prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: JWST is envisioned to be a large deployable space telescope, optimized for infrared observations, and the scientific successor to the aging Hubble Space Telescope  JWST is being designed for a 5-year mission to find the first stars, study planets in other solar systems to search for the building blocks of life elsewhere in the universe, and trace the evolution of galaxies from their beginning to their current formation  JWST is intended to operate in an orbit approximately 1 5 million kilometers—or 1 million miles—from the Earth  With a 6 5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope  JWST’s science instruments are designed to observe very faint infrared sources and therefore are required to operate at extremely cold temperatures  To help keep these instruments cold, a multi-layered tennis court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat  The JWST project is divided into three major segments: the observatory segment, the ground segment, and the launch segment  When complete, the observatory segment of JWST is to include several elements (Optical Telescope Element (OTE), Integrated Science Instrument Module (ISIM), and spacecraft) and major subsystems (sunshield and cryocooler)  The hardware configuration referred to as OTIS was created when the Optical Telescope Element and the Integrated Science Instrument Module were integrated  Additionally, JWST is dependent on software to deploy and control various components of the telescope, and to collect and transmit data back to Earth  The elements, major subsystems, and software are being developed through a mixture of NASA, contractor, and international partner efforts  See figure 1 for the elements and major subsystems of JWST and appendix 1 for more details, including a description of the elements, major subsystems, and JWST’s instruments  For the majority of work remaining, the JWST project is relying on two contractors: Northrop Grumman and the Association of Universities for Research in Astronomy’s Space Telescope Science Institute  Northrop Grumman plays the largest role, developing the sunshield, the Optical Telescope Element, the spacecraft, and the Mid-Infrared Instrument’s cryocooler, in addition to integrating and testing the observatory  Space Telescope Science Institute’s role includes soliciting and evaluating research proposals from the scientific community, and receiving and storing the scientific data collected, both of which are services that it currently provides for the Hubble Space Telescope  Additionally, the Institute is developing the ground system that manages and controls the telescope’s observations and will operate the observatory on behalf of NASA  JWST will be launched on an Ariane 5 rocket, provided by the European Space Agency  JWST depends on 22 deployment events—more than a typical science mission—to prepare the observatory for normal operations on orbit  For example, the sunshield and primary mirror are designed to fold and stow for launch and deploy once in space  Due to its large size, it is nearly impossible to perform deployment tests of the fully assembled observatory, so the verification of deployment elements is accomplished by a combination of lower level component tests in flight-simulated environments; ambient deployment tests for assembly, element, and observatory levels; and detailed analysis and simulations at various levels of assembly  We have previously found that complex development efforts like JWST face numerous risks and unforeseen technical challenges, which can often become apparent during integration and testing  To accommodate unanticipated challenges and manage risk, projects reserve extra time in their schedules, which is referred to as schedule reserve, and extra funds in their budgets, which is referred to as cost reserve  Schedule reserve is allocated to specific activities, elements, and major subsystems in the event of delays or to address unforeseen risks  Each JWST element and major subsystem has been allocated schedule reserve  When an element or major subsystem exhausts schedule reserve, it may begin to affect schedule reserve on other elements or major subsystems whose progress is dependent on prior work being finished for its activities to proceed  Cost reserves are additional funds within the project manager’s budget that can be used to address unanticipated issues for any element or major subsystem, and are used to mitigate issues during the development of a project  For example, cost reserves can be used to buy additional materials to replace a component or, if a project needs to preserve schedule reserve, reserves can be used to accelerate work by adding shifts to expedite manufacturing  NASA’s Goddard Space Flight Center— the NASA center with responsibility for managing JWST—has issued procedures that establish the requirements for cost and schedule reserves  In addition to cost reserves held by the project manager, management reserves are funds held by the contractors that allow them to manage program risks and to address unanticipated cost increases throughout development  We have previously found that management reserves should contain 10 percent or more of the cost to complete a project and are generally used to address various issues tied to the contract’s scope  NASA’s cost-plus-award-fee contract with Northrop Grumman has spanned almost two decades, during which there have been significant variances in contractor performance  Cost-reimbursement contracts are suitable when uncertainties in the scope of work or cost of services prevent the use of contract types in which prices are fixed, known as fixed-price contracts  Award fee contracts provide contractors the opportunity to obtain monetary incentives for performance in designated areas identified in the award fee plan  Award fees may be used when key elements of performance cannot be defined objectively, and, as such, require the project officials’ judgment to assess contractor performance  For JWST’s contract with Northrop Grumman, these areas include cost, schedule, technical, and business management and are established in the contracts’ performance evaluation plans  In December 2013, the JWST program and the contractor agreed to replace a $56 million on-orbit incentive—incentives based on successful performance in space—with award fees  The award fees are to incentivize cost and schedule performance during development  This shift increased the available award fee for the entire contract to almost a quarter of a billion dollars  According to officials, restructuring the incentives gave NASA more flexibility to incentivize the contractor to prioritize the cost and schedule performance over exceeding technical requirements  In December 2014, we found that NASA award fee letters of award fee periods from February 2013 to March 2014 indicated that the contractor had been responsive to interim award fee period criteria provided by NASA and that contractor officials confirmed that they pay close attention to this guidance in prioritizing their work  For example, Northrop Grumman officials reported that they had made specific changes to improve communications in direct response to this guidance, which was validated by award fee letters from NASA  The JWST program has a history of significant schedule delays and increases to project costs, which resulted in replans in 2011 and 2018  Before 2011, early technical and management challenges, contractor performance issues, low levels of cost reserves, and poorly phased funding caused the JWST program to delay work  As a result, the program experienced schedule overruns, including launch delays, and cost growth  The JWST program underwent a replan in September 2011, and a rebaseline in November of that same year, and Congress placed an $8 billion cap on the formulation and development costs for the project  On the basis of the replan, NASA rebaselined JWST with a life- cycle cost estimate of $8 835 billion, which included additional money for operations and a planned launch in October 2018  Congress also required that NASA treat any cost increase above the cap according to procedures established for projects that exceed their development cost estimates by at least 30 percent  This process is known as a rebaseline  Congress must authorize continuation of the JWST program if formulation and development costs increase over the $8 billion cost cap  In June 2018, after a series of launch delay announcements due to technical and workmanship issues identified during spacecraft element integration, NASA notified Congress that it had again revised the JWST program’s cost and schedule estimates  NASA estimated that it now required $828 million in additional resources and 29 more months to complete beyond those estimates agreed to in the 2011 rebaseline  As of November 2018, NASA had funding to continue to execute the program and was waiting to see if Congress would authorize the program’s continuation and appropriate funds for the program in fiscal year 2019  Figure 2 shows the project’s history of changes to its cost or schedule and key findings from two external independent review teams and our prior work  As discussed above, various technical and workmanship errors drove some of the more recent delays  Examples of some of the workmanship issues we found in the past include: In October 2015, the project reported that a piece of flight hardware for the sunshield’s mid-boom assembly was irreparably damaged during vacuum sealing in preparation for shipping  The damaged piece had to be remanufactured, which consumed 3 weeks of schedule reserve  In April 2017, a contractor technician applied too much voltage and irreparably damaged the spacecraft’s pressure transducers, components of the propulsion system that help monitor spacecraft fuel levels  The transducers had to be replaced and reattached in a complicated welding process  At the same time, Northrop Grumman also addressed several challenges with integrating sunshield hardware  These issues combined took up another 1 25 months of schedule reserve  In May 2017, some of the valves in the spacecraft propulsion system’s thruster modules were leaking beyond permissible levels  Northrop Grumman determined that the most likely cause was the use of an improper cleaning solution, and the thruster modules were returned to the vendor for investigation and refurbishment  Reattaching the refurbished modules was expected to be complete by February 2018, but was delayed by one month when a technician applied too much voltage to one of the components in a recently refurbished thruster module  NASA and Northrop Grumman reported that resolving the thruster module issue resulted in a 2-month delay to the project’s overall schedule  In October 2017, when conducting folding and deployment exercises on the sunshield, Northrop Grumman discovered several tears in the sunshield membrane layers  According to program officials, a workmanship error contributed to the tears  The tears resulted in another 2-month delay to the project’s overall schedule  In addition, some first-time efforts took longer than planned  For example, in fall 2017, the project determined that it would need to use up to 3 months of schedule reserve based upon lessons learned from the contractor’s initial sunshield folding operation  This first deployment, or unfolding, took 30 days longer than planned  The sunshield has since undergone another deployment, and will be deployed twice more before launch  The IRB took into account these technical and workmanship errors, as well as other considerations, when it analyzed the project’s organizational and technical issues  The board’s final report, issued in May 2018, included 31 recommendations that addressed a range of factors  For example, the IRB recommended that the project: Conduct an audit to identify potential embedded design flaws— problems that have not been detected through analysis, inspection, or test activities and pose a significant risk to JWST schedule, cost, and mission success; Establish corrective actions to detect and correct human mistakes during integration and test; Establish a coherent, agreed-upon, and factual narrative on project status and communicate that status regularly across to all relevant stakeholders; and Augment integration and test staff to ensure adequate long-term staffing and improve employee morale  In its response to the IRB’s report, NASA stated that it accepted the report’s recommendations and had already begun implementing action in response to many of them  Further, project officials told us that some of the actions were underway before the IRB completed its review  To develop a new schedule for JWST’s 2018 replan, NASA took into account the remaining integration and test work and added time to the schedule to address threats that were not yet mitigated  This includes 5 5 months to address an anomaly that occurred on the sunshield’s cover in 2018  The project also replenished its schedule reserves—which we found in February 2018 had been consumed—so that they now exceed the recommended levels  Both the project and IRB conducted schedule risk assessments that produced similar launch dates  The project relied on the replan schedule to determine its remaining costs because the workforce necessary to complete the observatory represents most of the remaining cost  Following is additional information on the schedule and cost considerations  Schedule: JWST’s revised launch readiness date of March 2021 reflects a consideration of the hardware integration and test challenges the project has experienced, including adding time to: Add snag guards for the membrane tensioning system—which helps deploy the sunshield and maintain its correct shape—to prevent excess cable from snagging, Repair tears of the sunshield membrane, Deploy, fold, and stow the sunshield, and Mitigate contractor schedule threats  In addition, the project added extra time to the schedule to complete repairs to the membrane cover assembly, which did not perform as expected during acoustics testing in April 2018  The membrane cover assembly shown in figure 3 is used to cover the sunshield membrane when in the stowed position to provide thermal protection during launch  After the anomaly occurred, the project halted spacecraft element testing, investigated the anomaly, and found that the fasteners had come loose due to a design change made to prevent the fasteners from damaging the sunshield membrane  The design change caused the nuts to not lock properly  According to project officials, due to the design of the membrane cover assembly, the project was not able to conduct flight-like, stand- alone testing on the cover prior to spacecraft element testing  As a result, the project did not discover the design issue until the hardware came loose while installed on the spacecraft element  The project determined that the repairs would take approximately 5 5 months  The project’s replan