The Government Is Confusing Values And Science In Climate Policy

Last Friday, a federal judge in Louisiana granted a preliminary injunction barring federal agencies from using a set of obscure climate measures to justify regulations targeting greenhouse gas emissions. In the short term, the move throws a minor wrench in President Biden’s global warming agenda, while the longer run implications for science-backed policy are more complicated.

When President Biden took office, he reconvened an Interagency Working Group on the Social Cost of Greenhouse Gases, which previously had been dismantled under former-President Trump. A primary job of this committee is providing updated estimates of the social cost of greenhouse gases, which are values of the societal benefits from reducing climate-warming emissions.

These estimates feed into economic analyses produced by regulators, which add together effects of regulatory actions. A preliminary report from the working group, issued early last year, included interim estimates of the social cost of methane, nitrous oxide and carbon dioxide. Now, due to the action taken by the Louisiana judge, these cannot be used in regulatory actions, at least not without significant changes.

The interim estimates were controversial in part because they weren’t initially subjected to comments from the public. They also deviated from aspects of federal guidelines on regulatory analysis by including benefits to foreigners and failing to use a seven percent social discount rate.

Those guidelines, however, are almost 20 years old, so some aspects of them are out of date. Other aspects—such as the recommendations on discounting—never made sense to begin with. Regardless, it now appears that federal agencies, at least for now, will have to live within the confines set by the guidelines.

While this is going on, the interagency working group continues to plug away at producing more updated estimates. In January, the EPA announced it is looking for names of peer reviewers for a more comprehensive, yet-to-be-released report.

Complex climate science undoubtedly deserves rigorous academic peer review. The problem in this case is that the social cost of greenhouse gas metrics are not science and should never be confused as such.

A typical cost-benefit analysis takes an approach that considers intragenerational impacts only. That is to say, the analysis assumes either that regulations have no impact on future generations, or, probably more accurately, that society is simply not going to worry about these external impacts.

In some cases, however, the case for considering intergenerational impacts is too strong to ignore, so analysts feel obliged to include them. The problem then is that there is no consensus among economists as to how to do it. If a regulation affects today’s generation as well as future ones, does today’s generation get priority or do they all receive equal weight?

One solution that has been proposed, which is widely used in academic climate economics, takes the theoretical perspective of a super-rational “social planner” who arranges all of the resources in the economy. We are then asked to imagine how this imaginary social planner would value society’s welfare, including how it would treat future generations.

Although the social cost of greenhouse gas metrics are sometimes described as expressing how much damage, in dollars, a ton of greenhouse gas emissions produces, technically the metrics express the impact of emissions on the wellbeing of the social planner—an imaginary stand-in for our own welfare.

If this sounds strange, it is. Nevertheless, a lot of thought and scholarship has gone into this approach. A Nobel Prize has even been awarded for it. However, calling it “scientific” is charitable; there are simply too many value judgments involved in the calculus.

By seeking peer reviewers for the forthcoming report, the EPA is creating a false impression that the analysis in these reports is science. The numbers that feed into regulators’ cost-benefit reports are essentially made up because the welfare function of the social planner is made up. Pulling numbers out of a hat would be no more or less scientifically valid than the methods currently employed by the interagency working group.

Former President Trump took a lot of flack for reducing the social cost of carbon dioxide to as little as $1 per ton in some cases. The reality is this judgment was just as defensible as those the working group are likely to make. In fact, one could criticize Trump for continuing to use the social cost of greenhouse gas framework at all, which hides political choices behind a veneer of science.

The ruling by the judge in Louisiana is not without its problems either. Decisions about how much to discount the future or whether to take foreigners into account in analysis—two choices the Louisiana judge took issue with—depend on value judgments. These are not scientific choices (though in some cases laws may require a domestic focus). Nor is there any particular reason federal government guidelines have anything insightful to say on these topics.

Making good decisions requires information we can trust. If government analysts and the courts can’t distinguish positive from normative statements, one has to wonder whether we can trust them to make decisions of vital national and global significance.