4

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## Chapter **4 Clim**  **ate Science, Rational Basis Analysis and Endangerment** 

**Contents** Climate Science

................................ ................................ ................................ ................... 2 4.1 Legal Comments Regarding Endangerment Finding and Rational Basis Analy sis

........... 27 4.2 Calculating "Contribution"

................................ ................................ ................................ 30 4.3 Social Cost of Carbon

................................ ................................ ................................ ........ 35 4.4 4. 4.1 Methodology

................................ ................................ ................................ .................... 35 4.4.2 Climate Science Components of the Modeling Underlyi ng SC

- CO 2 .............................. 47 4.4.3 Global vs. Domestic Value

................................ ................................ .............................. 61 4.4.4 Uncertainty ................................ ................................ ................................ ....................... 70 4.4.5 Proc ess - related Concerns

................................ ................................ ................................ . 75 Carbon dioxide fertilization

................................ ................................ ................................ .. 91 Discount rate

................................ ................................ ................................ ......................... 93 Application and aggregation

................................ ................................ ................................ . 99 Miscellaneous

................................ ................................ ................................ .................. 112 4.54

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### CLIMATE SCIENCE **4.1** Commenters 9685 and 10966 assert that there are flaws with the major lines of **Comment 4.1**
**- 1:**  evidence that are referenced in EPA’s 2009 Endangerment Finding, and that therefore the basis for the Endangerment Finding should be brought into question. Commenter 10966 notes that each of th e three lines of evidence are invalidated by the failure of real

- world data to support each line of evidence.

EPA has previously

responded to comments that took issue with the general **Response 4.1**
**- 1:**  three lines of evidence that EPA referenced from the assessment literat ure in its 2009 Endangerment Finding. EPA, referencing the assessment literature, described the three lines of evidence attributing observed climate change to anthropogenic activities in its 2009 Endangerment Finding as such: The first line of evidence ari ses from our basic phy sical understanding of the effects of changing concentrations of greenhouse gases, natural factors, and other human impacts on the climate s ys tem. The second line of evidence arises from indirect, historical estimates of past climate changes that suggest that the changes in global surface temperature over the last several decades are unusual. The third line of evidence arises from the use of computer

- based climate models to simulate the likely patterns of response of the climate sy stem to different forcing mechanisms (both natural and anthropogenic). Comments on the first line of evidence (our basic physical understanding of the effects of changing concentrations of greenhouse gases) were responded to in the RTC document accompan yi ng t he 2009 Endangerment Finding (see, for example, section 3.2.2 of volume 3). More recent evidence, such as from the 2013

- 14 IPCC Fifth Assessment Report (AR5), continues to support the line of evidence that the anthropogenic buildup of greenhouse gases is a major driver of climate change compared to natural factors such as changes in solar radiation (see Figure SPM.5 of the Summary for Policy

makers of the IPCC AR5, Working Group I). Previous comments on the second line of evidence (that recent climate changes stand out as unusual compared to estimates of past climates) were also addressed in the RTC, volume 2, which accompanied the 2009 Endangerment Finding and Volume 1 of the Respons e to Petitions. More recent conclusions in the I PCC AR5 state that current levels of the two most important greenhouse gases, CO 2 and CH 4 , are at higher levels now compared to at least the last 800,000 ye ars, whereas this statement could only be made relat ive to the past 650,000 years based on evidence available at the time of the 2009 Endangerment Finding. Furthermore, numerous comments questioning the validity of the historic data, such as past records of global temperature change, were addressed at lengt h in 2009 (see, for example, Response 2

- 29 of the RTC where, in response to numerous comments raising concerns about the global surface records, EPA states it “has concluded that the three primary global surface temperature records (NOAA, NASA, and HadCRUT ) are reliable and credible.”). The more recent I PCC AR5 stated that, “Warming of the climate sy stem is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia.” Comments regarding the third line of evide nce (the capability of climate models to simulate expected patterns of human

- induced climate change) were also addressed in the RTC in 2009 (volumes 3 and 4). More recentl y, IPCC AR5 stated, “Climate models have improved since the AR4. Models reproduce obs erved continental

- scale surface temperature patterns and trends over4

- 3

many decades, including the more rapid warming since the mid

- 20 th century and the cooling immediately

following large volcanic eruptions.” EPA’s 2010 Denial of Petitions and accompan yi n g response to petitions document addressed similar critiques of the three lines of evidence. To note one part of EPA’s 2010 Denial (74 FR 49572) : “Petitioners’ evidence does not materially change or warrant an y l ess reliance on the other important lines of evidence linking greenhouse gases and climate change: Our basic phy sical understanding of the effects of changing greenhouse gas concentrations and other factors; the broad, qualitative consistency between observed changes in climate and the computer mode l simulations of how climate would be expected to change in response to anthropogenic emissions of greenhouse gases (and aerosols); as well as other important evidence of an anthropogenic fingerprint in the observed warming.” With several more years of res earch, the IPCC AR5 actuall y strengthened their conclusion that humans have contributed to most of the recent warming, finding that it is extremely likel y (>95 percent confidence) that “more than half of the observed increase in global average surface temp erature from 1951 to 2010 was caused b y the anthropogenic increase in greenhouse gas concentrations and other anthropogenic forcings together.” In sum, the general three lines of evidence attributing human activities to observed climate change, as origina lly

described in EPA’s 2009 Endangerment Finding, were sufficiently supported in that original record, and remain well supported by more recent evidence.

Commenter 10091 argued that climate change does not result in negative **Comment 4.1**
**- 2:**  human health impacts, and may r esult in positive health outcomes. This commenter cites improvements in general health statistics to argue that climate change has not resulted in negative health outcomes and to suggest that continued climate changes could result in continued improvements in these health metrics. For example, the commenter suggests that human health in the United States has improved due to climate change, as evidenced by an increase in the life span of Americans. The commenter also argues that climate change does not resul t in negative health impacts from changes in the frequency or severit y of extreme events, as evidenced b y a decrease in deaths from extreme events. The commenter contends that heat

- related mortality risk has declined over time in the US despite a rise in t emperature and an increase in the magnitude and frequency

of heat events, suggesting that adaptation measures to decrease the US population’s sensitivity

to extreme heat are a health benefit that will continue under continued climate change. In addition, c ommenter 10662 states that EPA does not directly demonstrate adverse health effects of greenhouse gas emissions, relying instead on “conjectures” regarding the relationship of ozone and PM2.5 with heat waves and drought. The commenter argues that, because these pollutants are already required to meet health

- based standards through the NAAQS, that an y further reductions in these pollutants cannot be considered to be justifications for regulation

. The commenter also argues that the EPA would have to regulate GHGs as ozone pollutant precursors under NAAQS if they do directly affect ground

- level ozone or PM2.5. Finally , the commenter claims that the EPA has not identified any concentration or emissions level of CO 2 that would significantl y decrease purported cli mate change effects.

The EPA continues to rely on the best available science in order to make its **Response 4.1**
**- 2:**  determinations. See also Coalition for Responsible Regulation v. EPA , 684 F. 3d at 120 holding both that “[t]he body

of scientific evidence marshaled by EPA i n support of the Endangerment4

- 4

Finding is substantial” and that EPA reasonabl y considered b y major assessments in the field in making its determination (“ EPA simply did here what it and other decision

- makers often must do to make a science

- based judgment: i t sought out and reviewed existing scientific evidence to determine whether a particular finding was warranted, it makes no difference that much of the scientific evidence in large part consisted of ‘s yntheses’ of individual studies and research. Even in dividual studies and research papers often s ynthesize past work in an area and then build upon it. This is how s cience works”; see also id. characterizing petitioners’ arguments regarding consideration of the assessments as “little more than a semantic trick”). The EPA relies on major assessment reports, including the US Global Change Research Program’s National Climate Assessments (NCA), which consider the entire literature in context rather than selecting a small number of individual studies. The third and most recent NCA (2014) states that:

“ Climate change threatens human health and well

- being in man y wa ys , including impacts from increased extreme weather events, wildfire, decreased air quality , and illnesses transmitted by

food, water, and diseases carriers such as mosquitoes and ticks. Some of these health impacts are alread y underway in the United States. ” Improvements in some health metrics in recent decades, such as an increase in life expectancy or a decrease in deaths due to extreme events, does not provide evidence to support a claim that climate change is or will be beneficial to health. Improvements in broad health metrics can be a result of changes in medical care, diet, income, or other factors. As noted in EPA’s Response to Comments on the 2009 Endangerment Finding (RTC 5.5), the single metric of life expectancy does not convey

or provide information on the risks associated with changes in climate and whether or not they

are increasing, either in the past or in the future. EPA does not dis pute the findings of Davis et al. (2003a and 2003b) or Kalkstein et al. (2009) that heat

- related mortality in major U.S. cities declined in the second half of the 20 th century and that adaptive measures contributed to the decline. However, these findings do not support a conclusion that climate change does not present a risk to human health. In fact, the 3 rd NCA (2014) states:

“ Some of the risks of heat

- related sicknes s and death have diminished in recent decades, possibly due to better forecasting, heat

- health early warning sy stems, and/or increased access to air conditioning for the U.S. population. However, extreme heat events remain a cause of preventable death nati onwide. ” Commenter 10091 mischaracterizes the results of Bobb et al. (2014), which demonstrated a decrease in heat

- related mortality and sensitivity

to extreme heat events in the United States, by suggesting that this increase in acclimatization represent s an increase in health benefits associated with climate change. In fact, the conclusion of the Bobb et al., 2014 study states:

“ The population has become more resilient to heat over time. Yet even with this increased resilience, substantial risks of heat