also reflected schedule reserves above the level required by Goddard Space Flight Center policy, which would have been approximately 5 months at that time  The new schedule includes a total of 293 days or 9 6 months of schedule reserves leading up to its committed launch readiness date of March 2021  NASA approved a JWST launch date of March 2021, but the project and the contractor are working toward a launch date in November 2020  Figure 4 shows the project’s new schedule following the 2018 replan, including how the project distributed its schedule reserves through different integration and test activities  As part of its May 2018 study, the IRB reviewed the project’s schedule and recommended a launch date of March 2021, which was subsequently reflected in NASA’s new schedule for the program  In reviewing the project’s schedule, the IRB found that the project had robust scheduling practices for ensuring that the schedule represented a complete and dynamic network of tasks that could respond automatically to changes  This schedule also passed a standard health check with minimal errors indicating that it was well constructed  However, the IRB noted that this schedule does not account for certain types of unknown risks to the program such as integration and test errors which can take many months to resolve, or the potential need to remove a science instrument from the observatory, which can have about a 1 year impact  As a result, the program could experience additional delays if a risk of this magnitude is realized  Cost: The project’s new $9 7 billion life-cycle cost estimate is principally driven by the schedule extension, which requires keeping the contractor’s workforce to complete integration and test longer than expected  Specifically, the project determined that almost all of the hardware had been delivered and the remaining cost was predominantly the cost for the workforce necessary to complete and test the observatory  For the past 3 years, we have reported that Northrop Grumman’s ability to decrease its workforce was central to JWST’s capacity to meet its long- term cost commitments  However, Northrop Grumman’s actual workforce continued to exceed its projections  This was because it needed to maintain higher workforce levels due to technical challenges, including problems with spacecraft and sunshield integration and test  It also needed to keep specialized engineers available when needed during final assembly and test activities  In developing the cost estimate supporting the 2018 replan, the project used a Northrop Grumman workforce profile that is higher than previous projections because Northrop Grumman now plans to maintain personnel longer during integration and test  According to project officials, the planned reduction of Northrop Grumman’s workforce is now more gradual and conservative than the prior plan  For example, the Northrop Grumman workforce will not start to significantly decline until the observatory ships to the launch site, which is expected to occur in August 2020  As shown in Figure 5, the JWST workforce assembling the observatory declines and the government and contractor workforce necessary to manage and operate the observatory remains after the internal launch readiness date of November 2020  As seen in the above figure, the Space Telescope Science Institute workforce, the contractor responsible for operating JWST, will remain generally flat between fiscal years 2021 to 2026 when it operates the observatory  The NASA civil service and support contractor will remain relatively flat through November 2020 launch date and then decline  In addition, the new cost estimate also took into account $61 million for implementing the IRB recommendations and mission success enhancements, funding for project cost reserves, and operations costs  In June 2018, the NASA associate administrator—who is the project’s decision authority—approved the project to proceed with its replan with a March 2021 launch date and $9 7 billion in life-cycle costs based on the Agency Program Management Council review and replan documents  The associate administrator did not require the project to conduct an updated Joint Cost and Schedule Confidence Level (JCL) analysis for this replan  A JCL is an integrated analysis of a project’s cost, schedule, risk, and uncertainty whose result indicates the probability of a project’s success of meeting cost and schedule targets  NASA policy states that a JCL should be recalculated and approved as a part of the rebaselining approval process, but it is not required  In its replan decision memo, NASA’s associate administrator explained that he did not require the project to update the JCL because project costs are almost entirely related to the workforce and most of the remaining planned activities will be performed generally in sequence  Therefore, according to NASA’s associate administrator, the total cost would be driven almost entirely by the schedule because the workforce levels will remain the same through delivery of the observatory  Both the project and independent estimators used multiple schedule estimating methods to analyze the schedule for the remaining work, and NASA’s associate administrator said these analyses returned consistent, high confidence launch dates  The project’s ability to execute to its new schedule will be tested as it progresses through the remainder of challenging integration and test work  The project has yet to complete three of five integration and test phases  The remaining phases include integration and test of OTIS, the spacecraft element, and the observatory  Our prior work has shown that integration and testing is the phase in which problems are most likely to be found and schedules tend to slip  For a uniquely complex project such as JWST, this risk is magnified as events start to become more sequential in nature  As a result, it will continue to become more difficult for the project to avoid schedule delays by mitigating issues in parallel  As of November 2018, the project is about a week behind its replanned schedule because repairs on the membrane cover assembly took longer than planned  Completing the membrane cover assembly repairs and returning the spacecraft to vibration testing was a key event for the project to demonstrate that it could execute to its new schedule  When the project developed its 2018 replanned schedule, it had planned to complete the membrane cover assembly repairs and reinstall the assembly onto the sunshield and restart spacecraft element integration and test activities by November 6, 2018  The project allocated 4 weeks of schedule reserves specifically for these repairs  However, the membrane cover repairs proved more difficult than anticipated  For example, the program had to address unanticipated technical challenges on the membrane cover assemblies, including repairing tears and pin holes in the covers discovered after the covers were removed  The project also had to allot time to install bumpers, which are kapton tubes, to the assembly to protect the composite material on a sunshield structure during launch  The project identified the need to add the bumpers during subassembly vibration testing  As a result, as of November 2018, the project had used about 4 5 weeks of schedule reserves to cover delays associated with these activities  The use of reserves beyond what the project had planned for the repairs pushed the restart of spacecraft element integration and test activities out about a week to November 14, 2018  Figure 6 compares the project’s initial membrane cover assembly schedule in June 2018 to the actual schedule in November 2018  While the project repaired the membrane cover assembly, it also used this time to conduct risk mitigation activities on OTIS  For example, the project worked to mitigate a design issue on the frill connections  The frill is composed of a single layer of blankets placed around the outside of the primary mirror used to block stray light (see figure 7)  A combination of modeling and inspections revealed that most of the frill sections did not have as much slack as expected at the near-absolute zero cryogenic temperatures of space  This caused shrinkage that put stress on the edges of the outer ring of mirrors, which could affect the stability of the optical mirror and image quality  The project loosened these outer connections by adding a ring to the connecting points  As of November 2018, project officials said they were in the process of verifying the fix through inspections  Examples of technical issues and risks that the project continues to face during the remaining phases of integration and test include: The project is working to mitigate a design issue on the sunshield membrane tensioning system—which helps deploy the sunshield and maintain its correct shape  In our February 2018 report, we found that Northrop Grumman was planning to modify the design of the membrane tensioning system after one of the sunshield’s six membrane tensioning systems experienced a snag when conducting folding and deployment exercises on the sunshield in October 2017  The project and Northrop Grumman determined that a design modification was necessary to fully mitigate the issue, which includes modifying clips used to progressively release the cable tension and adding guards to control the excess cable  The project identified a concern that the depressurization of trapped air in the folded sunshield membrane when the fairing separates to release the JWST observatory may overly stress the membrane material  The project is working with Arianespace—the company responsible for operating JWST’s launch vehicle—and experts at the Kennedy Space Center to resolve this concern  Officials estimated that a design solution would be in place in mid-2019  However, if the project determines that it needs to reinforce the membrane covers to survive excessive residual pressure as it works on this design solution, a multi-month schedule delay could occur  As of November 2018, the project has mitigated 21 of its 47 hardware and software risks to acceptable levels, and reviews these risks monthly for any changes that might affect the continued acceptability of the risk  Five of these 21 risks are related to the project’s more than 300 potential single point failures—several of which are related to the deployment of the sunshield  The project is actively working to mitigate the remaining 26 risks to acceptable levels or closure prior to launching  The project also has several first-time and challenging integration and test activities remaining  For example, the project must integrate OTIS and the completed spacecraft element and test the full observatory in the final integration phase, which includes another set of challenging environmental tests  See figure 8 for an image of OTIS and the spacecraft element prior to being integrated  As previously discussed, the project also has two remaining deployments of the sunshield, and prior deployments have taken longer than planned  To help mitigate the risks associated with the deployments, the project added additional time for deployments in the 2018 replanned schedule based on lessons learned from prior deployments  The two remaining deployments are to occur after spacecraft element integration and test and again after observatory integration and test  The JWST project office is required to evaluate whether the project can complete development within its revised cost and schedule commitments at its next major review—the system integration review—planned for August 2019  This review is to occur after the project has completed two major tasks—OTIS and spacecraft element integration and test  The review is to evaluate whether the project (1) is ready to enter observatory integration and test, and (2) can complete remaining project development with acceptable risk and within its cost and schedule constraints  NASA guidance does not require projects to conduct a JCL at this review  However, project officials said that they plan to conduct another schedule risk analysis in the future  They do not intend to complete a new JCL for the same reasons they did not complete one for the 2018 replan— because costs are almost entirely related to the workforce and can be derived from a schedule that takes into account known risk  While not required, conducting a JCL prior to the system integration review would inform NASA about the probability of meeting both its cost and schedule commitments  If the project proceeds with its plan to conduct only a schedule risk analysis, NASA would be provided only with an updated probability of meeting its schedule commitments  Our cost estimating best practices recommend that cost estimates should be updated to reflect changes to a program or kept current as it moves through milestones and as new risks emerge  In addition, government and industry cost and schedule experts we spoke with noted that integration and testing is a critical time for a project when problems can develop  These experts told us that completing a JCL is a best practice for analyzing major risks at the most uncertain part of project execution  Conducting a JCL at system integration review—a review that occurs during the riskiest phase of development, the integration and test phase— would allow the project to update its assumptions of risk and uncertainty based on its experiences in OTIS and spacecraft element integration and test  The project could then determine how those updated assumptions affect overall cost and schedule for the JWST project  As noted above, the project has many risks to mitigate, technical challenges to overcome, and challenging test events to complete, which could affect the project’s schedule and risk posture  Further, the project has an established history of significant cost growth and schedule delays  In its June 2018 letter notifying an appropriate congressional committee of its updated cost and schedule commitments, NASA acknowledged that recent cost growth for the project will likely impact other science missions  Conducting a JCL at system integration review would provide NASA and Congress with critical information for making informed resource decisions on the JWST project and its affordability within NASA’s portfolio of projects more broadly  NASA has taken steps to augment oversight of the contractor and project following the discovery of the embedded design flaws and workmanship errors that contributed to the project’s most recent schedule delays and cost increases  See table 1 for examples of changes NASA has made to contractor and project oversight—some of which NASA self-identified and others that were in response to IRB recommendations  The IRB made 31 recommendations that ranged from improving employee morale to improving security during transporting JWST to its launch site  NASA has also used award fees to try to incentivize Northrop Grumman to improve its performance  In a July 2018 hearing on the JWST program before the House