversed national climate change policy. Most visibly, President Trump withdrew from the Paris Climate Agreement, directed the Environmental Protection Agency (EPA) to revise or revoke greenhouse gas standards promulgated under President Obama, and appointed EPA Administrators demonstrably hostile to climate change science.

But a less publicized battle stands to shape U.S. climate change law from behind the scenes both during and after his presidency. President Trump’s March 2017 executive order directing the EPA to revisit greenhouse gas regulations also jettisoned the federal social cost of carbon (SCC), a set of standardized values developed during the Obama administration to monetize the climate benefits of new regulations. The move pleased congressional conservatives who had repeatedly sought to block agencies’ inclusion of the figures in cost-benefit analyses (CBAs) of proposed rules. Disputes over the methodology and role of such specialized calculations unsurprisingly evade widespread public discussion. However, the rise of executive-enforced cost-benefit analysis has made such seemingly obscure technical questions key determinants of U.S. policy.

A series of executive orders since the Reagan administration have made the Office of Information and Regulatory Affairs (OIRA) an efficiency gatekeeper, enforcing a formal process of cost-benefit analysis for new regulations. Because federal agencies’ CBAs often overlook unmonetized benefits, development of the federal SCC advanced climate change policy compared to prior practice. The federal SCC made visible the value of reducing carbon dioxide emissions, allowing this benefit to counterbalance costs in agencies’ regulatory impact analyses. Nonetheless, this Article argues that the federal SCC undermines effective policy in the long run. While scholars have questioned the federal SCC’s methodology, this Article raises concerns about the broader analytical paradigm of which it is a part.

CBA under OIRA oversight impedes critical reform of energy, transportation, and other systems because its antiregulatory process favors the status quo. It presumes a neutral, unregulated baseline. The formality of the analysis also obscures impacts that cannot be monetized. Meanwhile, the analysis overlooks policies that have distorted markets and infrastructure by subsidizing fossil fuel development. To the extent the federal SCC implies that formal CBA optimizes decisionmaking, it also stands to mislead policymakers; to make the necessary calculations, analysts must forecast social, economic, and technological conditions far into a future that will lack familiar environmental stability. The difficulty of imagining these background conditions makes these predictions extremely rough at best. Finally, the end product of CBA—numeric models of decision options—implies a level of understanding and control over the physical environment that humans do not in fact possess. With climate change, the failure to comprehend limits of human understanding contributes to complacency in the face of potential disaster.