- related mortality remain. Based on 2005 estimates, an increase in average temperatures b y 5°F (central climate projection) would lead to an additional 1,907 deaths per summer across all cities. ”4

- 5

As noted in EPA’s Response to Comments on the 2009 Endanger ment Finding (RTC 5

- 5, 5

- 7 and 5

- 36), risks to human health can be reduced by technology and adaptive measures, but heat presentl y causes substantial mortality in the Unites States and adaptive measures do not eliminate risk and are rather a response to th at risk. In fact, decreased sensitivity or decline in heat

- related mortality may not be as pronounced in the future since access to air conditioning is alread y high in most regions (Ebi et al., 2008). (See also RTC 5

- 45, 5

- 48, 5

- 51) The major scientific as sessments that EPA relies on, including the NCA, I PCC AR5, and the IPCC SREX, all project negative impacts of climate change, and the subsequent increase in frequency or severit y of extreme events, on human health. Commenter 10662 criticized EPA’s demonst ration of the linkage between climate change and health. First, it is important to note that the only facet of this linkage that the commenter addressed was the connection between climate change and air quality. The commenter did not present an y arguments regarding the impacts of climate change on human health through heat waves, fires, extreme weather events, or food, water, or vectorborne illnesses. Regarding the criticism of the linkage between air quality and climate change, it is also important to note that the commenter did not provide any evidence or citations to research that contradict such a linkage. In the Endangerment Finding, EPA cited EPA’s I nterim Assessment stating that there “is now consistent evidence from models and observations that 21st century climate change will worsen summertime surface ozone in polluted regions of North America compared to a future with no climate change.” The 2014 National Climate Assessment cited estimates that climate

change induced increases in ozone and particula te matter, absent changes in human emissions, are projected to lead to “1,000 to 4,300 additional premature deaths nationally per y ear b y 2050.” The commenter did not provide any evidence counter to these conclusions. The EPA specificall y addressed the arg ument by the commenter that the NAAQS are protective in the Endangerment Finding, (Federal Register Vol 74, No 239, pg. 66530). EPA stated first that despite the existence of a NAAQS, not all areas are in attainment, and climate change can worsen air quali ty

in those areas. EPA stated second that even in areas that are in attainment, because ozone and PM have no threshold below with no effects can be observed, increases in concentration in those areas would still likely result in additional adverse health e ffects for some individuals. The EPA concluded that, “[t]he clear risk to the public from ozone increases in nonattainment areas, in combination with the risk to some individuals in attainment areas, supports the finding that overall the public health is e ndangered b y increases in ozone resulting from climate change.” Despite the connection between climate change and ozone levels, greenhouse gases do not qualify as “ozone precursors” which is a term for compounds that react in the atmosphere to form ozone l ocally , whereas greenhouse gases cause increased ozone concentration through the mechanism of changing the climate globally. Finally , the EPA has stated that an y decrease of greenhouse gas emissions or concentrations will reduce climate change. Therefor e, EPA has considered these comments, and finds that they do not provide credible evidence of flaws in the EPA’s approach of relying upon the best estimates of the major assessments, nor do they

demonstrate that climate change does not represent a threat t o human health. Commenter 10951 submitted a review of the so

- called Climategate 2.0 e

- mails **Comment 4.1**
**- 3:**  claiming that “the second installment of Climategate e

- mails provides a strong basis for renewed4

- 6

scrutiny of the Endangerment Finding.” The commenter identifies 5 themes within the e

- mails that they claim demonstrate that the IPCC produced flawed scientific work, and that therefore the endangerment finding is similarly flawed. The five themes identified b y the commenter include:

 The Divergence Problem with historica l temperature proxies based on tree

- ring data.
 Leading climate scientists’ evasion of freedom of information act requests and destruction of responsive material.
 Internal expressions of doubt among the leading climate scientists as to the validity and accuracy

of their work.
 Concerted efforts to downplay the Medieval Warming Period as natural analogue to 20th Century

warming.
 Shortcomings in the peer review process. The commenter claims, “Considered together, the foregoing themes significantly undermine the prevailing theory

of climate change and unprecedented warmth in the late 20th Century as reported in the Fourth Assessment Report of United Nations I ntergovernmental Panel on Climate Change, and as reflected in the motor vehicle endangerment finding. The C limategate 2.0 material makes abundantly clear that the leading proponents of this theory, who were key I PCC authors, were biased and that their approach to science was, in fact, highl y unscientific and results

- oriented. In short, climate science must be rigorousl y re - evaluated in light of these sy stemic problems.”

This comment should be considered in the context of an extensive record **Response 4.1**
**- 3:**  including the Endangerment Finding, the Response to Comments document, the Denial and Response to Petitions, and the recen t Court ruling. The Administrator considered the full body of scientific evidence in making the Endangerment Finding, and this body of evidence is voluminous and well documented. The e

- mails that Commenter 10951 has highlighted are a second batch of e

- mai ls from the incident in 2009 when a server at the Universit y o f East Anglia was hacked and a number of e

- mail communications between scientists at the Climatic Research Unit (CRU) from 1999 to 2009 were copied from that server. The first batch of e

- mails f rom the 2009 incident was anal yz ed and responded to in great detail in the EPA Denial and Response to Petitions. The conclusion of the EPA, upheld by

the Court, was that the contents of the original set of e

- mails did not undermine the Endangerment Finding , as stated in the Denial:

“ As EPA’s review and analysis shows, the petitioners routinel y take these private e

- mail communications out of context and assert they are ‘‘smoking gun’’ evidence of wrongdoing and scientific manipulation of data. EPA’s careful examination of the e

mails and their context shows that the petitioners’ claims are exaggerated, are often contradicted b y other evidence, and are not a material or reliable basis to question the validity and credibility

of the body

of science underlying t he Administrator’s Endangerment Finding or the Administrator’s decision process articulated in the Findings themselves. Petitioners’ assumptions and subjective assertions regarding what the e

- mails purport to show about the state of climate change science are clearly inadequate pieces of4

- 7

evidence to challenge the voluminous and well documented body of science that is the technical foundation of the Administrator’s Endangerment Finding. 1 ” Similar conclusions have been reached independently by a number of other bodies, including the UK House of Commons, Science and Technology Committee, the University of East Anglia, Oxburgh Panel, the Pennsylvania State University, and the Universit y of East Anglia, Russell Panel. The outcomes of each of these independent p anels are also in the existing record. The commenters’ arguments regarding the hacked e mails have also been held by the D.C. Circuit to be of insufficient import to justify reconsidering the endangerment finding because they do not provide a basis for qu estioning the correctness of that determination. See Coalition for Responsible Regulation v. EPA , 684 F. 3d at 124

- 25 (e mails not of “’central relevance to the outcome of [the Endangerment Finding]... and do not “’provide substantial support for the argument that the regulation should be revised’”). EPA has reviewed all of the new e

- mails provided by Commenter 10951. There is nothing in the e - mails that would cause EPA to come to a different conclusion than it came to in 2009 or 2010. Commenter 10951 rep eats all the same errors, misunderstandings, fault y conclusions, acts of hy perbole, and “cherry

- picking” that the Petitioners did in 2010. The 2010 Denial of Petitions and its more technical supplemental Response to Petitions already addressed the bulk of the Commenter’s arguments, and the Commenter asserts but does not demonstrate that EPA’s Denial or Response to Petitions mischaracterized the original e

- mails in any way . Regarding the five themes identified by the commenter, the EPA has previously addre ssed each of these themes, and the commenter does not demonstrate that they are raising an y new issues. Regarding the so

- called “divergence problem” and the related issue of downplaying the medieval warm period, the EPA addressed these issues in Volume 1.1 of the Response to Petitions, finding that all the relevant uncertainties in attempts to determine historical temperatures through indirect measures such as tree rings were appropriately discussed in the assessment reports, and thus alread y considered in the Endangerment determination. The commenter does not demonstrate that these uncertainties were mischaracterized, or how these uncertainties would undermine the conclusions of the Endangerment Finding. Regarding freedom of information (FOI) issues, the co mmenter fails to link the e

- mails regarding FOI to an y substantive scientific errors or to an y data that has not been made publically available in the period since the emails were written. Regarding internal expressions of doubt among climate researchers, the commenter does not recognize that these discussions of uncertainty parallel discussions of uncertaint y in the published literature and the assessment reports. Finally , regarding assertions of shortcomings in the peer review process, the commenter does not show why the emails they provide, which highlight scientists criticizing the work of other scientists, are improper. As stated in Volume 3.3 of the Response to Petitions, “the petitioners make broad leaps in logic to impugn the overall integrit y of the peer - reviewed climate change literature based on very limited examples and largel y speculative assertions.”

1 EPA’s Denial of the Petitions to Reconsider the Endangerment and Cause or Contribute Findings for Greenhouse Gases, http://www.epa.gov/climatechange/Downloads/endangerment/response

- decision.pdf, 49557.4

- 8

An identical comment was submitted to the docket for the 2012 proposal. The EPA also reviewed the comment at that time, and discussed the emails in questions in the preamble of the 2013 proposal:

“ One commenter submitted emails between climate change researchers from the period 1999 to 2009 that were surreptitiously obtained from a University of East Anglia server in 2009 and publicly

released in 2011. According to the commenter, these emails showed that the climatologists distorted their research results to prove that climate change causes adverse effects. The EPA reviewed these emails and found that they raised no issues that Petitioners had not already raised concerning other emails from the same incident, released in 2009. The commenter's unsubstantiated assumptions and subjective assertions regarding what the emails purport to show about the state of climate change science is not adequate evide nce to challenge the voluminous and well

- documented body of science that underpins the Administrator's Endangerment Finding. ” The commenter did not acknowledge EPA’s discussion of this issue, and the EPA’s conclusion still holds that these emails do not p rovide a reliable basis to question the validity and credibility of the body of climate science.