Science, Space, and Technology Committee, Administrator Bridenstine stated that NASA had reduced the available award fee through commissioning by $28 million out of a total of about $60 million  Northrop Grumman also did not earn its full award fee in the two most recent periods of performance that NASA assessed  For the performance period of April 1, 2017 to September 30, 2017, Northrop Grumman earned approximately 56 percent of the available award fee  Reasons that NASA cited for its evaluation of award fees in this period included workmanship errors on the propulsion system, schedule delays, as well as issues with schedule execution, management, and quality control  For the period of October 1, 2017 to March 31, 2018, Northrop Grumman earned none of the available award fee  Northrop Grumman’s overall score was driven by an “unacceptable” rating in schedule and cost due to delays and in anticipation of exceeding the project’s $8 billion cost cap  Northrop Grumman received an “excellent” rating under the technical category, but the evaluation noted ongoing issues with quality controls, which resulted in delays  For example, the process steps for applying voltage to the spacecraft’s pressure transducers were not clear enough, which resulted in technician error and irreparable damage to the hardware  According to Northrop Grumman officials, the contractor has started to take action to try to improve its quality assurance processes  Officials described actions that ranged from rewriting hardware integration and test procedures to starting efforts to change aspects of the company’s culture that contributed to quality control issues  For example, in July 2018, Northrop Grumman initiated a JWST mission assurance culture change campaign to increase focus on product quality and process compliance  This effort includes having inspectors affirm by signature that they have personally inspected, verified, and confirmed that all aspects of an activity meet quality standards  According to the form instructions, if the inspector is uncertain on compliance or if instructions are unclear, workers are to halt work, investigate and assess the situation, and request help to resolve the situation  Project and Northrop Grumman officials provided an example of these changes working  During a manual deployment of a radiator panel, a Northrop Grumman employee discovered that a flap used as thermal protection for a radiator was installed incorrectly and reported the error  Northrop Grumman technicians found that this flap had been swapped with another flap in the process of moving them to be installed and corrected the problem before work proceeded  Further, NASA and Northrop Grumman are conducting audits to try to minimize the risk of failures during the remaining phases of integration and test  These audits are conducted on items that have not been fully tested, are in workmanship-sensitive areas, or have had a late design change  The first phase of the audit was completed in September 2018 and found no major design issues or hardware rework required  The project plans to audit other areas through at least spring 2019, but will add audits if needed  The JWST oversight structure includes a number of positions that could be responsible for ensuring that the recent augmentations to contractor and project oversight are sustained through launch (see table 2)  In response to our review, NASA officials clarified that the project manager has sole responsibility for ensuring that these improvements are sustained through launch  Further, these officials stated that the project office is responsible for monitoring these changes at the project level and at Northrop Grumman  The project manager’s continued focus on these efforts will be important because: The project is implementing a wide span of improvement efforts, ranging from more on-site coverage at the contractor facility to cultural improvements, which will now need to be sustained for an additional 29 months  The project has had recurring issues with effective internal and external communication as well as defining key management and oversight responsibilities, both of which are important to sustaining oversight  For example, the Independent Comprehensive Review Panel identified communication problems—between the JWST project and Science Mission Directorate management as well as between NASA and Northrop Grumman—and that the project’s governance structure lacked clear lines of authority and accountability  In December 2012, we found the JWST project had taken several steps to improve communication—such as instituting meetings that include various levels of NASA, contractor, and subcontractor management— but the IRB’s findings in 2018 indicate that communication and governance issues have resurfaced in some areas  For example, the IRB found that communication with key stakeholders including the science community, Congress, and NASA leadership, has been variable and at times inconsistent  The project may encounter new schedule pressures as it proceeds through integration and test  A senior NASA official with expertise in workmanship issues told us that schedule pressure is a key reason for increased quality problems on projects  For example, this official said that companies tend to give experts leniency to operate without the burden of quality assurance paperwork when schedule pressures arise, which can lead to workmanship errors  While JWST project officials told us they do not view this as applicable to their project, the perspective regarding potential schedule pressures and workmanship is important to keep focus on given the magnitude of technical challenges and delays the project has faced  We will continue to monitor the project’s efforts at maintaining these oversight augmentations in future reviews, given that less than a year has passed since the project began implementing many of them  Moreover, the project may find that some actions will be required of officials outside the project, particularly since the communication problems identified by the IRB may well extend to headquarters’ interaction with stakeholders from the science community, industry, and the Congress  JWST is one of NASA’s most expensive and complex science projects, and NASA has invested considerable time and resources on it  The project first established its cost and schedule baseline in 2009  Since then, the project made progress by completing two of five phases of integration and test, but has also experienced significant cost growth and schedule delays  However, the project did not complete a JCL analysis as part of its second replan  Between now and its system integration review planned for August 2019, the JWST program will have to continue to address technical challenges and mitigate risks  Conducting a JCL would better inform decision makers on the status of the project as they determine whether the project can complete remaining project development with acceptable risk and within its cost and schedule constraints  Given the project is now on its third iteration of cost and schedule commitments, conducting a JCL is a small step that NASA can take to demonstrate it is on track to meet these new commitments  We are making the following recommendation to NASA: The NASA Administrator should direct the JWST project office to conduct a JCL prior to its system integration review  (Recommendation 1) We provided a draft of this report to NASA for comment  In written comments, NASA agreed with our recommendation  NASA expects to complete the JCL by September 2019, prior to the system integration review  The comments are reprinted in appendix II  NASA also provided technical comments, which have been addressed in the report, as appropriate  We are sending copies of this report to the appropriate congressional committees, the NASA Administrator, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-4841 or chaplainc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  In addition to the contact named above, Molly Traci (Assistant Director), Karen Richey (Assistant Director), Jay Tallon (Assistant Director), Brian Bothwell, Daniel Emirkhanian, Laura Greifner, Erin Kennedy, Jose Ramos, Sylvia Schatz, Roxanna Sun, and Alyssa Weir made key contributions to this report 


Report 2: The U S  Fourth National Climate Assessment, released in 2018, concluded that "the impacts of global climate change are already being felt in the United States and are projected to intensify in the future—but the severity of future impacts will depend largely on actions taken to reduce greenhouse g as [GHG] emissions and to adapt to the changes that will occur " Although a variety of efforts seeking to reduce GHG emissions are currently underway on the international and sub-national level, federal policymakers and stakeholders have different viewpoints over what to do, if anything, about future climate change and related impacts  Their views regarding climate change cover a wide range of perspectives  For example, some contend that climate change poses a "direct, existential threat" to human society and that nations must start making significant reductions in GHG emissions in order to avoid "dire effects " To support this argument, proponents of climate change mitigation highlight the evidence and conclusions from recent reports that are generally considered authoritative, including: 1  The Intergovernmental Panel on Climate Change, Global W arming of 1 5°C , 2018; and 2  The U S  Global Change Research Program, Fourth National Climate Assessment , Volume II: Impacts, Risks, and Adaptation in the United States , 2018  On the other hand, some question whether there are sufficient risks of climate change to merit a federal program requiring GHG emission reductions  In addition, others argue that a unilateral approach to climate change by the United States could disproportionately impact domestic industries while achieving minimal results in global climate change mitigation  If Congress were to consider establishing a program to reduce GHG emissions, one option would be to apply a tax or fee on GHG emissions or the inputs that produce them  This type of approach is commonly called a carbon tax or a GHG emissions fee (see "Terminology Issues: A Carbon Tax or an Emissions Fee?")  This report does not compare and analyze the multiple policy tools available to Congress that could address climate change (see text box "Other Policy Options for Addressing GHG Emissions")  This report focuses on the policy considerations and potential impacts of using a carbon tax or GHG emissions fee to control GHG emissions  The key human-related GHG is CO 2 , which is generated primarily through the combustion of fossil fuels: coal, oil, and natural gas  In 2016, fossil fuel combustion accounted for 94% of U S  CO 2 emissions and 76% of U S  GHG emissions  A carbon tax could apply either directly to GHG emissions or to the materials—based on their carbon contents—that ultimately generate the emissions (i e , "emissions inputs")  A carbon price on emissions or their emissions inputs—mainly fossil fuels—would increase the relative price of the more carbon-intensive energy sources, particularly coal  This result could spur innovation in less carbon-intensive technologies (e g , renewable energy, nuclear power, carbon capture and sequestration [CCS]) and stimulate other behavior that may decrease emissions, such as efficiency improvements  The energy price increases could also have both economy-wide impacts and negative effects on specific industries and particular demographic groups  A carbon tax approach has received some attention and debate in recent years  In the 115 th Congress, Members introduced nine carbon tax or fee proposals  Outside of Congress, the Climate Leadership Council—a bipartisan group of former policymakers and industry leaders—published a conceptual carbon tax approach in 2017 that generated some interest  Some of the industry leaders on the council represent major energy companies, including Shell, BP, and ExxonMobil  On the other hand, many Members have expressed their opposition to a carbon tax  Starting in the 112 th Congress and going through the 115 th Congress, Members have introduced resolutions in both the House and Senate expressing the view that a carbon tax is not in the economic interests of the United States  In 2018, the House passed a resolution "expressing the sense of Congress that a carbon tax would be detrimental to the United States economy" ( H Con Res  119 )  An analogous resolution was not introduced in the Senate in the 115 th Congress  The first section of this report examines carbon tax design issues, including the point of taxation, the rate of taxation, and potential border carbon adjustments  The second section discusses issues related to the distribution of carbon tax revenues  The third section discusses additional considerations associated with a carbon tax program, including estimates of GHG emissions, federal revenue, and fossil fuel prices and changes in energy use  The fourth section provides concluding observations  If policymakers decide to establish a carbon tax system, Congress would face several key design decisions, including the point of taxation—where to impose the tax and what to tax—the rate of taxation, and whether and/or how to address imported carbon-intensive materials  Alternatively, Congress could direct one or more federal agencies to determine these design features through a rulemaking procedure  Although a few of the GHG emission reduction proposals in prior Congresses delegated such authority to an agency, such as the U S  Environmental Protection Agency (EPA), all of the proposals since the 111 th Congress have included some degree of design details in the statutory language  (A later section discusses carbon tax revenue application considerations ) The point of taxation would determine which entities would be required to (1) make tax payments based on emissions or emission inputs, such as fossil fuels, (2) monitor emissions or emission inputs, and (3) maintain records of relevant activities and transactions  This section provides some considerations for policymakers deciding which GHG emissions and/or emission sources to cover in a carbon tax system  Throughout the U S  economy, millions of discrete sources generate GHG emissions: power plants, industrial facilities, motor vehicles, households, commercial buildings, livestock, etc  Administrative costs and challenges would likely increase with a broader scope of an emissions tax  A carbon tax may apply to CO 2 emissions alone, which account for most U S  GHG emissions, or to multiple GHGs  Carbon tax proposals that apply only to CO 2 generally attach a price to a metric ton of CO 2 emissions (mtCO 2 )  Some sources emit non-CO 2 GHGs, such as methane, nitrous oxides, and sulfur hexafluoride  GHG emissions from these sources could be addressed by attaching a price to a metric ton of CO 2 emissions-equivalent (mtCO 2 e)  This term of