An obscure new rule on microwaves can tell us a lot about Obama’s climate policies

June 5, 2013

What does zapping a frozen burrito in the microwave have to do with tackling climate change? Quite a bit, it turns out.

WHAT SECRETS DO YOU HOLD!?! (Credit: David Dang/Flickr)
WHAT SECRETS DO YOU HOLD!?! (Credit: David Dang/Flickr)

Last week, the Department of Energy announced a little-noticed update to its energy-efficiency standards for microwaves, requiring newer models to use less power in stand-by mode.

But there was a surprise buried in the fine print: The agency is now using a higher figure for the "social cost of carbon" in calculating the benefits of the rule. Instead of assuming that the harm caused by carbon-dioxide emissions comes to $22 per ton in 2013, regulators are now using a figure of about $36 per ton.

That's a big shift — the Obama administration is effectively saying that climate change will be more damaging than previously estimated, in part because of the impacts of future sea-level rise. And that means U.S. government agencies could, in theory, justify even stricter regulations to curb greenhouse-gas emissions.

Here's some basic background on what's going on:

What is the "social cost of carbon"? 

But how much is the goose cooked? (Tim Sharp/Reuters)

Back in 2010, 12 different U.S. government agencies got together and tried to estimate how much damage a ton of carbon-dioxide actually caused through global warming. This is a tricky calculation. It entails scrutinizing climate models and estimating the future effects of higher temperatures, and then translating that into present-day dollar terms, which means deciding how much value to place on future generations.

When the dust settled, the agencies settled on a central estimate of about $21 per ton of carbon-dioxide in 2010 — rising to $22 by 2013 and continuing upward — and the value varied if you put more or less weight on future generations.

This meant that an efficiency standard or power-plant regulation that prevented, say, 100,000 tons of carbon-dioxide per year would get assigned a benefit of $2.1 million per year. That number, in turn, could be weighed against the costs of complying with the rule. (For reference, all the cars, trucks, power plants, factories, and farms in the United States produced the equivalent of 6.7 billion tons of carbon-dioxide in 2011.)

So why did the government just increase its estimate of the social cost of carbon? 

(Michael S. Williamson/The Washington Post)

This was a scheduled update, and you can read the reasoning in this newly released memo (pdf) from the Office of Management and Budget, dated May 2013. And essentially, the government is now incorporating newer climate models that capture the future damage from sea-level rise more explicitly. Those models also project that agriculture will suffer more heavily in a hotter world.

So, in its central estimate, the federal government now assumes a ton of carbon-dioxide emitted in 2013 does roughly $36 in damage, rather than its previous estimate of $22, with the value rising each year:

Again, as the chart shows, a lot depends on what "social discount rate" you use to value future generations — the central value is considered to be 3 percent.

Is $36 per ton the right number for a carbon price?

The White House thinks it's a reasonable figure. "These updated values are well within the range of mainstream estimates," says OMB spokeswoman Ari Isaacman Astles. "Indeed, similar estimates are used by other governments, international institutions, and major corporations."

As noted above, it's always difficult to settle a precise number for the amount of damage a given ton of carbon-dioxide causes. There's a fair bit of uncertainty about future climate costs. To get a sense for all the variables involved: In its 2013 memo, the federal government even recalculated how space-heating bills would be affected by higher temperatures.

Some environmental economists, like Frank Ackerman of Tufts or Laurie Johnson of the Natural Resources Defense Council, have argued that the White House might even be underrating the harm caused by carbon-dioxide and climate change, and the social cost of carbon should be twice as high, or 12 times as high, or 45 times as high. The assumptions used can matter a lot.

So a higher number means stricter carbon regulations are possible?

Environmental Protection Agency headquarters in Washington. (Andrew Harrer - Bloomberg)

Sort of. A larger value for the social cost of carbon basically means that any efficiency standard or air-pollution regulation that reduces carbon-dioxide emissions will have higher benefits assigned to it. That could, in theory, make it easier for stricter standards to pass a cost-benefit analysis test, says Frank O'Donnell of Clean Air Watch.

We got an early glimpse of this with the Energy Department's microwave rule. Under the old social cost of carbon, the microwave standards had an estimated $4.2 billion in benefits over the next 30 years. Under the new carbon numbers, the microwave rule has an estimated $4.6 billion in benefits. (The agency has the authority to tighten standards for household appliances, so this could well come up again.)

This might sound like nitpicking. But seeing as how much of the Obama administration's climate-change agenda will likely be carried out through the Environmental Protection Agency, this small tweak could make a big difference in the years ahead.

Related: Obama has said he plans to address climate change in his second term. Here's what he could do.

Show Comments



Most Read Business
Next Story
Dylan Matthews · June 5, 2013