Commenters 9733 and 10045 argue that EPA should exclude biogenic CO 2 **Comment 4.1**
**- 4:**  emissions from this rule because they are carbon neutral. The commenters begin b y arguing that EPA’s 2009 Endangerment Finding onl y identified as the cause of endangerment emissions from fossil fuels, and specifically omitted biomass from national GHG emi ssion totals upon which it relied. Therefore, the commenters argue that the rational basis upon which the EPA relies for regulating CO 2 cannot be relied upon for biogenic carbon, and that it would therefore be arbitrary and capricious for EPA to regulate b iogenic CO 2 before it has finalized its scientific review and Accounting Framework which will determine whether these sources should be regulated under the Clean Air Act. Commenter 9733 argues that language in the EPA 2009 I nventory of Greenhouse Gas Emiss ions and Sinks admits that carbon “release during the consumption of biomass is recycled as U.S. forests and crops regenerated, causing no net addition of CO 2 to the atmosphere.” Commenter 10045 also notes that the 2006 I PCC Guidelines recommend that inven tories place emissions of CO 2 from combustion of biomass in the section devoted to forestry and land

- use changes as opposed to the section devoted to energy production, and states the RFS2 program excludes emissions of crop

- derived CO 2 from combustion and fermentation in comparisons of the lifecycle GHG emissions of newly

- proposed biofuels. Commenter 9733 provides additional data regarding carbon sequestration from forests. Commenter 9733 argues that the use of forest product manufacturing residuals for com bined heat and power facilities is preferable to letting the residuals decay, potentially leading to release of methane, citing a stud y which calculated that the lifecy cle emissions from decay will exceed that from burning the residuals, on average, for an y time period greater than 2.4 years. Commenter 10045 argues specificall y that indirect emissions of CO 2 associated with production and gathering of crop

derived fuels are also harmless. Commenter 10045 also disagrees with EPA’s 2009 Endangerment Finding R esponse to Comments response 9

- 9, stating that the author of the response failed to recognize that the definitional foundation of the 2009 Findings contained a science

- based determination that crop

- derived CO 2 is inconsequential to global warming. Commente r 10045 concludes by arguing that, even if EPA did have the authority to regulate4

- 9

crop - derived CO 2 , it should exclude it on de minimis grounds, and that when EPA finishes its Biogenic Accounting Framework it should set a default of zero for crop

- derived CO 2 emissions.

Regarding the 2009 Finding, the commenters have pointed to the fact that some **Response 4.1**
**- 4:**  of the inventories relied upon by the EPA have excluded biogenic emissions. However, the inventories, and the Endangerment TSD, have been clear that land use, land

- use change, and forestry emissions are not included in the gross national totals but rather in net emission totals. This is not a statement on whether these emissions endanger. The Endangerment arises from the elevated concentrations of greenhouse gases: w hile fossil fuel emissions may be the cause of the majority of the increase in concentrations of carbon dioxide, land use, land

- use change, and forestry have also contributed to that increase (the “air pollution” at issue), as noted in the Endangerment TSD , and therefore there was no intent to exclude biogenic sources from the Endangerment decision. EPA developed the revised draft report, Framework for Assessing Biogenic CO 2 Emissions from Stationary Sources , to continue advancing our understanding of the r ole the use of biomass can play in strategies to address greenhouse gas emissions. Specifically , the Framework was developed as a policy

- neutral framework for assessing biogenic CO 2 emissions from stationary sources

— it was not developed as technical guidan ce in conjunction with any specific policy or program. The EPA is engaging in a second round of targeted peer review of the revised draft Framework with the SAB in 2015. In November 2014, the agency released a second draft of the technical report, Framework for Assessing Biogenic Carbon Dioxide for Stationary Sources . The revised Framework, and the EPA’s Science Advisory Board (SAB) peer review of the 2011 Draft Framework , finds that it is not scientifically valid to assume that all biogenic feedstocks are “carbon neutral” and that the net biogenic CO 2 atmospheric contribution of different biogenic feedstocks generally

depends on various factors related to feedstock characteristics, production, processing and combustion practices, and, in some cases, what wo uld happen to that feedstock and the related biogenic emissions if not used for energy production. For more information regarding the revised Framework

. 2

Commenter 3593 notes that the EPA endangerment finding for greenhouse **Comment 4.1**
**- 5:**  gases did not rel y on an y anal ys is done within EPA and instead erred in using science assessments developed by others. Commenter 10951 states the assessments produced b y the Intergovernmental Panel on Climate Change (I PCC) are scientificall y flawed due to how the reports are devel oped. One commenter argues that the NRC assessment report process is not transparent, and that the reports are not independent because they rel y on previous assessments developed b y IPCC and USGCRP. Commenter 10046 argues that b y placing lesser weight on individual studies than on major scientific assessments, EPA introduces timing and data

- bias issues. Commenter 10046 first points out that the next partial I PCC assessment was due in March, with the final document due October of 2014, and further states that EPA timed its proposal by

not waiting for the full and formal review of that assessment, and that EPA is therefore s ys tematicall y refusing to consider the most recent evidence on these issues.

2 see: http://epa.gov/climatechange/ghgemissions/biogenic

- emissions.html4

- 10 Commenters repeat the argument alread y rejected by the D.C . Circuit as “little **Response 4.1**
**- 5:**  more than a semantic trick”. See Coalition for Responsible Regulation , 684 F. 3d at 120. As outlined in Section VIII. A. of the 2009 Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act (Endangerment Finding), EPA’s approach to providing the technical and scientific information to inform the Administrator’s judgment regarding the endangerment question was to rely primaril y upon the recent, major assessments by

the U.S. Global Chan ge Research Program (USGCRP), the Intergovernmental Panel on Climate Change (I PCC), and the National Research Council (NRC) of the National Academies. In brief, these assessments addressed the scientific issues that the EPA was required to examine, were c omprehensive in their coverage of the greenhouse gas (GHG) and climate change problem, and underwent rigorous and exacting peer review by the expert community, as well as rigorous levels of U.S. government review and acceptance, of which EPA took part. Pr imary reliance on the major assessments provided EPA greater assurance that it was basing its judgment on the breadth of well

- vetted science that reflected the consensus of the scientific community . The major findings of the USGCRP, IPCC, and NRC assessme nts supported the finding that GHGs threaten the public health and welfare of current and future generations. EPA demonstrated this scientific support at length in the Endangerment Finding itself, in its Technical Support Document (which summarized the fi ndings of USGCRP, IPCC and NRC), and in its RTC document. Use of IPCC, CCSP, USGCRP, and NRC Reports as the primary scientific basis is addressed in Response to Comment (RTC) Volume 1 Section 1, with specific comments on EPA’s use of IPCC reports addresse d in Section 1.1.1. The IPCC Principles and Procedures are outlined in EPA’s Response to Comments Volume I Appendix A. On June 26, 2012, the United States Court of Appeals for the D istrict of C olumbia Circuit ) confirmed the appropriateness of using scien tific assessment literature, stating that the EPA had based its decision on “substantial scientific evidence” 3 and noting that EPA’s reliance on assessments was consistent with what decision

- makers often must do to make a science

- based judgment 4

. In add ition to the above description of EPA’s rationale for relyi ng on the major assessments as the primary

scientific basis for the endangerment determination, Section III.A of the Endangerment Finding, “The Science on Which the Decisions Are Based,” describes that it was not necessary

nor logical for EPA to conduct an additional and separate review of the underl yi ng climate data and research. Section III.A states: “EPA has no reason to believe that the assessment reports do not represent the best source materi al to determine the state of science and the consensus view of the world’s scientific experts on the issues central to making an endangerment decision with respect to greenhouse gases. EPA also has no reason to believe that putting this significant body of work aside and attempting to develop a new and separate assessment would provide any better basis for making the endangerment decision, especially because an y such new assessment by EPA would still have to give proper weight to these same consensus assess ment reports.”

3 Coalition for Responsible Regulation, Inc. v. EPA, 684 F.3d 102, 120 (D.C. Cir. 2012). 4 Id. at 120; see also id. (“EPA is not required to re

- prove the existence of the atom every time it approaches a scientific question”).4

- 11

In response to the comment regarding IP CC’s assessment report development process, we note that this comment has been previousl y raised during the public comment and reconsideration processes for the Endangerment Finding (see Section 1.1.1 of Volume 1 the Response to Comment document, and Section 2.2 of Volume 2 of the Response to Petitions document). Response to Comment 1

- 14 in Volume 1 of the Response to Comment document addresses IP CC processes for ensuring information quality , objectiv ity , and transparency , and clearl y states that EPA and the U.S. Government approve the rigorous I PCC review process and the legitimacy of its scientific content:

“ EPA has both evaluated and participated in the development and review of IPCC reports, and the IP CC process is transparent and rigorous. The I PCC ensures scientific credibility

and legitimacy

of its reports by

fairl y representing the range of scientific opinions on climate change, and the IPCC provides multiple opportunities for input from experts along the entire spectrum of opinions... ...The evidence is clear that the IPCC’s procedures are sufficient and effective for ensuring quality , transparency , and consideration of multiple and diverse perspectives. Because the assessment reports EPA used in developing the TSD represent the best available science, and because supporting studies were conducted in accordance with sound and objective scientific practices, were peer reviewed, and adhered to standards of quality based on objectivity , utility , and i ntegrit y, we find that IPCC’s information quality process is consistent with EPA’s Guidelines for Ensuring and Maximizing the Quality, Objectivity, Utility and Integrity of Information Disseminated by the Environmental Protection Agency. The U.S. Government participated full y in the development, review, and ultimate acceptance and approval of IPCC (2007). As stated on the USGCRP’s Web site: “When governments accept the IPCC reports and approve their Summary for Policy

makers, they acknowledge the legitimacy of their scientific content”. ” In response to the comment regarding the NRC assessments and the procedures emplo yed during their development, we note that this comment was alread y responded to following the public comment process for the Endangerment Findi ng 5 . In short, we disagree with the commenter that the NRC reports are not transparent. The NRC assessment reports cited in the Endangerment Finding record were prepared following rigorous and transparent processes addressing such issues as the nominatio n and selection of authors, the caliber of literature reflected in the assessment, and the processes for review and revision of reports. We also disagree with the comment that the reports are not independent. Just because the NRC reports reference findin gs from previous scientific assessments produced b y others does not signify that the conclusions of the NRC report were not independentl y reached. Instead, previous findings that are reassessed in light of the most recent scientific literature and subsequ ently reaffirmed, helps to demonstrate increased confidence in those findings. In fact, in its ruling, the DC Circuit Court stated “EPA is not required to re

- prove the existence of the atom every time it approaches a scientific question:” similarly , scientific assessments do not need to ignore the existence of all previous assessments.