measure is used because GHGs vary by global warming potential (GWP)  At these sources, the determined GWP values would be an important issue  Policymakers may consider limiting the tax to sectors or sources that emit above a certain percentage of total U S  GHG emissions, many of which currently report their emissions to the government  For more than 20 years, monitoring devices or systems have been installed in smokestacks of most large facilities, such as power plants, which are required to periodically report emissions data to EPA  In addition, since 2010, EPA has collected annual emissions data from approximately 8,000 facilities that directly release above certain amounts of GHG emissions  Using these established monitoring frameworks, policymakers could employ a "downstream" approach, applying a carbon tax at the point where the GHGs from these facilities are released to the atmosphere  Alternatively, the tax could be applied to reliable proxies for emissions, such as emission inputs  For example, the carbon content of fossil fuels—coal, natural gas, petroleum—can serve as a proxy for the emissions released when the fuels are combusted  Applying a tax on emission inputs allows for the consideration of various points of taxation  For instance, emission inputs could be taxed at "upstream" (e g , wells) or "midstream" stages in that process (e g , refineries), the latter allowing for potential tax administration advantages that may be provided by specific infrastructure chokepoints in the fossil fuel market  For example, with respect to petroleum, the number of upstream sources—wells that produce crude oil—is over 445,000, but the number of midstream sources—facilities that refine crude oil—is only 137  Table A-1 (in Appendix A) lists the top GHG emission sources in the United States  These sources combined to account for approximately 95% of U S  GHG emissions in 2016  Table A-1 identifies the number of entities for each source category (e g , number of coal mines, number of steel production facilities) and the percentage of total U S  GHG emissions the category contributes  In the case of fossil fuel combustion—which accounted for 76% of total U S  GHG emissions—the table provides several options for segmenting the universe of sources if policymakers choose to implement a carbon tax  It identifies the number of entities that might be subject to the carbon tax under a particular option (pending any exclusions)  For example, policymakers could address fossil fuel combustion emissions by applying a carbon tax to fossil fuels (based on their carbon content) at the following entities, which include both upstream and midstream infrastructure chokepoints: 137 petroleum refineries (based on 2017 data) and 166 petroleum importers (based on 2018 data); 671 coal mines and eight companies supplying imported coal (based on 2017 data); and 1,679 entities that report natural gas deliveries to the Energy Information Administration (EIA) on Form EIA-176 and 123 natural gas fractionators (based on 2016 data)  Some of the above points of taxation might take advantage of the administrative frameworks for existing federal excise taxes  For example, a per-barrel federal excise tax on crude oil at the refinery supports the Oil Spill Liability Trust Fund  An excise tax on the sale or use of coal supports the Black Lung Disability Trust Fund  A central policy choice when establishing a price on GHG emissions is the rate of the carbon tax  Several approaches, which are discussed below, could inform the decision  One approach would set the carbon tax rate at a level or pathway—based on modeling estimates—that would achieve a specific GHG emissions target  For example, a 2018 study estimated the carbon tax rate needed to meet the U S  GHG emission reduction targets established under the 2015 Paris Agreement: 26%-28% below 2005 net GHG emission levels by 2025  The study found that a constant tax rate of $43/ton starting in 2019 would meet the 2025 reduction target  Emissions reduction estimates from carbon tax programs are based on multiple assumptions  Accordingly, such estimates provide different tax rates needed to meet a particular emissions target depending on these assumptions  See " Impacts on GHG Emission Levels " for selected analyses of emission reductions for a given carbon price and rate of price increase  Under another approach, policymakers could base the carbon tax rate on the estimated marginal net benefits associated with reduced CO 2 emissions  The net benefits would be the avoided net damages (i e , costs) of climate change  The estimates of net benefits of avoided emissions often rely on analyses of the social cost of carbon (SC-CO 2 ) or the social cost of greenhouse gases (SC-GHG )  Therefore, policymakers could use SC-CO 2 measurements—as the basis for an estimate of the net benefits of a marginal change in emissions—to set the rate of a carbon tax or emissions fee  One potential challenge of relying on SC-CO 2 estimates to set a carbon fee are methodological concerns  For example, the existing estimates in peer-reviewed research cover a wide range  In addition, some argue that the underlying simulation models for estimating the SC-CO 2 values are insufficient  For any level of emissions, the projected increase in global average temperature may cover multiple degrees Fahrenheit, and other measures of climate change, such as precipitation patterns, may encompass directional uncertainties  No estimates of impacts are comprehensive at this time, and many of the risks are difficult to estimate and value  When valuing the SC-CO 2 , analysts encounter a range of views on methods and assumptions, and establishing study parameters may be challenging  For example, estimates of the monetary values of climate change impacts may be difficult or controversial to estimate, such as the monetary values associated with human deaths or sickness  A related framework question is whether to include global climate impacts or just domestic impacts  In addition, the element of time in climate change impacts particularly complicates the valuation  The fact that many impacts of climate change will occur in the distant future requires consideration of society's willingness to pay in the near term to reduce emissions that would cause future damages, mostly to future generations  To take time into account, economists discount future values to a calculated "present value " Economists do not agree on the appropriate discount rate(s) to use for a multi-generational, largely nonmarket issue such as human-induced climate change  The choice of discount rate can significantly increase or decrease values of the SC-CO 2   A low discount rate would give greater value today to future impacts than would a higher discount rate  High discount rates can reduce the value today of future climate change impacts to a small fraction of their undiscounted values  A high discount rate would recommend applying fewer of today's resources to addressing climate change impacts in the future  Since 2008, federal agencies have used SC-CO 2 estimates in dozens of final rulemakings as a method to estimate the net benefits of abating CO 2 emissions  An Interagency Working Group prepared SC-CO 2 estimates, which were updated over time and subjected to expert and public comment  On March 28, 2017, President Trump issued Executive Order 13783, "Promoting Energy Independence and Economic Growth," which effectively withdrew the federal SC-CO 2 estimates  Nonetheless, federal agencies have used new, interim values generated by EPA in 2017, modified from the withdrawn technical support documents, in regulatory and other decisions  Legislation could set a carbon price citing any of these SC-CO 2 values or others available from nonfederal researchers or prescribe methods for estimating new ones  Using SC-CO 2 estimates to set the tax rate would involve a cost-benefit framework  Although many posit that a cost-benefit framework remains the best option, some economists argue that a cost-benefit framework may be inappropriate for climate change policy for these reasons Many experts expect climate change—and policies to address it—to cause nonmarginal changes to economies and ecosystems  The changes are expected to increase disproportionately with incremental climate change with a potential for crossing critical "tipping points" after which systems change dramatically and rapidly  Climate change impacts are multi-generational, and uncertainty and disagreement exists about whether and how to assign a present value to social costs and benefits over generations  Some impacts from climate change may be irreversible on the timescale of human civilizations, such as melting of major ice sheets in Antarctica or Greenland  Policymakers might consider a carbon tax as a fiscal tool to help reduce the federal deficit, reduce other taxes, or pay for specific programs that may or may not be related to climate change policy  In addition, some have proposed a phased-in approach, setting a rate that is initially lower but increases at an announced or adjustable rate either for a fixed period or indefinitely  Advantages of this approach include providing an opportunity for consumers and investors to adjust their behavior before the higher tax rates go into effect, such as purchasing more energy efficient appliances or investing in low-emissions technologies  Phasing in a carbon tax, however, could delay climate-related benefits  If Congress finds agreement in principle on carbon pricing, the rate(s) could emerge from the process of reaching political agreement  Elements that might be considered include the options described above or consideration of the magnitude of overall economic impact; impacts on certain economic sectors, regions, or population groups; timing to motivate and allow an orderly transition to a lower-GHG economy; or other factors  Many stakeholders have voiced concerns over how a U S  carbon price system would interact with policies in other nations, particularly if the United States were to enact a carbon tax system that covers more sources or is more stringent than enacted elsewhere  A central concern is that a U S  carbon tax could raise U S  prices more than the prices of goods manufactured abroad, potentially creating a competitive disadvantage for some domestic businesses  Certain businesses may become less profitable, lose market share, and reduce jobs  The industries generally expected to experience disproportionate impacts under a U S  carbon tax are often described as "emission-intensive, trade-exposed" industries  An industry's CO 2 emission intensity is a function of both direct CO 2 emissions from its manufacturing process (e g , CO 2 from cement or steel production) and indirect CO 2 emissions from the inputs to the manufacturing process (e g , electricity, natural gas)  Such industries are likely to experience greater cost increases than less carbon intensive industries, all else being equal  In general, trade-exposed industries are those that face greater international competition compared to other domestic industries  A carbon tax could present a particular challenge for these industries, because they might be less able to pass along the tax in the form of higher prices, because they may lose global market share—and jobs—to competitors in countries lacking comparable carbon policies  Policymakers might consider approaches to mitigate these potential economic impacts in several ways  One approach that has received interest in recent years is a border adjustment mechanism, which is often described as a border carbon adjustment (BCA) in the carbon tax context  A BCA would apply a tariff to emission-intensive, imported goods such as steel, aluminum, cement, and certain chemicals  Each of the carbon price proposals in the 115 th Congress would have established a BCA to address emission-intensive imports  Another rationale for adding a BCA to a carbon tax system is the possibility that it would encourage other nations to adopt comparable carbon price policies  Many of the recently proposed BCA mechanisms allow for exemptions for nations with comparable programs  To date, no nations have implemented a BCA as part of their climate change policies  Establishing an economically efficient BCA would likely present substantial challenges  For example, policymakers must decide which goods and/or industries would be covered by a BCA and how the adjustment program would assess the comparability of varied climate-related policies in other nations  In addition, accurately determining and verifying the volume of GHG emissions embodied in a particular imported product would be data intensive and challenging  To alleviate some of the measurement complexity, policymakers could limit the program to selected industries and apply default values and assumptions to particular manufacturing processes  However, this simplified approach could result in less accurate import price adjustments, which could potentially affect the accuracy of GHG emission reductions achieved by the carbon tax program  Another option would be to allow companies to provide measured, independently verified emissions data as an alternative to default values  In addition, the border adjustment approach would likely raise concerns of violating international trade rules  Further, some researchers have highlighted the potential for unintended consequences from a BCA  For example, some studies have found that a border adjustment may lead to lower net exports than the carbon price alone, due to the adjustment's terms-of-trade effect on U S  currency  These issues are beyond the scope of this report, but some of the concerns may be lessened to some degree if a larger number of nations establish comparable emission reduction policies, as many have agreed to do under the Paris Agreement  Another possible rationale for a BCA is to address the concern of "emissions leakage" (or "carbon leakage")  Emissions leakage "occurs when economic activity is shifted as a result of the emission control regulation [e g , a carbon tax program] and, as a result, emission abatement achieved in one location that is subject to emission control regulation is [diminished] by increased emissions in unregulated locations " The concern of emissions leakage has been central in the debate over whether the United States (or any nation) should unilaterally address GHG emissions  A BCA may diminish the potential for emissions leakage by reducing the incentive to shift economic activity to a nation without a comparable carbon tax  However, some recent studies raise questions regarding the degree to which emissions leakage would be a concern under a unilateral U S  carbon tax  Although a tax may be levied on fossil fuels or GHG emission sources at various points in the economy, the carbon tax impacts may be experienced elsewhere  Policymakers have multiple options to address these expected impacts  Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues  As