Does the Social Cost of Carbon Matter?: An Assessment of U.S. Policy
By: Robert W. Hahn
Robert A. Ritz
We evaluate a recent U.S. initiative to include the social cost of carbon (SCC) in regulatory decisions. To our knowledge, this paper provides the first systematic test of the extent to which applying the SCC has affected national policy. We examine all economically significant federal regulations since 2008, and obtain a surprising result: Putting a value on changes in carbon dioxide emissions does not generally affect the ranking of the preferred policy compared with the status quo. Overall, we find little evidence that use of the SCC has affected U.S. policy choices to date. We offer an explanation related to the political economy of regulation.
Keywords: Cost-Benefit Analysis; Social Cost of Carbon; Climate Policy; Regulatory Innovation
JEL: H43 K32 Q51 Q58
From pages 2-3:
To assess how outcomes were affected, we examine net benefits of all significant federal regulatory policies from 2008 through 2013. We consider 53 regulatory policies, with and without including estimates of the benefits associated with changes in carbon dioxide emissions. Over half of the policies we consider set energy conservation standards for commercial or residential items such as electric motors or dishwashers. Most of the remaining policies set limits on hazardous pollutants from large entities, such as petroleum refineries or electric utilities.
We examine whether inclusion of the benefits from carbon dioxide emissions changes the sign of the net benefits for each regulatory policy. Using this measure, we obtain the surprising result that including the benefits from estimated changes in carbon dioxide emissions does not generally change the sign of quantified net benefits relative to the status quo. Put differently, in almost all cases, estimated net benefits are positive both with and without the social cost of carbon. This finding provides support for the view that the SCC has not had a big effect on actual U.S. policy to date.