5 See Section 1.1 of Volume 1 of the Response to Comments document “Use of IPCC, CCSP, USGCRP, an d NRC Reports as the Primary Scientific Basis” and Appendix C of Volume 1 “NRC Report Development Procedures”4

- 12

In response to the comment regarding the use of individual studies and the timing of new assessments, we note that EPA gave careful consideration to all of the scientific and technical information received during the public comment processes. As stated above, the Agency primarily relied on the major assessments because these documents provided EPA with greater assurance that it was basing its judgment on well

- vetted science that reflected the consensus of the scientific community . On the other hand, less weight was placed on the much smaller number of individual studies that were not considered or reflected in the major assessments

— often the case when th e study was published after some cut

- off date to be incorporated into the larger assessments. EPA reviewed the individual studies submitted to the Agency largel y to see if they would lead EPA to change its interpretation of, or place less weight on, the m ajor findings reflected in the assessment reports. From its review of individual studies submitted to the Agency , EPA has concluded that these individual studies do not change the various conclusions or judgments EPA would draw based on the more comprehen sive assessment reports. EPA also reviewed the most recent science assessments, such as I PCC’s Fifth Assessment Report, that have been published since the proposed action was released. The Agency found that the findings of these most recent assessments a re consistent with the conclusions previously relied upon b y the Agency , and in some cases strengthen the scientific understanding of how GHGs endanger public health and welfare. One of the primary goals of reviewing the individual studies submitted to th e Agency and the latest scientific assessments was to address the data and timing biases raised b y the commenters. EPA plans to continue relying primarily on the major assessments by

the IPCC, the USGCRP, and the NRC. Studies from these bodies address th e scientific issues that the Administrator must examine, represent the current state of knowledge on the key elements for the endangerment anal ys is, comprehensivel y cover and synthesize thousands of individual studies to obtain the majority conclusions fro m the body of scientific literature and undergo a rigorous and exacting standard of review by the peer expert community and U.S. government. Therefore, EPA has considered these comments, and finds that they do not provide credible evidence of flaws in EPA ’s approach of rel yi ng and placing primary weight on the major scientific assessments.

A number of commenters use three general, somewhat related, arguments to **Comment 4.1**
**- 6:**  claim that recent science suggests that the sensitivity of the climate sys tem to increased conce ntrations of greenhouse gases is lower than was previously assumed. The first is that commenters claim that there has been a recent pause in observed global warming that has lasted since 1998. One commenter claims that this pause makes the causal connectio n between greenhouse gases and climate change uncertain (commenter 10046). Another commenter suggests that estimates of future warming should be lowered because climate models did not predict this pause and a historical over

- prediction of warming implies f aulty models (commenter 10951). The second argument for a lower climate sensitivity estimate is based on studies by Loehle (2014), Spencer and Braswell (2013), or on a review of 18 recent studies that all show a best estimate of climate sensitivity lower t han the mean of the IPCC models (commenter 3953). The third argument is that the EPA should take into account changes in how the 5 th IP CC Assessment (AR5) characterized climate sensitivity. In this regard, one commenter claims that the IPCC decision not to present a “best estimate” of climate sensitivity completely undermines4

- 13

its findings (10966) while another commenter claims that the I PCC presented evidence from several studies showing a climate sensitivity range of 1.5 to 2 degrees. The EPA continues to rely on the best available science. In the case of climate **Response 4.1**
**- 6:**  sensitivity , the EPA relies on the major assessment reports, including the recent I PCC 5 th Assessment Report. These assessment reports consider the entire literature in context, rather than select ing a small number of individual studies. The likely range for the climate system response to a doubling of carbon dioxide concentrations (i.e., the climate sensitivity) described b y the IPCC AR5 assessment of 1.5 to 4.5 degrees represents a sound judgment of the literature, and the appropriate range on which to base EPA decisions. The commenters compare reported climate sensitivity

from a set of studies to the reported climate sensitivity of the climate models assessed by the IPCC. The studies selected b y the commenters may present a lower climate sensitivity than included in most climate models, but the estimated likely (>90%) climate sensitivity range made b y the IPCC assessment itself is broader than the range found in climate models, and encompasses all but one of the studies presented by the commenters. The commenters’ characterization of the available evidence is limited. For example, commenters discuss a recent 16 year pause in the rate of global surface temperature rise, but mischaracterize or do no t consider a number of important factors that put this “pause” in context within observed, long term climatological trends. The first factor is that this is not actually a pause but rather a reduction in the rate of surface temperature rise. The second is that observations of the slower rate during this pause depends on which dataset is chosen, but, according to the I PCC, all global surface temperature datasets do exhibit a warming trend over the period 1998

- 2012;. The third is that this reduction in rate i s mostly evident only

in atmospheric temperatures, and that ocean heat content and sea level rise (which can be a proxy for ocean heat content) both continue to increase rapidly . Other measures of climate change, such as Arctic sea ice retreat and glacial melt, similarly show no pause or even demonstrate an acceleration during this time period. A final important factor is that trends based on short time periods such as a 16 year period often do not reflect long

- term climate trends. As with the issue of climate sensitivity , the EPA relies on the major assessment reports, including the recent IP CC 5 th Assessment Report when considering the characterization of the recent slowdown in the rate of rise of global surface temperatures. The IPCC AR5 assessment di scussed the recent reduction in surface temperature rate at length, noting several of the above issues. They

also note that models generally did not capture the reduction in rate in large part because they

do not reflect a recent increase in observed heat uptake b y the oceans which has been a result of natural variability. Estimating the climate sensitivity is an area of ongoing research. Many o f the studies cited b y commenters are based on a method of using simple models and recent observed temperatures. It is important to also give appropriate weight to other methodologies, such as paleoclimate and theoretical approaches, as in done in the I PCC assessment process. Many of the studies cited b y the commenters were considered b y the IPCC, and a number of au thors of the cited studies were also IPCC authors. Therefore, EPA finds the IPCC process to have appropriately accounted for not only the research highlighted b y the commenters but the full spectrum of the literature that relates to climate sensitivity est imation. The IPCC range does include the possibility that the4

- 14

sensitivity

is below 3 degrees, but also shows that there is a possibility that the climate sensitivity is higher than 3 degrees. The IPCC AR5 provided a best estimate of a likely range of cli mate sensitivity of 1.5 to 4.5 degrees of warming for a doubling of CO 2 , compared to a range of 2 to 4.5 degrees in AR4. While such an expansion in the range of best estimates of climate sensitivity to include lower sensitivity

values would likely

lower es timates of future damages, the reduction in the best estimate would have to be extreme in order to reduce the damages to the point where they would no longer endanger public health or welfare. In contrast, this is a relatively small change to the previous uncertainty

range. EPA previously

responded to a number of similar comments in 2009, in Section 4.3 of the EPA’s Response to Comments on the 2009 Endangerment Finding. In those responses, EPA also showed how the approach of the major assessments to deter mine the Earth’s climate sensitivity was sound, and considered the entire bod y of science in context, rather than relying on individual studies that were often sensitive to a choice of specific temperature dataset or single methodology

. Therefore, EPA ha s considered these comments, and finds that they do not provide credible evidence of flaws in the EPA’s approach of relying upon the best estimates of the major assessments, or that the assessments did not take into account the new literature, nor do they demonstrate that a lower best estimate of climate sensitivity would eliminate endangerment rather than merel y slightly reducing the danger.