discussed below, some economic analyses indicate that certain distributions of tax revenue—depending on the level of the tax—would have a greater economic impact than the direct effects from the tax or fee on GHG emissions  Carbon tax revenues could be treated as general fund revenue without a dedication to a specific purpose in the enacting legislation (i e , subject to the annual appropriations process), or policymakers could state that the new revenues would support deficit (or debt) reduction  Alternatively, the enacting legislation could return the tax revenue to the economy in some manner, sometimes called "revenue recycling " All of the carbon tax legislative proposals in recent Congresses have proposed some manner of revenue recycling, specifically directing the carbon tax revenue to support specific policy objectives  Carbon tax revenues may be used to support a variety of policy goals  When deciding how to allocate the new revenue stream, policymakers would likely encounter trade-offs among objectives, including: reducing the economy-wide costs resulting from a carbon tax program; alleviating the costs borne by subgroups in the U S  population, particularly low-income households and/or communities most dependent on carbon-intensive economic activity; and supporting specific policy objectives, such as domestic employment, climate change adaptation, energy efficiency, technological advance, energy diversity, or federal deficit reduction, among others  In general, economic carbon tax studies have found that the relative ranking of revenue recycling options to mitigate the economy-wide impacts is generally the opposite of the relative ranking for alleviating distributional impacts  The contrasting relative rankings highlight a central tradeoff policymakers would face when deciding how to allocate carbon tax revenues  The following sections discuss these trade-offs and some of the revenue application options that have received attention in recent years  A large body of economic literature has examined the economic impacts of hypothetical carbon tax programs, particularly the impacts of using the carbon tax revenues for different purposes  Many of the economic studies cited below were prepared prior to the enactment of the Tax Cuts and Jobs Act (TCJA, P L  115-97 )  Signed by President Trump in December 2017, the act changed various elements of the U S  federal tax system  In particular, the act lowered the corporate income tax rate from 35% to 21%  As discussed below, adjusting the corporate income tax rate is one of the central policy options generally considered in carbon tax economic literature both before and after enactment of P L  115-97   Based on a selected review of the economic literature that includes the tax code changes in P L  115-97 , the central conclusions from carbon tax literature regarding revenue recycling appear to be largely unchanged  A primary concern with a carbon tax is the potential economy-wide costs that may result  Generally, a tax or fee on GHG emissions or the fuels that generate them would increase certain energy prices, namely fossil fuels, in the near- to medium-term as well as the prices of goods and services produced using these materials, like electricity  This outcome is inherent to the carbon tax, as its purpose is to increase the relative price of the more carbon-intensive energy sources compared to less carbon-intensive alternatives, encourage innovation in less carbon-intensive technologies, and promote other activity (e g , energy efficiency) that may decrease emissions  These expected outcomes will have some economy-wide impacts  Ultimately, the economy-wide effects would depend on a number of factors, including, but not limited to, the magnitude and scope of the carbon tax and, most importantly, use of the ensuing revenues

ground_truth: JWST, a large, deployable telescope, is one of NASA's most complex projects and top priorities. The project has delayed its planned launch three times since September 2017 due to problems discovered in testing. In June 2018, NASA approved new cost and schedule estimates for JWST. Since the project established its cost and schedule baselines in 2009, the project's costs have increased by 95 percent and the launch date has been moved back by 81 months. Conference Report No. 112-284, accompanying the Consolidated and Further Continuing Appropriations Act, 2012, included a provision for GAO to assess the project annually and report on its progress. This is the seventh report. This report assesses (1) the considerations NASA took into account when updating the project's cost and schedule commitments and (2) the extent to which NASA has taken steps to improve oversight and performance of JWST, among other issues. GAO reviewed relevant NASA policies, analyzed NASA and contractor data, and interviewed NASA and contractor officials. In June 2018, the National Aeronautics and Space Administration (NASA) revised the cost and schedule commitments for the James Webb Space Telescope (JWST) to reflect known technical challenges, as well as provide additional time to address unanticipated challenges. For example, the revised launch readiness date of March 2021 included 5.5 months to address a design issue for the cover of the sunshield (see image). The purpose of the sunshield is to protect the telescope's mirrors and instruments from the sun's heat. NASA found that hardware on the cover came loose during testing in April 2018. The new cost estimate of $9.7 billion is driven by the schedule extension, which requires keeping the contractor's workforce on board longer than expected. Before the project enters its final phase of integration and test, it must conduct a review to determine if it can launch within its cost and schedule commitments. As part of this review, the project is not required to update its joint cost and schedule confidence level analysis—an analysis that provides the probability the project can meet its cost and schedule commitments—but government and industry cost and schedule experts have found it is a best practice to do so. Such analysis would provide NASA officials with better information to support decisions on allocating resources, especially in light of the project's recent cost and schedule growth. NASA has taken steps to improve oversight and performance of JWST, and identified the JWST project manager as responsible for monitoring the continued implementation of these changes. Examples of recent changes include increasing on-site presence at the contractor facility and conducting comprehensive audits of design processes. Sustaining focus on these changes through launch will be important if schedule pressures arise later and because of past challenges with communications. GAO will follow up on the project's monitoring of these improvements in future reviews. GAO recommends NASA update the project's joint cost and schedule confidence level analysis. NASA concurred with the recommendation made in this report.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2:  Economy-wide costs (referred to as macroeconomic costs) are often measured in terms of changes in projected gross domestic product (GDP) or another societal-scale metric, such as economic welfare  The magnitude of macroeconomic impacts from a carbon tax has been a subject of debate among policymakers and stakeholders  In addition, results of economy-wide impacts will not include comparisons of impacts to different subpopulations or geographic regions, which may be of interest to policymakers  Multiple economic studies and models have examined and compared various options for addressing the economy-wide impacts that may result from a carbon tax  One option for reducing the economic cost of a carbon tax is using the revenue to reduce existing taxes, such as those on labor, income, and investment  Economists generally describe such taxes as distortionary, because the taxes discourage economically beneficial activity, such as employment and investment  Another option for policymakers is to use the tax revenues to address the national debt  Fewer studies have examined deficit reduction scenarios, because "modeling the effects of budget deficits is much more difficult than modeling the effects of tax cuts " Some studies have concluded that using tax revenues for this purpose would help alleviate economy-wide costs from a carbon tax because of the reduced need to impose distortionary taxes in the future  These studies indicate that the economy-wide benefit would be delayed and its realization assumes policymakers would, sometime in the future, address the deficit by raising taxes  Many recent legislative proposals would distribute the carbon tax revenue back to households in lump-sum payments  Policymakers have generally included this carbon tax revenue application to address distribution impacts (discussed below)  These payments could take multiple forms  Economic analyses typically assume an equal payment to individuals or households regardless of their income or location or the effects of the carbon price on them individually  Alternatively, payments could be targeted or scaled to different segments of the population  Among the options mentioned above, economic studies indicate that using carbon tax revenues to offset reductions in existing, distortionary taxes would be the most economically efficient use of the revenues and yield the greatest benefit to the economy overall  This concept is sometimes referred to as a "tax swap " Using carbon tax or fee revenues to offset other distortionary taxes (e g , labor or capital) may yield a "double-dividend," which includes: reduced GHG emissions; and reduced market distortions by reducing other distortionary taxes, such as investment or income  The economic models that examine the economic impacts of a carbon tax differ in their frameworks and underlying assumptions and often include multiple scenarios involving different uses of carbon tax revenue  In general, the economic models find that certain revenue recycling options may reduce the economy-wide carbon tax impacts but may not eliminate them entirely  Some studies cite particular economic modeling scenarios in which a carbon tax with certain revenue recycling applications would produce a net increase in GDP or economic welfare compared to a baseline scenario  These results indicate that, in certain modeling conditions, the economic improvements gained by reducing existing distortionary taxes would be greater than the costs imposed by the new carbon tax (without including the intended climate benefits of the policy)  For example, results from a 2018 study demonstrated a net increase in GDP, compared to baseline conditions, when carbon tax revenues were used to finance proportionate reductions in labor tax rates (payroll tax)  In general, the economic carbon tax studies usually agree on the relative ranking of revenue recycling options in terms of their ability to mitigate the economy-wide impacts of a carbon tax program  The studies indicate that the approaches that use carbon tax revenue to proportionately lower existing tax rates are able to mitigate more of the carbon tax economy-wide costs than using the revenue to provide a lump-sum distribution to individuals or households  Researchers prepared multiple carbon tax analyses prior to the enactment of the TCJA in 2017 that estimated the magnitude GDP impacts  As with other estimates relating to carbon tax impacts, the results depend on the scope of the carbon tax, underlying assumptions in the analytical model, and the terms of measurement: Some estimates measure GDP growth rates; others measure actual GDP  Figure 1 illustrates the modeled GDP results from a 2018 carbon tax analysis that includes the changes made by the TCJA  This study assessed the GDP impacts under a $50/mtCO 2 e carbon tax (starting in 2020 and increasing by 2% annually) that would apply to CO 2 emissions from fossil fuel combustion and methane emissions from fossil fuel production activities  The figure compares projected GDP impacts under a baseline scenario (i e , no carbon tax) with three carbon tax revenue applications: a payroll tax rate reduction tax swap, a lump-sum distribution to households, and a scenario that would use tax revenue to reduce the national debt for 10 years and then use revenues for a lump-sum distribution to households  The figure projects GDP impacts in 2020, 2024, 2029, and 2039  As the figure indicates, the payroll tax rate scenario would result in a 0 1% loss of GDP in the first year (2020), but would yield GDP gains in subsequent years compared to baseline  The lump-sum distribution approach would yield GDP losses each year, ranging from 0 3% to 0 4% below the projected baseline  The deficit reduction approach would yield a range of GDP losses in the first 10 years—ranging from 0 4% to 0 04%—but would yield a GDP gain in 2039 (if not before), compared to baseline  Opponents of a carbon tax approach often highlight the GDP losses that would result from a carbon tax  Policymakers and stakeholders may have different perspectives regarding whether the magnitude of the GDP impacts are significant  In addition, GDP impact estimates may be presented in several ways  For example, one could compare the differences in GDP value for a particular year between carbon tax scenarios and a baseline scenario  This approach is employed in the above figure  Alternatively, one could present the GDP losses with a cumulative measure  For instance, if one were to add up the annual GDP losses (for example, over a 10-year period) from the lump-sum scenario compared to the baseline scenario, the resulting sum would be much larger  These types of calculations would require assumptions about annual GDP growth rates  Some may point out that the GDP impact estimates do not account for the environmental and public health benefits for reducing GHG emissions and that the GDP projections should be compared with the climate benefits achieved from the program as well as the estimated costs of taking no action  As discussed above, estimates of climate-related benefits and costs often contain considerable uncertainty and have generated debate in recent years  Many economic analyses have found that a carbon tax (before revenue recycling) would produce a regressive outcome among households, with lower-income households facing a larger impact from the tax than higher-income households  However, "the degree to which a carbon tax is found to disproportionately burden low-income households varies across studies, based on the metrics against which analysts measure costs " Entities that pay the carbon tax may pass its costs back to fuel producers or forward to fuel consumers  If entities pass the costs forward, consumers would face higher prices for fuels and electricity and carbon-intensive products  When the carbon tax is passed forward to consumers, lower-income households in particular would likely face a disproportionate impact (i e , regressive