EPA Revises the Social Cost of a Potent Greenhouse Gas

The Trump administration is tweaking how it measures the costs of emitting a potent greenhouse gas, a move that will have major impacts for climate rules.

Known as the social cost of methane, this obscure metric is a younger counterpart to the better-known social cost of carbon.

Economists and scientists developed the calculation to give policymakers a better idea of the economic benefits of cutting methane emissions. Its revision by the Trump administration is part of a broader shift within the federal government to downplay the impacts of climate change and will have important implications for how U.S. EPA regulates greenhouse gases.

After carbon dioxide, methane is the second largest source of greenhouse gas emissions in the United States. The shorter-lived gas has a much stronger warming effect than CO₂. Over 100 years, methane's warming impact is over 30 times that of carbon dioxide.

That difference is reflected in the social cost of methane calculated under the Obama administration. For 2020, its price was set at about $1,400 per metric ton. That's orders of magnitude greater than the social cost of carbon—about $50 per metric ton.

Under Administrator Scott Pruitt, the Trump EPA is taking a different approach. The agency recently set an interim social cost of methane at $55 per metric ton in 2020, more than 25 times less than the estimate of the previous administration.

The agency will use this value "until an improved estimate of the impacts of climate change in the U.S. can be developed based on the best available science and economics," an EPA spokesperson said in an email.

EPA revealed how it was reshaping methane's impact in a recently published notice. The agency was seeking comment for a proposal to delay implementation of portions of an Obama-era rule aimed at controlling methane emissions from new and modified sources in the oil and gas industry. EPA estimated that the climate benefits the United States would give up by delaying the rule for a year would be between $4.3 million and $13 million.

Pruitt isn't the only one taking a cudgel to climate impact estimates. The Interior Department Bureau of Land Management's interim value for the social cost of methane is at about $162 per metric ton.

Domestic focus

So why are the numbers shrinking under the Trump administration? Part of the reason is EPA is only considering the domestic cost of methane emissions in its calculations, a fact that critics say severely underestimates the global environmental harm caused by the gas. The administration is taking a similar approach in its revisions to the social cost of carbon (Climatewire, Oct. 25).

Jason Schwartz, a research scholar at New York University School of Law, slammed the Trump administration's changes to calculations for the social cost of greenhouse gases. "They have begun to manipulate those estimates in ways that are not at all consistent with the best science or economics," he said.

A guide on the social cost of greenhouse gases co-authored by Schwartz and published by NYU's Institute for Policy Integrity argues that using a domestic-emissions-only approach doesn't make sense for the United States or the rest of the world.

"Because greenhouse pollution does not stay within geographic borders but rather mixes in the atmosphere and affects the climate worldwide, each ton emitted by the United States or a particular U.S. state not only creates domestic harms, but also imposes large externalities on the rest of the world. Conversely, each ton of greenhouse gases abated in another country benefits the United States along with the rest of the world," the authors wrote.

The other problem with the approach, according to the guide, is the existing methods for calculating the "domestic-only" value of the social cost of methane are neither reliable nor complete.

Instead, the Institute for Policy Integrity recommended the best approach would be to use the calculations put forward by the Obama administration's Interagency Working Group in August 2016, which set a social cost of methane at $1,200 per metric ton for 2020 in 2007 dollars ($1,400 in today's dollars).

EPA isn't just using domestic values for methane emissions. It's also changing the discount rate—a calculation that considers how much society is willing to pay now to avoid future damage.

The Trump administration is using higher discount rates of 3 to 7 percent. Under President Obama, the highest discount rate was 5 percent. That might not sound like much of a difference, but over many decades those percentage-point shifts are substantial, according to Andres Restrepo, staff attorney at the Sierra Club.

"The basic idea is that when you have costs or benefits from some sort of regulatory policy that will happen in the future, if you want to know the value today, the standard practice is to discount them by a certain degree," he said.

Schwartz said that there was "virtually no support" among economists for using a 7 percent discount rate.

"It's like saying, 'I'm only willing to spend a couple dollars right now to keep the entire economy from being destroyed for my great-great-grandchildren. It sounds like an absurd statement," Schwartz said.

Justification for stalling rules?

The faltering federal controls on methane followed a growing recognition of the gas's impact on the climate that translated into regulations on methane emissions for landfills and the oil and gas industry toward the end of Obama's second term.

In addition to crafting regulations, the Obama administration sought to expand methane reduction initiatives beyond its own borders. The United States, along with Canada and Mexico, announced in June 2016 that they planned to work together to limit methane emissions by 40 to 45 percent by 2025. The Trump administration canceled the international collaboration—known as the "Methane Strategy"—as part of the president's energy independence executive order.

"EPA continues to collaborate with Canada and Mexico on a number of environmental initiatives," said an EPA spokesperson.

While the Obama administration made a late push to control methane, environmental groups often referred to the regulations on the books as a good jumping-off point but not nearly strict enough to match the threat, particularly over the short term.

The Center for Biological Diversity took particular issue with the way the agency calculated methane's potency. The gas only stays in the atmosphere for a dozen years. That means emissions have an intense but relatively short-lived impact on the climate.

The environmental group cites the recommendations of a 2013 Intergovernmental Panel on Climate Change report as a reason for EPA to dramatically shorten the time frame over which it calculates greenhouse gas impact—from 100 years down to 20.

"Methane has a very different impact over a 20-year period than over a 100-year period," said Vera Pardee, senior counsel at the Center for Biological Diversity. "Under a 20-year period, fossil fuel methane is 87 times as much as CO₂, over a 100-year period it's 36 times as much."

Pruitt's latest change will further ratchet down methane's estimated impact. The administrator could use the resulting lower climate benefits to justify stalling the rules on the grounds that the compliance costs to the industry over the two-year stay of the oil and gas rule outweigh the value of any reductions in methane, said Restrepo.

"Obviously I think those numbers are unlawfully unjustifiable," he said.

Reprinted from Climatewire with permission from E&E News. E&E provides daily coverage of essential energy and environmental news at www.eenews.net.