Commenter 10951 states that the I PCC Fifth Assessment Report (I PCC AR5) **Comment 4.1**
**- 7:**  includes greater doubts about surface temper ature data quality than was admitted in previous IPCC assessments, and that the I PCC acknowledges that its earlier dismissal of the problem of surface data contamination was made without supporting evidence. The commenter provides as support a document b y Ross McKitrick which provides several quotes from the I PCC AR4 and AR5 assessments regarding the urban heat island and a discussion of a 2004 paper b y McKitrick and Michaels along with several subsequent papers. The commenter claims that the endangerment f

inding relied on claims of the previous I PCC report, and that since, according to the commenter, this new language overturns that claim, the endangerment finding should be revised. The EPA continues to rely on the best technical and scientific information, **Response 4.1**
**- 7:**  primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (I PCC), and the National Research Council (NRC) of the National Academies. While the final version of the IP CC AR5 assessment was not available at the time of proposal, the EPA has since reviewed the AR5 assessment, along with other new assessments of the USGCRP and the NAS, and found that the improved understanding of the climate s ys tem they present strength ens the case that GHGs endanger public health and welfare. Particularly relevant for discussions of surface temperature, confidence in attributing recent warming to human causes has increased since the publication of the 4 th Assessment Report: the IPCC sta ted that it is extremely likel y (>95 percent confidence) that human influences have been the dominant cause of recent warming, compared to the previous Fourth Assessment Report conclusion that most of the recent warming was very likel y4

- 15

(>90 percent confide nce) due to the observed increase in human

- produced greenhouse gases. Moreover, the I PCC found that the last 30 y ears were likel y (>66 percent confidence) the warmest 30 ye ar period in the Northern Hemisphere of the past 1400 y ears. The evidence is clear that the Earth has warmed. A number of metrics are clear indicators of a warming planet, including increases in ocean heat content, sea level rise, glacial melt, and satellite observations of a warming atmosphere. These indicators add to the evidence provid ed b y the surface temperature record. However, we also disagree that there are major flaws in the surface temperature record. Similar comments were submitted in 2009, and were extensively discussed in the Response to Petitions, Volume 1. The Response to Pe titions described how a number of different methods by different research groups all conclude that there has been recent warming, regardless of whether they accounted for heat island effects by using nightlights, or more stations, or, in the US, a Climate Reference Network designed specifically to be used for monitoring climate change. As in most of climate science, there is ongoing research on methodology

improvements (whether to adjust for urban heat islands or for lack of coverage of rapidly warming regi ons such as the Arctic), but the major conclusions remain robust. Regarding the commenter’s discussion of the change in IPCC reports, we find that the commenter has mischaracterized the conclusions of the 5 th Assessment report. The commenter claims that “[t]he I PCC now acknowledges that its earlier dismissal of the problem of surface data contamination was made without supporting evidence”. While the IPCC did note that “explicit” evidence had not been included in the original assessment regarding a lack o f statistically

significant correlation between socioeconomic development and warming (where such a correlation would be potential evidence of temperature station bias), this does not imply that the previous conclusions were wrong. In fact, the I PCC cites a newer publication (Schmidt, 2009) that “supported AR4 conclusions”, though the I PCC also cites a pair of publications by McKitrick that “still yielded significant evidence for such contamination of the record”. While this paragraph in isolation does not provide a clear determination about the accuracy of the surface temperature record overall, in context of Section 2.4.1.3, it is clear that the overall conclusion of the IPCC was that the urban heat island effects are small compared to the global trend. Th is conclusion was based on a variet y of methodologies, ranging from using satellites to classify stations and determine that there is little difference between warming at urban and rural sites (Wickham et al. 2013, Hansen et al. 2010), to reanal ys is method s that compare surface warming from models constrained b y observed sea surface temperatures (such as Parker, 2011). The I PCC also found that regression

- based results such as the McKitrick papers were less convincing than other approaches, stating that they were “inconsistent with many other components of the global observing s ys tem.” So when the IPCC considered all the available approaches to assessing surface temperature biases and urban heat island effects, it determined with high confidence that based on the totality of the evidence, that it was unlikely that uncorrected effects would have causes an error or more than 10%. The commenter also mischaracterizes the change between IPCC AR5 assessment and the previous Fourth Assessment, stating that “Rather than saying categoricall y that no such bias exists [resulting from urban heat islands], they say only that it is unlikely

the effects are greater than 10% of the observed global average trend”. However, the IP CC never categorically claimed that the urban he at island effect did not exist: in fact, the AR4 report (Trenberth et al., 2007) states: “Studies that have looked at hemispheric and global scales conclude that any urban

-4

- 16

related trend is an order of magnitude smaller than decadal and long

- scale trends ev ident in the series.” The “order of magnitude smaller” conclusion from AR4 is consistent with the “10%” conclusion in AR5. Therefore, EPA has considered these comments, and finds that they do not provide credible evidence that the surface temperature rec ord has major flaws, or that any flaws that may exist would materially

change the conclusions that greenhouse gases endanger public health and welfare. Comments 9664 and 10961 describe that greenhouse gas emissions, including **Comment 4.1**
**- 8:**  CO 2 , seriously

endanger public health and welfare. Comment 1871 states that the expected negative health impacts of climate change have been well studied and include: increased malnutrition and infectious disease, injury, heat stress, respiratory disease, reproductive and developmenta l disorders, cancer, phys ical and psychological trauma from extreme weather disasters, and increases in insect

- borne disease. Commenter 9514 states that scientific and anal yt ical assessments issued since the 2009 Endangerment Finding indicate that climate change is a more serious threat than previousl y realized, and that CO 2 emissions are more, not less, likely to endanger the public health and welfare. Commen t er 10090 states the standards to be set b y EPA should ensure that new power plants use the most efficient, lowest

- emitting technology available, strongl y supports EPA's limits on new coal power plants and supports requirements that would mandate that an y new coal plants use technology

to capture carbon emissions to ensure these plants meet emission l imits set by EPA because addressing carbon pollution from coal fired power plants tackles one of America's dirtiest fuel sources and is an immense step forward Commenter 9514 similarly states that a strong NSPS for fossil fuel

- fired power plants is critica l to achieving the emissions reductions necessary to mitigate the dangers of climate change. In 2009, the EPA Administrator found that the current and projected **Response 4.1**
**- 8:**  concentrations of the six key well

- mixed greenhouse gases

— carbon dioxide ( CO 2 ), methane ( CH 4 ) , nitrous oxide (N 2 O), h ydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 )

— in the atmosphere threaten the public health and welfare of current and future generations. The full scientific record supporting the Endangerment Finding, in particular the scientific assessment literature as summarized in the TSD, support the Admini strator’s determination. We therefore agree with the comments that greenhouse gases, including CO 2 , endanger public health and welfare. Regarding the adverse health effects of climate change, we note that the EPA evaluated and considered scientific inform ation on observed and projected health impacts during the development of the 2009 Endangerment Finding. The specific health effects mentioned by the commenter have been described in the scientific assessments that the Agency relied upon in making the Enda ngerment Finding and include direct (temperature effects) and indirect (e.g., changes in climate

- sensitive diseases) impacts on human health. For more specific information regarding EPA’s consideration of these health effects, see Volume 5 of the Response to Comments document supporting the 2009 Endangerment Finding.4

- 17

In response to the comment regarding assessments released since the 2009 Endangerment Finding, we agree that these reports, in general, show stronger evidence that climate change poses risks to human health and welfare. The preamble summarizes many of these findings. For example, recent assessments provide new evidence that reaffirms the linkages between climate change and certain extreme weather events such as increases in heav y rainfall in some areas and greater extent of wildfire in others; estimates of greater sea level rise than previously projected; more evidence of the threats of ocean acidification; impacts of climate change on air qualit y; more confidence in the role of human emissio ns of greenhouse gases in recent global climate change; and man y other examples.

Some commenters (9685, 10091, 10951) argue that the EPA has not **Comment 4.1**
**- 9:**  adequatel y considered the benefits of CO 2 fertilization on plants, especially agricultural crops. Commenters rel y primarily on NIPCC (2009) and Idso (2013) when stating that increased atmospheric CO 2 concentrations can increase crop yields, reduce the amount of water plants need, and improve plants’ ability to respond to environmental stresses. Another commenter states that, “more than 40 recent peer

- reviewed academic journals articles have appeared, supporting the benefits of increased atmospheric CO 2 on plant life.” Further, they note that higher crop yi elds can increase food availability and lower food prices. In contrast, a different commenter (9681) expressed concern that CO 2 fertilization benefits have been overstated and may be cancelled out by

negative climate change impacts on agriculture, such as extreme heat, pests, and weeds. The EPA has never disputed that CO 2 is a required ingredient for plant growth **Response 4.1**
**- 9:**  and survival, or that CO 2 can stimulate plant growth. This comment was put forth previousl y and responded to in the Response to Public Comments Document of the Endangerment Findi ng. The 2009 Endangerment Finding Technical Support Document (TSD) summarizes the scientific assessment literature on the stimulatory, or fertilization effect of CO 2 on plant growth and productivity . For example, Section 3 states that CO 2 , “can have a stim ulatory or fertilization effect on plant growth” and “studies have demonstrated increases in CO 2 affects water use and water use efficiency

in plants” (EPA 2009). Section 9 focuses specifically o n U.S. agriculture and shows that for grain and oilseed crops , increased CO 2 and temperature will likely speed plant growth in the near

- term future (USDA CCSP 2008). The IPCC (2007) also confirms that experimental studies of elevated CO 2 on crops increases yi elds. However, the EPA considers the stimulatory effects or beneficial influences of elevated CO 2 on plants alongside other climate change impacts. Many aspects of climate change can negatively affect plant growth and crop y ields and can outweigh the benefits of CO 2 fertilization, as suggested b y commenter 9681. For instance, the USCGRP found that high temperatures, extreme weather events (i.e., heavy downpours, droughts), enhanced pest and weed growth, and ozone exposure can significantly limit the benefits of the direct stimulatory CO 2 response on plant growth. The UGCRP also concluded that as temperature rises beyond a certain threshold in the future, grain and oilseed crops will increasingly b egin to experience failure, especiall y if climate variability

increases and precipitation lessens or becomes more varia ble. The IPCC (2007) concluded that the global price of cereals may decrease with warming below 2 o C, but above this temperature, prices could increase b y 30%. Further, USGCRP concludes that the marketable yi eld of man y horticultural crops (e.g., tomatoes, onions, fruits) is very likely to be more sensitive to climate change than grain and oilseed crops. More recent assessments (not available4

- 18

at the time of the 111(b) proposal) released b y the IPCC (AR5) in 2013, and the USGCRP in 2014, reaffirm these findin gs. For instance, the IPCC states, “based on many studies covering a wide range of regions and crops, negative impacts of climate change on crop y ields have been more common than positive impacts”. EPA has considered the comments regarding the effects of elevated CO 2 concentrations on plants, and determined that they do not provide credible evidence of flaws in the EPA’s approach of rel yi ng upon the characterization of CO 2 fertilization in the assessment literature in making its determination. In particula r, the commenters did not recognize that EPA had alread y considered the effects of CO 2 fertilization when originally finding that greenhouse gases endanger public health and welfare, and had responded to a number of related comments. The commenters general ly rel y on individual studies showing benefits of elevated CO 2 in the absence of any other climate changes: therefore, the commenters neither present a comprehensive picture of impacts of CO 2 on the agricultural sector in specific, or on the broader issues of public health and welfare. In contrast, EPA relies on the assessment literature, which demonstrates that the net impacts of elevated GHG concentrations on agriculture will likely be negative, when considering relevant factors such as temperature, preci pitation, weather variability, and ground level ozone, and that in the broader context of all climate impacts, it is even more clear that climate change represents a threat to public health and welfare.