outcome), because a larger percentage of their income is used to pay for energy needs, such as electricity, gasoline, or home heating oil  Many economic analyses of carbon price scenarios assume that the vast majority (if not all) of the carbon tax impact is passed forward to consumers, leading to a regressive outcome  On the other hand, if entities pass the costs backward to producers, the tax impacts would fall on labor through reduced wages or owners of capital through reduced returns on investment  Economic models that assume this outcome produce more progressive results (absent revenue recycling), with lower-income households experiencing smaller impacts than higher-income households  The economic analyses appear to agree that the distributional effects among households (i e , regressive vs  progressive) of a carbon tax program would be largely dependent on how the carbon tax revenues were used  A number of economic studies have used models to estimate the impacts of a carbon tax across households under several revenue distribution scenarios  The results vary because the studies use different modeling frameworks, carbon tax rates and scopes, underlying assumptions, and ways to measure impacts  For example, a 2018 study assessed the impacts to household income for different household quintiles under a carbon tax of $50/mtCO 2 e, starting in 2020  This study examined four revenue distribution scenarios: 1  reduce federal deficit, 2  reduce corporate income tax rate, 3  reduce payroll tax rate, and 4  provide a per-capita rebate to households  This report highlights this study, because it includes carbon tax revenue applications that have generated interest in recent years  In addition, this analysis was prepared after the 2017 tax rate changes in P L  115-97   Figure 2 illustrates the modeled results, which the study measured as percentage reductions to household income  Thus, negative percentages illustrated in the figure are gains to household income  The per-capita rebate approach provides the most progressive result, yielding a net benefit for the bottom three household quintiles but a net loss for the top quintile  The fourth quintile impact is zero  By comparison, the other approaches produce varying degrees of regressive outcomes while providing a net gain for wealthier groups in two particular instances  Of the four options, the payroll tax rate reduction approach estimates the smallest variance between the income quintiles, ranging from a 0 5% loss for the lowest quintile to a 0 2% gain for the fourth quintile  The fifth quintile impact is zero  The relative ranking among options for progressivity is generally the opposite of the relative ranking for mitigating economy-wide impacts  Other economic analyses have found similar relative rankings of revenue recycling options  The contrasting rankings highlight a central tradeoff policymakers would face when deciding how to allocate carbon tax revenues  Policymakers could allot some portion of the revenues to partially support both objectives  In a 2018 carbon tax study, economic modelers assessed a scenario in which a portion of the revenue was used to offset the welfare impacts for the lowest-income household quintile and the remaining revenue supported reductions in capital tax rates  The study's models estimated that a carbon tax's impacts on the lowest-income household quintile could be counteracted with approximately 10% of the revenue  This would allow for 90% of the revenue to be used to reduce capital tax rates and thus address the economy-wide impacts from the carbon tax  As discussed above, a carbon tax is projected to disproportionately impact certain industries, particularly those that are described as "emission-intensive, trade-exposed industries " To address these concerns, many of the recent carbon tax legislative proposals have included design mechanisms that would attach a carbon price to certain imported materials and products (see " Border Carbon Adjustments ")  Another approach to addressing the competitiveness concerns of domestic industries would involve distributing a portion of the carbon tax revenues to emission-intensive, trade-exposed industries as rebates based on their output  Output rebate proposals generally determine rebate amounts by measuring emissions intensity at the relevant sector level or by a benchmark that would encourage facilities to reduce their emissions intensity  These rebates could be phased out over time or continue until other nations adopt comparable carbon price policies  Under a carbon tax system in Canada, which is scheduled to take effect in 2019, industries will be subject to an "output-based pricing system " Some contend that the data and administrative resources necessary to implement such a program would be substantial  A carbon tax system is also expected to disproportionately impact fossil fuel industries and the communities that rely on their employment  In particular, coal-mining communities are expected to experience substantial impacts based on the coal production declines predicted in carbon tax analyses  For example, one model estimates that under a $50/mtCO 2 e carbon tax, annual U S  coal production would decline by almost 80% in 2030 compared to a reference case  Policymakers may consider supporting worker transition or community transition assistance to help mitigate the economic impacts  Several of the recent carbon tax proposals would have devoted carbon tax revenues for this objective  Policymakers may also consider using the carbon tax revenues to provide funding to support a range of objectives, which may include policy goals that are not directly related to climate change  Some options are identified below, and many have been included in recent legislative proposals or in state GHG mitigation programs that raise revenues: Technology development and deployment: Efforts to reduce the costs of emission mitigation technologies—particularly carbon capture, utilization, and sequestration—are often considered in carbon tax programs, and Congress has funded such programs in other legislation  Energy efficiency programs: Although a carbon tax would likely stimulate energy efficiency to some degree, Congress may consider using the revenues to provide additional incentives and/or technical assistance, particularly to encourage households and small businesses to increase efficiency, which would also reduce the effects of the tax on their energy bills  States in the Regional Greenhouse Gas Initiative (RGGI) have used revenues from the program to support efficiency improvements, among other objectives  Biological sequestration: Trees, plants, and soils sequester carbon, removing it from the earth's atmosphere  Revenues could be used to promote carbon sequestration efforts, particularly forestry or agricultural activities, which would supplement the GHG reductions of the carbon tax  Adaptation to climate change: Regardless of emission reduction efforts taken today, climatic changes are expected due to the ongoing accumulation of GHGs in the atmosphere  Therefore, some advocate using revenues to reduce potential damage—domestically and internationally—of a changing climate  Deficit reduction: The possible contribution of a carbon tax to deficit reduction would depend on the magnitude and scope of the carbon tax, various market factors, and assumptions about the size of the deficit  Some carbon tax proposals in recent congressional sessions would have allotted a portion of revenues for deficit reduction  Infrastructure funding: Some recent proposals have provided funding for infrastructure projects  This objective could be combined with funding for adaptation activities  Multiple economic studies have estimated the emission reductions that particular carbon tax designs could achieve  Economic models provide estimates based on the best information available at the time  Comparing results from different studies is problematic, because the studies' scenarios differ in multiple ways, including the tax rate, start date, scope of the program, assumptions about economic growth and technological advances, and assumptions about other federal and state policies and their effects  A 2018 study avoided some of these comparison difficulties by inviting modeling teams to analyze a coordinated set of scenarios  The 2018 Stanford Energy Modeling Forum study ("EMF 32") assembled 11 modeling teams to analyze the economic impacts of four carbon tax scenarios starting in 2020: a $25/metric ton and $50/metric ton carbon tax, increasing annually by 1% and 5%  Within each of these carbon price frameworks, the models ran separate revenue distribution scenarios: a reduction in labor tax rates, a reduction in capital tax rates, and household rebates  Figure 3 illustrates the study's estimates of CO 2 emissions from fossil fuel combustion  The red lines in the figure display the average values for the 11 models  The shaded areas illustrate the range of results, highlighting the uncertainties in emission reduction estimates  Based on these results, the study authors concluded that each of the tax rate scenarios would likely achieve the U S  CO 2 emission reduction targets under the Paris Agreement  As Figure 3 indicates, a carbon tax or emissions fee could be set with the expectation that it would achieve an emissions reduction target, but the resulting level of emissions would be uncertain  The uncertainty of resulting emissions may lead some stakeholders to disfavor a carbon tax or fee option to control GHG emissions  Although uncertain emissions are inherent with a carbon tax approach, Congress could employ certain design elements to enhance the emission control certainty  For example, the existing GHG emission reporting data could be used to track the impact and performance of a carbon price  If policymakers determine that emission reduction is not occurring at a desired pace, the price could be amended  Legislation could establish the conditions and process by which price changes could occur  Some may argue that adjusting the carbon price to reflect actual emissions performance would undermine the benefits of price certainty  Others may point out that unplanned adjustments to the carbon price could be politically unpalatable  For example, it may be difficult for policymakers to increase the tax rate, especially during periods of high energy prices  Some have suggested that Congress authorize an independent board or agency with the mandate to modify the tax rate administratively in order to meet pre-determined emission reduction objectives  Although this approach would likely improve emission certainty, long-term price certainty may be sacrificed to some degree, depending on the authority of the delegated entity to adjust the tax rate  Some would argue that potential year-to-year emission variations under a carbon tax would not undermine efforts to control climate change so long as long-term emission goals are achieved  Indeed, they would assert that annual emission fluctuations are preferable to price volatility that could result from an emissions cap program  They support their preference for price control by suggesting that CO 2 generates damages through its overall accumulation as concentrations in the atmosphere, not its annual flow  A potential concern of a carbon tax is whether it would be effective in reducing GHG emissions in all of its covered sectors, particularly emissions in the transportation sector  As of 2016, the transportation sector contributes the largest percentage (36%) of CO 2 emissions from fossil fuel combustion, with electric power second at 35%  Carbon tax analyses generally agree that the majority of the emission reductions resulting from a carbon tax program would occur in the electricity sector  By comparison, economic models generally conclude that a carbon tax would have much less of an impact on emissions in the transportation sector  Several factors explain this projected outcome  The transportation sector offers fewer opportunities to switch to less carbon-intensive fuels in the short term than does the electric power sector, which can displace coal with natural gas relatively quickly  In addition, short-term emission changes in the transportation sector are largely influenced by changes in driving demand, which has historically been relatively insensitive to gasoline price increases  Based on these projected outcomes, some may contend that to achieve deeper, long-term reductions in total GHG emissions, policymakers would need to complement a carbon tax with other programs, such as vehicle technology standards (e g , Corporate Average Fuel Economy, CAFE) or fuel performance standards, among other options  The quantity of revenues generated under a carbon tax system depend on the program's design features, namely the tax base and rate, as well as such independent factors as prices in global energy markets  They would also depend on how covered emission sources respond to the carbon price, for example by adopting alternative technologies or changing behavior  Several carbon tax studies have prepared revenue estimates, which are presented in Table 1   From a public finance perspective, a carbon tax may not be a reliable source of long-term funding, because a primary goal of the carbon tax is to reduce its tax base—GHG emissions  The estimates in Table 1 project carbon tax revenue values in 2020  Multiple studies have projected carbon tax revenue trajectories beyond 2020  In the 2018 EMF 32 study, all but one of eight models projected carbon tax revenue increases from 2020 through 2040  The carbon tax scenarios with larger annual rate increases resulted in steeper trajectories of increasing revenues through 2040  The models' estimates of annual carbon tax revenue in 2040 ranged from approximately $250 billion to $475 billion (under the tax rate scenario of $50/metric ton, increasing 5% annually)  Fossil fuels have a wide range of CO 2 emission intensity (i e , emissions per unit of energy)  As illustrated in Figure 4 , the CO 2 emission intensity of coal is approximately 30% more than oil and approximately 80% more than natural gas  These emissions intensity differences would lead to different tax rates per unit of energy across different fuels in a carbon tax regime  Carbon taxes could affect fuel prices in complex ways  The change in consumer fuel prices would likely not be the same as the price paid by the party directly subject to the tax  Actual price impacts for consumers would depend on multiple factors, including whether: a carbon tax is applied at the beginning of the production process ("upstream") to fossil fuels; and the price impacts are passed through to end users and not absorbed by upstream energy producers or midstream entities, such as retailers  In addition, market participants such as electric power plant operators can avoid paying the increased costs by substituting fuels or technologies  Energy consumers may modify their behavior in the marketplace—energy