Article by Tyler Ferdinand
The Heritage Foundation, a leading conservative think tank in Washington, D.C., hosted a discussion on the modeling, science and economics behind climate change last week. The Panelists included Kevin Dayaratna, Ph.D. (Senior Statistician and Research Programmer, The Heritage Foundation), Ross McKitrick, Ph.D. (Professor of Economics, University of Guelph; Senior Fellow, Fraser Institute; and Adjunct Scholar, Cato Institute), and Paul Knappenberger (Assistant Director, Center for the Study of Science, Cato Institute).
The talk centered on critically analyzing the statistical models regarding greenhouse gas emissions used by the Obama Administration to justify carbon taxes, cap and trade policies and greenhouse gas regulations.1 The panelists highlighted that recent research on these models indicate that previous parameters were flawed and urged that the Trump Administration and Congress consider updated findings when devising new regulatory policy.
The topic of main concern was integrated assessment models (IAMs) – models that estimate the social cost of carbon (SC-CO2) in the form of US$ per metric ton of carbon per year. The central question these models attempt to answer is: what is the accumulative economic impact of carbon emissions over the next 300 years? Estimates of SC-CO2 have been previously calculated by the Environmental Protection Agency (EPA) using a Dynamic Integrated Climate-Economy (DICE) model, Climate Framework for Uncertainty, Negotiation and Distribution (FUND) model and Policy Analysis of the Greenhouse Effect (PAGE) model based on an equilibrium climate sensitivity (ECS) formulated from the Roe-Baker distribution. ECS refers to values of the Earth’s temperature changes in response to a doubling of CO2 emissions. The Roe-Baker distribution determines climate sensitivity using a non-linear relationship between the strength of climate feedbacks and the resulting temperature.2 Panelists argued that use of the Roe-Baker distribution overestimated the SC-CO2 and that lower estimates, based on the more recently published Lewis distribution, were more accurate.
SC-CO2 estimates based on the Lewis distribution hover around $30/metric ton of carbon. McKitrick made the statement that unless the SC-CO2 is above $75/metric ton of carbon relevant policy is unjustifiable. Additionally, he claimed that a carbon tax rate would be too high if it were to be based solely off of a SC-CO2 estimate. Instead, according to McKitrick, a carbon tax should be based off of SC-CO2 divided by the marginal cost of public funds. The marginal cost of public funds is essentially the amount of private sector activity that would have to be eliminated in order to increase comparable government revenue. This would also be under the assumption that a carbon tax would be used to reduce other taxes such as income tax.
The talk was summarized with McKitrick saying that thus far there has been a “use and abuse of SC-CO2 numbers.” He suggested a removal of carbon regulations and “if necessary” the introduction of a carbon tax based on concurrent satellite data rather than predictive models.
The EPA has encouraged further research on and refinement of the SC-CO2 models recognizing that current estimates do not currently include all of the important physical, ecological and economic impacts of climate change because of a lack of precise data and model linkages. Despite current limitations the EPA and other members of the interagency group including Council on Environmental Quality, National Economic Council, Office of Energy and Climate Change, and Office of Science and Technology Policy along with the Departments of Agriculture, Commerce, Energy, Transportation and Treasury encourage the continued use of SC-CO2. More accurate SC-CO2 estimates may allow for the establishment of an effective carbon tax to promote economic growth, reduce budget deficits, reduce redundant and inefficient regulation, reduce unnecessary subsidies and reduce the costs associate with climate change.3
For a brief summary on the EPA’s design and implementation of the Social Cost of Carbon check out the EPA Fact sheet at: http://bit.ly/2leQw5M.
For more information on IAMS check out the Consortium for International Earth Science Information Network’s (CIESIN) Integrated Assessment Modeling: 10 Things to Know: http://sedac.ciesin.columbia.edu/mva/iamcc.tg/mva-questions.html
1The Heritage Foundation (2017) Smoke and Mirrors Behind Climate Modeling: Advice to Policymakers. Available from: http://www.heritage.org/environment/event/the-smoke-and-mirrors-behind-climate-modeling-advice-policymakers.
2 RealClimate (2007) The certainty of uncertainty. RealClimate. Available from: http://www.realclimate.org/index.php/archives/2007/10/the-certainty-of-uncertainty/.
3Morris, A.C. (2013) Proposal 11: The Many Benefits of a Carbon Tax. The Hamilton Project. Available from: https://www.brookings.edu/research/the-many-benefits-of-a-carbon-tax/.