Multiple commenters highlight the need to protect chi ldren from the negative **Comment 4.1**
**- 10:**  impacts of climate change (commenters 10025, 1871, 6358, 6318, 6351, 3984, 6292, 5608). Several commenters note that climate change have alread y n egativel y affected children’s health and are projected to further exacerbate health im pacts, such as asthma and other respiratory illness, infectious disease, malnutrition, heat stress, and mental health disorders (commenters 1871, 6318, 6351, 3984). These commenters state that there exists an obligation to protect future generations from t he effects of climate change.

The EPA continues to rely on the best technical and scientific information, **Response 4.1**
**- 10:**  primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (IPCC), and the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer

- reviewed literature in context to draw conclusions based on the entire body of findings from the literature. The preamble summariz es many new assessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013

- 4 Fifth Assessment Report (AR5) and IP CC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (SREX). These new assessments provide further evidence supporting the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare, including ch ildren’s health. EPA has considered the information provided b y the commenters and finds that it is generally consistent with the findings of the major scientific assessments. We agree with commenters that children are a population of concern with respect to health impacts from climate change. As noted in EPA’s Response to Comments on the 2009 Endangerment Finding (RTC 5

- 21), children4

- 19

are particularl y vulnerable to illness and death from heat waves and acute and chronic illnesses of the respiratory

s ys tem from particulate matter emissions during forest fires. The most recent National Cli mate Assessment (2014) found that children, primarily because of ph ys iological and developmental factors, will disproportionately suffer from the effects of heat waves, air pollution, infectious illness, and trauma resulting from extreme weather events. Overall, the EPA finds that the information provided by the commenter is generall y consistent with and does not alter the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare.

Commenter 3593 refers to a document written b y Alan Carlin at the EPA **Comment 4.1**
**- 11:**  criticizing the science used in the Endangerment Finding. The commenter argues that EPA violated due process by

ordering Alan Carlin n ot to discuss the report. The commenter alleges that after Alan Carlin’s report was forwarded to the endangerment finding workgroup that it was dismissed without consideration or response due to a predetermined decision by the EPA, and that the EPA never a nal yzed the underlying scientific issues raised b y Dr. Carlin. The commenter states that the appropriate remed y for the due process violations under the Fifth Amendment, including violation of the rights of protected classes of individuals, that EPA cannot promulgate the rule as written. The commenter alleges that the Agency cannot appropriately address the mischief involved, and that therefore it must withdraw the proposal in its entirety.

The document written b y Alan Carlin was not ignored. EPA reviewed and **Response 4.1**
**- 11:**  addressed the comments submitted by Alan Carlin in the record for the Endangerment Finding in 2009. At the time, Alan Carlin’s document was a collection of various statements; it was not a publication nor a new analysis. In Volume 1 of EPA’s responses to public comments (RTC) in support of the Endangerment Finding, we stated: “EPA has reviewed new and additional scientific literature [in addition to the major scientific assessments on which EPA placed primary weight] received through public comment. Thi s review includes the Carlin document.” 6 Inother volumes of the RTC there are numerous examples where EPA responds directly to statements made in the Carlin document. I n volume 2 of the RTC 7 , numerous commenters used statements from the Carlin document an d these were responded to in detail. For example, several commenters submitted a comment from Alan Carlin claiming that the most reliable sets of global temperature data available, using satellite microwave sounding units, show no appreciable temperature i ncreases during the time from 1978 to 1997. EPA provided a detailed response (Response 2

- 48), concluding it was “unclear how the Carlin comment reached this conclusion, because our review of the two satellite temperature datasets...show temperature increases for the period from 1979 (when annual data became available) to 1997.” In volume 4 of the RTC (available at: http://epa.gov/climatechange/endangerment/comments/volume4.html ), several commenters referred to the Carlin document to state that the IPCC ignore d the possibility that there may be other significant natural effects on global temperatures that we do not y et understand, and that therefore this possibility invalidates IPCC statements imply ing that one must assume anthropogenic sources in order to dupl icate the temperature record. EPA’s response (4

- 14) addresses the comment in detail, including the statements that “EPA has reviewed Alan

6 Response 1

- 13; available at: http://epa.gov/climatechange/endangerment/comments/volume1.html. 7 http://epa.gov/climatechange/endangerment/comments/volume2.html.4

- 20

Carlin’s document”, that “the assessment literature clearly demonstrates that the historical pattern of global tempera ture change is due to a combination of natural and anthropogenic factors,” and that “we find that the evidence that the Carlin document relies on for this anal ys is of recent temperature trends is very weak.” In sum, Alan Carlin’s comments were considered, reviewed, and responded to by EPA , and these comments did not warrant calling into question the fundamental science relied upon that supported EPA’s 2009 Endangerment Finding.

Some commenters have argued that the EPA relies too heavily on the 2009 **Comment 4.1**
**- 12:**  Endangerment Finding and that the agency has inadequatel y considered the most up

- to
- date science in moving forward with the 111(b) rulemaking. One commenter (9201) asserts that the fact that the Endangerment Finding (and subsequent petition denials) has been uphel d in the courts does not preclude the agency from reconsidering the endangerment determination in light of the most up

- to
- date climate science. The commenter also notes that the science relied upon was current in 2006 and will be nearl y a decade old when s tates submit plants for the upcoming 111(d) rulemaking. Another commenter (10951) notes that the 2007 I PCC report (AR4) and the 2009 USGCRP report, both of which the EPA relied upon in making the Endangerment determination, provide the scientific knowledge only up to 2006 and 2008, respectivel y. This commenter asserts that current scientific knowledge does not fully support the scientific conclusions that underpin the Endangerment finding, focusing on their interpretation of the most recent IP CC report (AR5 ), NRC reports, and on the so

- called “Climategate.”

The EPA recognizes that climate change is a very active area of scientific **Response 4.1**
**- 12:**  research and that multiple assessments have been released since the 2009 Endangerment Finding. Accordingl y, the EPA has and cont inues to review all new relevant assessments and use this updated information to inform rule development. This continued scientific review began following the Endangerment determination and is ongoing. As discussed in the preamble, new assessments since th e 2009 Endangerment Finding were considered and evaluated, and informed this 111(b) rule. These recent assessments include several NRC reports of the National Academy of Sciences, the IP CC Fifth Assessment Report (AR5), the 2014 National Climate Assessment , and the IPCC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (SREX). Based on our review of the more recent scientific assessments, we disagree with the assertion that recent reports sum marizing climate change research contradict the body of science that underpinned EPA’s 2009 Endangerment Finding. In fact, these assessments show stronger evidence to support the determination that GHGs are reasonabl y anticipated to endanger public health and welfare. The preamble summarizes the findings of man y o f these reports. For example, recent assessments provide even stronger evidence attributing the human

- induced buildup of GHGs in the atmosphere to recently observed climate change, as well as new e vidence reaffirming the linkages between human

- induced climate change and extreme weather, increases in heav y rainfall in some areas and greater extent of wildfire in others, increased loss of sea ice in the arctic, and greater projected sea level rise tha n previousl y documented. Recently released assessments that were not available prior to the 111(b) rulemaking further strengthen the determination that GHGs threaten human health and welfare. Both the IPCC (2013) and the National Climate Assessment (USG CRP 2014) document widespread impacts on heath and numerous sectors important to human well

- being. For instance, the I PCC Fifth4

- 21

Assessment Report states that, “I mpacts from recent climate

- related extremes, such as heat waves, droughts, floods, cyclones, an d wildfires, reveal significant vulnerability and exposure of some ecos ys tems and many human s ys tems to current climate variability ”. These include disruption of food production and water supply, damage to infrastructure, morbidity and mortality , and conse quences for human well

- being, among others. Additional impacts include increased air pollution and exposure to allergens, as well as greater emergence of diseases such as ly me (USGCRP 2014). I

n sum, it is our view that consideration of more up

- to
- date clim ate science would onl y serve to reaffirm EPA’s judgment that led to the original Endangerment Finding. Commenter 10091 states that there has been an overall long

- term decline in **Comment 4.1**
**- 13:**  mortality from extreme weather events (hurricanes, floods, lightning, tornadoe s) in the United States, adjusted for population changes. The commenter cites Goklan y, I. M. (2011). Wealth and Safety: The Amazing Decline in Deaths from Extreme Weather in an Era of Global W arming, 1900

–2010 . Policy

Study 393, Reason Foundation. Based on this study , the commenter concludes that anthropogenic climate change will not cause adverse human health impacts from extreme weather events.