conservation, consuming less or different products and services—to mitigate impacts from the increased prices  Table 2 includes estimates of price increases on coal, crude oil, natural gas, home heating oil, and motor gasoline based on a carbon tax rate of $25/mtCO 2 that applies CO 2 emissions from fossil fuel combustion  As indicated in the table, a carbon tax would have the greatest impact on the price of coal due to coal's relatively high CO 2 emissions intensity  By comparison, a carbon tax is expected to have less of an impact on the price of gasoline, increasing its price by 8%  Economic models have projected how carbon prices would impact energy use, particularly the consumption of different fossil fuels and less carbon-intensive alternatives, such as renewables or nuclear power  For example, the 2018 EMF 32 study, which included results from 11 modeling groups, assessed how several carbon tax scenarios would impact energy consumption  Highlights of these models' results (compared to reference case scenarios) include the following: Coal consumption could decline by 40% to nearly 100% by 2030 under a $50/mtCO 2 carbon tax, though one model projected an increase in coal due to the model incorporating CCS technology  Natural gas consumption estimates vary across the models, with some showing minimal change in 2030 and others showing declines ranging between 40% and 60%  Oil consumption estimates indicate that the largest decline (approximately 4% by 2030) would occur under the $50/mtCO 2 carbon tax scenario  Wind energy consumption could increase by 48% to 300% by 2030 under a $50/mtCO 2 carbon tax scenario  A carbon tax is one policy option to address U S  GHG emission levels, which contribute to climate change and related impacts  Economic modeling indicates that a carbon tax would achieve emission reductions, the level of which would depend on which GHG emissions and sources are covered and the rate of the carbon tax  A carbon tax would generate a new revenue stream  The magnitude of the revenues would depend on the scope and rate of the tax and multiple market factors, which introduce uncertainty in the revenue projections  A 2018 CBO study estimated that a $25/metric ton tax on CO 2 emissions from energy-related activities and other selected GHG emission sources would yield approximately $100 billion in the first year of the program  To put this estimate in context, the CBO projected that total federal revenue would be $3 5 trillion in FY2019  Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues  Depending on the level of the tax, some economic analyses indicate that the distribution of tax revenue could yield greater economic impacts than the direct impacts of the tax  Some models indicate that the economic impacts are greatest in the early years of the carbon tax  Policymakers could apply the tax revenues to support a range of policy objectives  When deciding how to allocate the revenues, policymakers would encounter trade-offs among objectives  The central trade-offs involve minimizing economy-wide costs, lessening the costs borne by specific groups—particularly low-income households—and supporting a range of specific policy objectives  A primary concern with a carbon tax is the potential economy-wide costs that may result  The potential costs would depend on a number of factors, including the magnitude, design, and use of revenues of the carbon tax  In general, economic literature finds that some of the modeled revenue applications would reduce the economy-wide costs imposed by a carbon tax but may not eliminate them entirely  Policymakers and stakeholders may have different perspectives regarding whether these estimated economy-wide costs (typically measured in terms of GDP loss) represent a significant concern  Some argue that the estimated economy-wide costs should be compared with the policy option of not establishing a carbon tax  This comparison is uncertain as carbon tax analyses do not generally consider the benefits that would be gained by reducing GHG emissions and avoiding climate change and its adverse impacts  Some studies cite particular economic modeling scenarios in which a carbon tax and revenue recycling could produce a net increase in GDP or economic welfare, compared to a baseline scenario  These scenarios involve using carbon tax revenues to offset reductions in existing, distortionary taxes, such as corporate income or payroll taxes  Although the models indicate that these revenue applications would yield the greatest benefit to the economy overall, the models also find that lower-income households would likely face a disproportionate impact under such revenue applications  As lower-income households spend a greater proportion of their income on energy needs, these households are expected to experience disproportionate impacts from a carbon tax if revenues were not recycled back to them in some fashion, such as a lump-sum distribution  Carbon tax revenues that are used to offset the burden imposed on various sectors or specific population groups would not be available to support other objectives  An additional concern with a carbon tax involves potential disproportionate impacts to "emission-intensive, trade-exposed industries " Policymakers could select among several options to address these concerns, either by establishing a border carbon adjustment program or allocating some of the carbon tax revenues to selected industry sectors based on an output-based metric  If other nations were to adopt comparable carbon price policies, this concern may be alleviated to some degree  Relatedly, a carbon tax is projected to disproportionately impact fossil fuel industries, particularly coal, and the communities that rely on their employment  To alleviate these impacts, policymakers could allocate some of the carbon tax revenue to provide transition assistance to employees or affected communities  Table A-1 identifies sources of GHG emissions that account for 0 5% or more of total U S  GHG emissions  The sources are listed in descending order by their percentage contribution  CO 2 emissions from fossil fuel combustion, which accounts for almost 76% of total U S  GHG emissions, are broken down by fossil fuel type: petroleum, coal, and natural gas  The table identifies potential points in the economy at which a carbon tax could be applied  The table lists the approximate number of entities that would be involved with different tax applications  The number of entities listed is current as of the most recent data available and varies accordingly by category  See table notes for details  The right-hand column of the table provides additional comments for some of the emission sources  In some cases the comments discuss potential opportunities for additional GHG emissions coverage at a particular source  In other cases, the comments address potential limitations of covering all of the emissions from a particular source 
Report 2:  We found that each of these four types of potentially inaccurate data would have changed estimated Medicare CLFS expenditures from 2018 through 2020 by 1 percent or less if CMS had instead excluded the data  To conduct this analysis, we recalculated Medicare rates after excluding each type of data and estimated Medicare expenditures assuming 2016 rates of utilization  Although weighted median private-payer rates were lower than Medicare’s 2017 national limitation amounts for 88 percent of tests, we estimated the total Medicare expenditures based on the 2018 CLFS would likely increase by 3 percent ($225 million overall) compared to 2016 expenditures, assuming test utilization remained at 2016 levels  This increase in estimated expenditures is due, in part, to CMS’s use of above-average payment rates as a baseline to calculate payment rates for those laboratory tests affected by PAMA’s annual payment-rate reduction limit of 10 percent  (See fig  4 ) When applying the 10-percent payment-rate reduction limit, CMS used as its starting point the 2017 national limitation amounts in order to set a single, national payment rate for each laboratory test  Thus, the Medicare payment rate for a test in 2018 could not be less than 90 percent of the test’s 2017 national limitation amount  However, prior to 2018, some payment rates were commonly lower than the national limitation amounts because they were based on the lesser of (1) the amount billed on claims, (2) the local fee for a geographic area, or (3) a national limitation amount, and because panel tests had different bundled payment rates  As a result, by reducing payment rates from national limitation amounts, CMS did not always reduce rates from what Medicare actually paid  Panel tests, in particular, frequently received bundled payment rates that differed substantially from national limitation amounts associated with their billing codes prior to 2018  We compared national limitation amounts, which represent maximum Medicare payment rates for tests, with the average amounts Medicare allowed for payment in 2016, which reflect actual Medicare payment rates  For example, figure 5 below shows that the 2017 national limitation amount for comprehensive metabolic panel tests ($14 49) was substantially higher than both the average amount Medicare allowed for payment in 2016 ($11 45) and the median payment rate laboratories reported receiving from private payers ($9 08)  As a result, using the 2017 national limitation amount as a basis for payment reductions caused Medicare’s payment rate to increase from an average allowed amount of $11 45 in 2016, to a payment rate of $13 04 in 2018, instead of decreasing towards a lower median private- payer rate of $9 08  By increasing average payment rates rather than phasing in reductions to rates, CMS’s implementation may lead to paying more than necessary for some tests  Federal standards for internal control for information and communications require agency management to use quality information to achieve its objectives  Basing reductions on national limitation amounts rather than more relevant information on how much Medicare actually paid—such as the average allowable amounts in 2016, for example—could result in Medicare paying more than necessary by $733 million from 2018 through 2020, according to our estimates  In implementing PAMA, CMS eliminated bundled rates for panel tests that lack billing codes and started paying separately for each component test instead  CMS also implemented the 2018 CLFS in a manner that could lead to unbundling payment rates for panel tests with billing codes  If payment rates for all panel tests were unbundled, we estimated that Medicare expenditures could increase by $218 million for panel tests that lack billing codes and by as much as $10 1 billion for panel tests with billing codes from 2018 through 2020  CMS also estimated that there could be significant risks of paying more than necessary associated with unbundling and has taken initial steps to monitor these risks and explore possible responses, but had not yet responded to these risks as of July 2018  CMS Unbundled Payment Rates for Panel Tests without Billing Codes Beginning in 2018, CMS no longer uses bundled payment rates for panel tests without billing codes and instead pays laboratories individual payments for each component test that comprises these panel tests  However, CMS staff and members of its advisory panel discussed concerns with this approach  At an advisory panel meeting in 2016, CMS staff relayed concerns from stakeholders that CMS would not be able to collect valid data on private-payer rates for these panel tests  According to agency staff, stakeholders had informed CMS that private payers commonly use bundled payment rates for these panel tests, but laboratories would only be able to report unbundled payment rates for individual component tests  We estimated that unbundling these payment rates would increase Medicare expenditures from 2018 through 2020 by $218 million in comparison to the estimated Medicare expenditures over the same time period based on Medicare’s 2016 utilization and allowable amounts  For example, under the 2016 CLFS, Medicare paid approximately 435,000 claims for panel tests that included the laboratory tests assay of creatinine (HCPCS code 82565) and assay of urea nitrogen (HCPCS code 84520) at an average bundled payment rate of $6 82  In contrast, under the 2018 CLFS, these two component tests are reimbursed individually at $6 33 and $4 88, respectively, or $11 21 combined—a 63 percent increase  Despite concerns about the validity of available private-payer data on component tests for panel tests without billing codes, CMS used these data to set payment rates for component tests  CMS officials told us that they stopped using bundled payment rates for these panel tests because it is not clear that CMS has the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for each test  However, in July 2018, CMS officials told us the agency was reviewing its authority regarding this issue  CMS officials told us they are exploring alternative approaches that could limit increases to Medicare expenditures but had not yet determined what additional legal authority would be needed, if any, and did not know when CMS would make this determination  Agency officials told us that CMS has taken initial steps to monitor unbundling and explore possible responses, including the following: Monitoring unbundling: CMS has begun monitoring changes in panel test utilization, payment rates, and expenditures associated with its implementation of PAMA, according to officials  For example, CMS officials told us that preliminary data indicated that Medicare payments for individual component tests of panel tests has increased substantially in 2018, but, as of July 2018, it was too early to draw conclusions from these data because laboratories have up to one year to submit claims for tests  Collecting input on alternatives: In 2016, a subcommittee of an advisory panel that CMS established reviewed Medicare’s use of bundled payment rates for panel tests and published different approaches for CMS to consider implementing in combination with other changes to implement PAMA  CMS’s Implementation of PAMA May Have Allowed Unbundling of Payment Rates for Panel Tests with Billing Codes Beginning in 2018, laboratories that submit claims for any of the seven panel tests with billing codes by using the billing codes for the individual component tests now receive the payment rate for each component test, rather than the bundled rate  Prior to 2018, laboratories could submit claims for these panel tests either by using the specific codes for panel tests or by billing separately for each of the component tests, and, regardless of how laboratories submitted claims, Medicare Administrative Contractors would pay bundled payment rates based on how many of the 23 component tests were conducted  However, CMS instructed Medicare Administrative Contractors to stop bundling payment rates for tests that are billed