The EPA continues to rely on the best technical and scientific information, **Response 4.1**
**- 13:**  primarily based upon the recent, maj or assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (I PCC), and the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer

- reviewed literatu re in context to draw sy nthesis conclusions based on the body of findings from the literature. In contrast, the commenter draws a conclusion from one individual, non - peer - reviewed study. The preamble summarizes many new assessment reports published since t he 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013

- 4 Fifth Assessment Report (AR5) and IP CC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Clim ate Change Adaptation” (SREX). These new assessments provide additional evidence to support the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare, including reaffirming the linkages between climate change , extreme weather, and human health. The assessment literature comprehensivel y discusses mortality, morbidity , and future projected impacts via various climate

- health exposure pathways. The commenter, on the other hand, focuses solel y on whether there i s an observed national mortality trend from hurricanes, floods, lightning, and tornadoes. The commenter ignores three key aspects of the assessment literature’s s ynthesis of the current state of scientific understanding: (1) that the discussion of health i mpacts focuses on those types of extreme weather events with appropriate links to climate change; (2) that in the U.S., the health impacts of extreme weather will manifest differently according to region and population affected; and (3) that health impacts of extreme weather include morbidity, not just mortality

. Regarding these three key aspects, the NCA3 concludes the following:4

- 22

Certain ty pes of extreme weather events with links to climate change have become more frequent and/or intense, including prolonged periods of heat, heav y downpours, and, in some regions, floods and droughts (NCA3 Highlights pg x). Extreme weather events often lead to fatalities and a variet y of health impacts on vulnerable populations, including impacts on mental health, such as anxiety and post

- traumatic stress disorder. Large

- scale changes in the environment due to climate change and extreme weather eve nts are increasing the risk of the emergence or reemergence of health threats that are currentl y uncommon in the United States, such as dengue fever [NCA3, pg 34]. The effects of temperature extremes on human health have been well documented for increased heat waves, which cause more deaths, hospital admissions and population vulnerability . [...] The effects of weather extremes on human health have been well documented, particularly for increased heavy precipitation, which has contributed to increases in sev ere flooding events in certain regions. Floods are the second deadliest of all weather

- related hazards in the United States. Elevated waterborne disease outbreaks have been reported in the weeks following heav y rainfall, although other variables may affect these associations. Populations living in damp indoor environments experience increased prevalence of asthma and other upper respiratory tract sy mptoms. [...]The effects of extreme weather on mental health have been extensively

studied. Studies have shown the impacts of mental health problems after disasters, with extreme events like Hurricane Katrina, floods, heat waves, and wildfires having led to mental health problems. Further work has shown that some people with mental illnesses are especiall y vulnerabl e to heat. Suicide rates vary

with weather, dementia is a risk factor for hospitalization and death during heat waves, and medications for schizophrenia may

interfere with temperature regulation or even directly cause h yperthermia. Additional potential mental health impacts include distress associated with environmental degradation, displacement, and the knowledge of climate change [NCA3, pgs 252

- 253] In addition, the I PCC AR5 states that Extreme heat events currently result in increases in mortality and morbidity

in North America (very

high confidence), with impacts that vary by age, location, and socioeconomic factors (high confidence). [...] Extreme coastal storm events can cause excess mortality and morbidity , particularly along the East Coast of the USA , and the Gulf Coast of both Mexico and the USA [...] Further climate warming in North America will impose stresses on the health sector through more severe extreme events such as heat waves and coastal storms [...] In light of these conclusions, EPA has cons idered the information provided by the commenter and finds that it does not provide credible evidence of flaws in the EPA’s approach of rel yi ng4

- 23

upon the sy

nthesis conclusions of the major assessments, nor does it demonstrate that there are no health impact s associated with extreme weather events related to climate change.

Commenter 10091 states that there is no definitive scientific evidence **Comment 4.1**
**- 14:**  regarding the direction or magnitude of changes in extreme weather events due to climate change. Commenter 10046

- 6983 states that no observational evidence exists to support a global increase in extreme weather events.

The EPA continues to rely on the best technical and scientific information, **Response 4.1**
**- 14:**  primarily based upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (I PCC), and the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer

- reviewed literature in context to draw sy nthesis conclusio ns based on the body of findings from the literature. In contrast, the commenters do not cite the basis of their conclusion. The preamble summarizes many new assessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 20 14 Third National Climate Assessment (NCA3), the IPCC’s 2013

- 4 Fifth Assessment Report (AR5) and IP CC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (SREX). These new assessments provide a dditional evidence to support the 2009 Endangerment Finding and reaffirm the linkages between climate change, extreme weather, and human health. The NCA3 concludes that “Certain ty pes of extreme weather events with links to climate change have become mo re frequent and/or intense, including prolonged periods of heat, heav y downpours, and, in some regions, floods and droughts” (NCA3 Highlights pg x). In contrast to the commenter’s argument regarding lack of observational evidence of extreme weather trends , additional findings of the NCA3 state: Some extreme weather and climate events have increased in recent decades, and new and stronger evidence confirms that some of these increases are related to human activities. Changes in extreme weather events are the primary way that most people experience climate change. Human

- induced climate change has alread y increased the number and strength of some of these extreme events. Over the last 50 years, much of the United States has seen an increase in prolonged per iods of excessively high temperatures, more heav y downpours, and in some regions, more severe droughts (NCA3 pg 24). The IPCC also finds observed changes in climate extremes related to temperature, precipitation, tropical cyclones, and sea level. As noted in the TSD for the 2009 Endangerment Finding , these changes “appl y generall y to all parts of the globe, including the United States, although there are some regional and local exceptions due to patterns of natural climate variability ” [4(k) pg43]. The IPC C SREX assessment report (IPCC 2012) further supports the Administrator’s finding regarding extreme weather and climate events: A changing climate leads to changes in the frequency, intensit y, spatial extent, duration, and timing of extreme weather and climate events, and can result in unprecedented extreme weather and climate events. [...] There is evidence that some extremes have4

- 24

c hanged as a result of anthropogenic influences, including increases in atmospheric concentrations of greenhouse gases. [...] Extreme events will have greater impacts on sectors with closer links to climate, such as water, agriculture and food security , fores try , health, and tourism. In light of these conclusions, EPA has considered the information provided by the commenter and finds that it does not provide credible evidence of flaws in the EPA’s approach of rel yi ng upon the sy

nthesis conclusions of the majo r assessments, nor does it demonstrate that no observational evidence exists to support a global increase in extreme weather events.

Commenter 1871 concludes that there are man y studies regarding the **Comment 4.1**
**- 15:**  expected negative health impacts of climate change, whic h includes “ph ys ical and ps ychological trauma from extreme weather disasters.” Commenter 9681

- 5964 states that climate change is making coastal flooding, drought, and impacts from extreme weather worse, citing Peterson, T. C., M. P. Hoerling, P. A. Stott a nd S. Herring, Eds., 2013: Explaining Extreme Events of 2012 from a Climate Perspective. Bull. Amer. Meteor. Soc., 94 (9), S1

–S74.

The EPA continues to rely on the best technical and scientific information, **Response 4.1**
**- 15:**  primarily based upon the recent, major assessment s by the U.S. Global Change Research Program (USGCRP), the Intergovernmental Panel on Climate Change (I PCC), and the National Research Council (NRC) of the National Academies. These assessment reports consider the entire peer

- reviewed literature in context to draw sy nthesis conclusions based on the body of findings from the literature. The preamble Section II.A.3 summarizes many new assessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate A ssessment (NCA3), the IPCC’s 2013

- 4 Fifth Assessment Report (AR5) and IP CC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (SREX). These new assessments provide additional evidence to suppo rt the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare, including reaffirming the linkages between climate change, extreme weather, and human health. EPA has considered the information provided b y the commenters and finds that it is generally consistent with the conclusions of the assessment literature. T he NCA3 concluded that “certain ty pes of extreme weather events with links to climate change have become more frequent and/or intense, including prolon ged periods of heat, heavy downpours, and, in some regions, floods and droughts” (NCA3 Highlights pg x). The Peterson (2013) study was not available at the time when NCA3 was being developed, but an earlier edition was assessed and cited in NCA3

. 8 The NC A3 also discusses various health impacts of extreme weather associated with climate change

— including deaths, hospital admissions, elevated waterborne disease outbreaks, increased prevalence of asthma and other upper respiratory tract s ymptoms, and mental h ealth problems

8 Peterson, T. C., P. A. Stott, and S. Herring, 2012: Explaining extreme events of 2011 from a climate perspective. Bulletin of the American Meteorological Society, 93, 1041

- 1067, doi:10.1175 /BAMS

- D

- 12

- 00021.1.4

- 25

after extreme weather disasters

—that are consistent with the commenter’s description of “phy sical and ps ychological trauma from extreme weather disasters.” Overall, the EPA finds that the information provided by the commenter is generall y c onsistent with and does not alter the 2009 Endangerment Finding that climate change will have a negative impact on human health and welfare.