individually on claims rather than billed on claims using codes for panel tests, beginning in 2018  CMS did so because it was not clear that CMS had the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for individual tests, according to agency officials  This change could potentially have a large effect on Medicare spending  For example, if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81 91, a 528 percent increase from the 2018 Medicare bundled payment rate of $13 04 for this panel test  (See fig  6 ) Improving how reductions to payment rates for panel tests are phased in could mitigate, but not completely counteract, the effect of unbundling these payment rates  For example, for the comprehensive metabolic panel test described in figure 6, basing maximum reductions on 2016 average allowable amounts would result in a 2018 Medicare bundled payment rate of $10 31 instead of $13 04 and individual payment rates for the 14 component tests that total $56 06—a 32 percent decrease from $81 91 that Medicare would otherwise pay  If the payment rate for each panel test with a billing code were unbundled, we estimated that Medicare expenditures for these tests from 2018 through 2020 could reach $13 5 billion, a $10 1 billion increase from the $3 3 billion we estimated Medicare would spend using the bundled payment rates in the CLFS  Similarly, prior to implementing PAMA, CMS estimated that Medicare expenditures to physician-office, independent, and other non-hospital laboratories could potentially increase as much as $2 5 billion in 2018, alone if it paid for the same number of panel tests with billing codes as it did in 2016 but paid for each component test individually  These estimates represent an upper limit on the increased expenditures that could occur if every laboratory stopped using panel test billing codes and instead used the billing codes for individual component tests  We do not know the extent to which laboratories will stop filing claims using panel test billing codes  CMS officials also told us that they were aware of the risks associated with paying for the individual component tests instead of the bundled payment rate for a panel test with a billing code  However, CMS guidance, which was effective in 2018, continued to allow laboratories to use the billing codes for individual component tests rather than the billing code for the panel  CMS officials explained that this was due to PAMA’s reference to payments for individual tests, similar to CMS’s decision to stop paying bundled rates for panel tests without billing codes  At the time we did our work, CMS had not implemented a response to these risks but had taken some initial steps to monitor unbundling and consider alternative approaches to Medicare payment rates for these tests  HHS provided additional information on planned activities to address these risks in its written comments on a draft of this report  (See app  III ) CMS collected data on private-payer rates from laboratories that were required to report these data, but not all laboratories complied with the reporting requirement, and the extent of noncompliance remains unclear  PAMA’s provision directing CMS to phase in payment-rate reductions to Medicare payment rates likely moderates the potential adverse effects of incomplete private-payer data  However, in the future, failing to collect complete data could substantially affect Medicare payment rates because private-payer rates alone will determine Medicare payment rates  In addition, we estimated that Medicare expenditures on laboratory tests will be $733 million higher from 2018 through 2020, because CMS started phasing in payment-rate reductions from national limitation amounts instead of more relevant data on actual payment rates, such as average allowable amounts  Finally, changes to payment rates, billing practices, and testing practices could increase Medicare expenditures by as much as $10 3 billion from 2018 through 2020, if CMS does not address the risks associated with unbundling payment rates for panel tests  Agency officials indicated that it was unclear if PAMA limited CMS’s ability to combine individual component tests into groups for bundled payment, and, as of July 2018, CMS was reviewing this matter but did not know when it would make a determination  We are making the following three recommendations to CMS: The Administrator of CMS should take steps to collect all of the data from all laboratories that are required to report  If only partial data can be collected, CMS should estimate how incomplete data would affect Medicare payment rates and address any significant challenges to setting accurate Medicare rates  (Recommendation 1) The Administrator of CMS should phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018 rather than the national limitation amounts  CMS should revise these rates as soon as practicable to prevent paying more than necessary  (Recommendation 2) The Administrator of CMS should use bundled rates for panel tests, consistent with its practice prior to 2018, rather than paying for them individually; if necessary, the Administrator of CMS should seek legislative authority to do so  (Recommendation 3) We provided a draft of this report to HHS for review and comment  HHs provided written comments, which are reproduced in appendix III  HHS also provided technical comments, which we incorporated as appropriate  HHS concurred with our first recommendation to take steps to collect all data from laboratories required to report and commented that it is evaluating ways to increase reporting  In particular, in a November 2018 final rule, HHS changed the definition of an applicable laboratory, which it expects will increase the number of laboratories required to report data on private-payer rates to the agency  HHS neither agreed nor disagreed with our second recommendation to phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018  HHS noted that any changes to the phasing in of payment-rate reductions would need to be implemented through rulemaking  We estimated that by using the national limitation amounts as a starting point for these reductions, Medicare expenditures would increase by $733 million from 2018 through 2020  For this reason, we continue to believe CMS should revise these rates as soon as practicable and through whatever mechanism CMS determines appropriate  HHS neither agreed nor disagreed with our third recommendation to use bundled rates for panel tests  However, HHS commented that it is taking steps to address this issue  More specifically, for panel tests with billing codes, HHS is working to implement an automated process to identify claims for panel tests that should receive bundled payments, similar to the process used to bundle payment rates for these panel tests prior to PAMA’s implementation and anticipates implementing this change by the summer of 2019  In addition, HHS posted guidance on November 14, 2018, stating that the panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019  To reduce the potential of paying more than necessary, we believe it is important that CMS implement its proposed automated process to allow for these payments as soon as possible  In contrast, for panel tests without billing codes, HHS commented that it is continuing to review its authority and considering other approaches to payment for these panel tests, such as adding codes to the CLFS  We estimate that unbundling the payment for these panel tests could increase Medicare expenditures by $218 million from 2018 through 2020 compared to expenditures based on Medicare’s 2016 utilization, and the actual amount could be higher if utilization increases  For this reason, we believe CMS should implement bundled payment rates for these panel tests to avoid excess payments  We are sending copies of this report to the appropriate congressional committees and the Administrator of CMS  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  Appendix I: Table of Key Dates Related to Developing the New Payment Rates for the 2018 Clinical Laboratory Fee Schedule Event Centers for Medicare and Medicaid Services (CMS) issued the CLFS proposed rule  CMS issued responses to frequently asked questions regarding the CLFS proposed rule  CMS issued the CLFS final rule  CMS issued responses to frequently asked questions regarding the CLFS final rule  CMS held the joint Annual Laboratory Public Meeting and Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS issued laboratory billing codes subject to data collection and reporting  CMS issued guidance to laboratories for collecting and reporting data  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS issued the CLFS data reporting template  CMS collected data on (1) the billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (i e , January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each billing code at that private-payer rate  CMS issued additional guidance for laboratories as the data collection period began  CMS issued the CLFS fee-for-service data collection user’s manual  CMS issued revised guidance to laboratories for collecting and reporting data  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  CMS released the proposed CLFS rates  CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting  Deadline for stakeholders to submit comments on the proposed CLFS rates to CMS  CMS issued the final CLFS rates  New CLFS rates became effective  Table 4 below demonstrates the challenges the Centers for Medicare & Medicaid Services (CMS) faces in setting accurate Medicare payment rates to the extent it does not collect complete data from laboratories on private-payer rates  Specifically, the table shows the potential effect that collecting additional data for each laboratory test could have on Medicare expenditures and how this effect could vary depending on (1) the amount of additional data collected, (2) payment rates in the additional data, and (3) limits to annual reductions in Medicare payment rates  These limits are in place from 2018 through 2023 to phase in changes to payment rates  In addition to the contact named above, Martin T  Gahart, Assistant Director; Gay Hee Lee, Analyst-in-Charge; Kaitlin Farquharson, Sandra George, Dan Lee, Elizabeth T  Morrison, Laurie Pachter, Vikki Porter, and Russell Voth made key contributions to this report 

ground_truth: The U.S. Fourth National Climate Assessment, released in 2018, concluded that "the impacts of global climate change are already being felt in the United States and are projected to intensify in the future—but the severity of future impacts will depend largely on actions taken to reduce greenhouse gas [GHG] emissions and to adapt to the changes that will occur." Members of Congress and stakeholders articulate a wide range of perspectives over what to do, if anything, about GHG emissions, future climate change, and related impacts. If Congress were to consider establishing a program to reduce GHG emissions, one option would be to attach a price to GHG emissions with a carbon tax or GHG emissions fee. In the 115th Congress, Members introduced nine bills to establish a carbon tax or emissions fee program. However, many Members have expressed their opposition to such an approach. In particular, in the 115th Congress, the House passed a resolution "expressing the sense of Congress that a carbon tax would be detrimental to the United States economy." Multiple economic studies have estimated the emission reductions that particular carbon tax would achieve. For example, a 2018 study analyzed various impacts of four carbon tax rate scenarios: a $25/metric ton of CO2 and $50/metric ton of CO2 carbon tax, increasing annually by 1% and 5%. The study concluded that each of the scenarios would likely achieve the U.S. GHG emission reduction target pledged under the international Paris Agreement (at least in terms of CO2 emissions). A carbon tax system would generate a new revenue stream, the magnitude of which would depend on the scope and rate of the tax, among other factors. In 2018, the Congressional Budget Office (CBO) estimated that a $25/metric ton carbon tax would yield approximately $100 billion in its first year. CBO projected that federal revenue would total $3.5 trillion in FY2019. Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues. Congress could apply revenues to support a range of policy objectives but would encounter trade-offs among the objectives. The central trade-offs involve minimizing economy-wide costs, lessening the costs borne by specific groups—particularly low-income households and displaced workers in certain industries (e.g., coal mining)—and supporting other policy objectives. A primary argument against a carbon tax regards it potential economy-wide impacts, often measured as impacts to the U.S. gross domestic product (GDP). Some may argue that projected impacts should be compared with the climate benefits achieved from the program as well as the estimated costs of taking no action. The potential impacts would depend on a number of factors, including the program's magnitude and design and, most importantly, the use of carbon tax revenues. In general, economic literature finds that some of the revenue applications would reduce the economy-wide costs from a carbon tax but may not eliminate them entirely. In addition, some studies cite particular economic modeling scenarios in which certain carbon tax revenue applications produce a net increase in GDP compared to a baseline scenario. These scenarios involve using carbon tax revenues to offset reductions in other tax rates (e.g., corporate income or payroll taxes). Although economic models generally indicate that these particular revenue applications would yield the greatest benefit to the economy overall, the models also find that lower-income households would likely face a disproportionate impact under such an approach. As lower-income households spend a greater proportion of their income on energy needs (electricity, gasoline), these households are expected to experience disproportionate impacts from a carbon tax if revenues were not recycled back to them in some fashion (e.g., lump-sum distribution). A price on GHG emissions could create a competitive disadvantage for some industries, particularly "emission-intensive, trade-exposed industries." Policymakers have several options to address this concern, including establishing a "border carbon adjustment" program, which would levy a fee on imports from countries without comparable GHG reduction programs. Alternatively, policymakers could allocate (indefinitely or for a period of time) some of the carbon tax revenues to selected industry sectors or businesses. Relatedly, a carbon tax system is projected to disproportionately impact fossil fuel industries, particularly coal, and the communities that rely on their employment. To alleviate these impacts, policymakers may consider using some of the revenue to provide transition assistance to employees or affected communities.