Commenter 10618 states EPA presents calculations using a benefit per ton **Comment 4.1**
**- 16:**  reduced for NOx and SO 2 that suffer from additional flaws. National Ambient Air Quality Standards are designed to protect the human and ecological health with an adequate margin of safet y. Additional reductions of these pollutants well below these standard levels should not have any quantifiable health benefit. Additionally, the modeling and calculations presented b y EPA ignore the projected impacts of the MATS Rule on air quality, which in many cases will drive emissions below the L owest Measured Levels in the studies used to su pport the health claims, thus invalidating the applicability of the studies to a benefit calculation. Furthermore, the Krewski et al. and Lepeule et al. studies which underpin the health benefit calculations that EPA estimates (see, e.g., RIA at 5

- 42) use data from the 1980s and 1990s that do not take into account current air quality

emission levels or trends. For example, air emissions post

- MATS implementation are going to be significantly lower than the years used in these studies. Additionally , these stu dies fail to differentiate health response between various components of particulate matter even though more recent studies show associations between locall y produced carbonaceous compounds but NO associations between utility produced SO 2 and NOx emissions

. There is also concern with EPA's continued use of the Value of a Statistical L ife calculated from willingness to pay

survey results as these results do not appropriately value premature mortality that could be measured in days. A more robust measure need s to be developed that appropriatel y values premature mortality with consideration to temporality

. Commenter 10618 states EPA should not include any discussion of health benefits within the RIA as any

such benefits are indirect and speculative. Furthermor e, EPA should update its calculations of health benefits to include use of a broader range of scientific literature, including peer - reviewed studies showing no association with PM and mortality and significant issues with health benefit calculation methodo logies. Commenter 9687 states EPA's own data shows that PM 2.5 concentrations are well below the national standard and are continuing to decrease, yet EPA claims a co

- benefit for PM reductions under the proposed rule. Air Quality Trends: EPA creates air q ualit y trends using measurements from monitors located across the country . The table below shows that air quality based on concentrations of the common pollutants has improved nationall y since 1980. EPA data shows that annual PM 2.5 concentrations have been reduced by 33% from 2000 to 2012. The 24

- hour PM 2.5 concentration has been reduced even more: 37%. The PM trends graphic shows that the national average concentration of PM 2.5 fell below the EPA standard in 2007. By 2012 the average was roughl y 20% below the national standard and the band showed that ninety percent of sites have concentrations below the national standard. Commenter concludes that EPA is claiming harm from concentrations that are BELOW the national standard.

The benefit

- cost anal ys is includ ed in the RIA accompany ing the proposed and **Response 4.1**
**- 16:**  final rules was conducted in compliance with Executive Order 12866. While the primary4

- 26

conclusion of the analy sis was that there would be no costs or benefits associated with these standards, because all new gene rating units built in the period of anal ys is would be compliant with these standards in the baseline. However, the EPA conducted two illustrative anal ys es that considered the costs and benefits if key assumptions were to change. Consistent with OMB 9 and EP A guidance 10 , when conducting a cost

- benefit analy sis to meet the requirements of EO 12866, the EPA estimates all of the anticipated costs and benefits associated with a regulatory action to the extent feasible, including benefits anticipated to occur from reducing air pollution to below the NAAQS levels. As EPA has consistently stated, the NAAQS are not risk free, and as a result, consistent with scientific evidence and CASAC review. The EPA disagrees that it has double

- counted the benefits for this ru le, as all of the estimated health benefits are attributable to the emissions reductions associated with this proposed rule. The EPA notes that NAAQS are set at a level deemed by the EPA Administrator to be protective of public health within an adequate margin of safety and are not set at a level of zero risk. Therefore, there would still be health benefits that occur at the lower concentrations, even if we have less confidence in the magnitude of those benefits. The EPA believes that the best estimate of benefits includes benefits both above and below the levels of the NAAQS and maintains it is not double

- counting benefits simply because the magnitude of the health benefits that occur at lower concentrations are more uncertain. The EPA’s standard prac tice for its rules is to estimate, to the extent data and time allow, all benefits of the emissions reductions achieved b y a rule beyond control requirements for other rules, i.e., establish a baseline. While it can be difficult to account for concurrent r ulemakings in a baseline, the EPA clearly identifies what is and what is not in the baseline for each anal ys is. If this proposed rule was duplicative of other rules, then there would be no additional costs or benefits attributable to this proposed rule. P rior to estimating the health benefits of this proposed rule (and an y other rule), we simulated what PM 2.5 concentrations would be in the future to account for the air quality benefits that would occur due to other regulations (e.g., MATS) or economic fact ors in this baseline. An y emissions changes expected as a result of this proposed rule are additional emissions reductions bey ond the other regulations included in the baseline (e.g., MATS). Therefore, the benefits from particle reductions are not double

- c ounted

– they are real health benefits from emissions reductions anticipated to be achieved b y this proposed rule. Further, the PM 2.5 and ozone health co

- benefits expected from this proposed rule are not double

counted with benefits estimated in the NAA QS RIAs. NAAQS RIAs illustrate, but do not predict, the emissions reductions strategies that States may choose to enact when implementing a revised NAAQS. Subsequent Federal and State implementation rules will be reflected in future baselines for PM and o zone NAAQS reviews. Also, because it is not possible to accuratel y account for rules that have not y et been promulgated, RIAs prepared for a future rulemaking will

9 Office of Management and Budget (OMB). 2003. Circular A

- 4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a

- 4.html. 10 U.S. Environmental Protection Agency (U.S. EPA). 20 10a. Guidelines for Preparing Economic Analyses. EPA 240

- R

- 10

- 001. National Center for Environmental Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at <http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/ EE

- 0568

- 50.pdf/$file/EE

- 0568

- 50.pdf>.4

- 27

likely include any

additional rulemakings in the baseline. For example, the baseline in this RIA reflects many

recently promulgated rulemakings, including MATS, CSAPR, and CCR. The U.S. EPA follows a highl y structured, transparent and peer

- reviewed process for estimating the human health impacts attributable to poor air quality. As a first step , the Agency identifies the health endpoints to quantify b y consulting the Integrated Science Assessment, a sy stematic review of the clinical, toxicological and epidemiological literature. This document is reviewed b y the independent Clean Air Scientific A dvisory Committee. The Agency quantifies those endpoints classified b y the I SA as being causal or likely causal, selecting concentration

- response relationships from studies that satisfy a host of criteria

—most notably whether the population characteristics match those affected b y the regulation, thus excluding studies performed outside of the U.S. and Canada. The Agency ’s approach for characterizing the benefits of air qualit y changes has been extensively reviewed b y independent scientific bodies including the National Academies of Sciences and the U.S. EPA Science Advisory Board. Consistent with the findings of the PM ISA, which found that the log

- linear no

- threshold model best estimates PM

- related premature death, the Agency quantifies PM impacts resulting from changes in ambient concentrations at all levels. 

### LEGAL COMMENTS REGAR **DING ENDANGERMENT FI NDING**  **4.2 AND RATIONAL BASIS A** **NALYSIS**

Multiple commenters submitted comments on whether EPA is required to do **Comment 4.2**
**- 1:**  an endangerment finding for this rule. Some c ommenters supported EPA’s view that section 111(b) only

requires an endangerment finding when a source category is listed and that no additional endangerment finding is needed to set standards for additional pollutants emitted from a listed source category . Other commenters argued that EPA must make a pollutant

- specific endangerment finding for any pollutant that it regulates under section 111(b), and so here must make a pollutant

- specific endangerment finding for CO 2 .

An endangerment finding is onl y requ ired when EPA lists a source category **Response 4.2**
**- 1:**  under section 111(b)(1)(A). Nothing in section 111 requires that EPA make further endangerment findings with respect to each pollutant that it regulates under section 111(b)(1)(B). EPA’s views on these issues are dis cussed in detail in Section III.A. of the preamble.

One commenter argued that EPA could not base this rule on the 1971 listing **Comment 4.2**
**- 2:**  decision of EGUs because the statutory listing criteria in effect at that time required only a “cause or contribute” finding a nd not that the source category “contribute significantl y,” as is currentl y required for listing under section 111(b)(1)(A).

EPA disagrees that the the 1971 listing decision must be redone

– with a new **Response 4.2**
**- 2:**  endangerment finding

-- in light of the revision to th e listing provision in section 111(b)(1)(A). Nothing in the statute requires that. Source categories that were listed under the previous listing provisions continue to be listed.

Some comment e rs state that Section 111(b)(1)(A) establishes that the purpose **Comment 4.2**
**- 3:**  of the NSPS program is to regulate and reduce emissions of significant "air pollution" that4

- 28

"endanger public health or welfare" and that EPA cannot reasonabl y interpret Section 111 such that the endangerment determination is separated from the subject of r egulation. These commenters state that EPA’s interpretation that it does not need to do an endangerment finding means there is no assurance that regulations would serve to mitigate an actual and significant endangerment of public health or welfare, and thu s this interpretation of Section 111(b)(1)(A) would allow EPA to impose standards for air pollutants that do not contribute significantly to an endangerment of public health or welfare. Similarly , other commenters state that EPA’s interpretation would all ow it to regulate any air pollutant, no matter how insignificant, from a source category

that was listed based on significant contributions of other pollutants. These comments ignore the role that EPA’s rationale basis anal ys is play s in **Response 4.2**
**- 3:**  deciding what pollu tants will be regulated under section 111(b)(1)(B). As discussed in Section III.A of the preamble, EPA has applied the rational basis analysis in the past to conclude that it would not regulate certain pollutants that are emitted from the source category. By considering whether there is a rational basis to regulate a given pollutant from a listed source category, EPA ensures that it regulates pollutants that warrant regulation.

Commenters stated that EPA’s interpretation that it should apply a rational **Comment 4.2**
**- 4:**  bas is anal ys is when it decides what pollutants to regulate under section 111(b)(1)(B) is not a reasonable interpretation because EPA’s rational basis analys is considers the same issues as an endangerment finding under section 111(b)(1)(A): the health and welf are impacts of the pollutant and the amount of the pollutant emitted by the source category . EPA should instead conduct an endangerment finding.

EPA disagrees with this comment. EPA’s interpretation to look to the same **Response 4.2**
**- 4:**  factors as an endangerment finding is both true to the statu t e and common sense. First, EPA believes that looking to the same considerations that Congress identified for the endangerment finding in section 111(b)(1)(A) when it applies the rational basis analysis under section 111(b)(1)(B) sup ports, rather than contradicts, the reasonableness of EPA’s approach. Second, EPA’s view is that the harm imposed by a pollutant and the amount of emissions of a pollutant are common - sense considerations in determining which pollutants should be regulated . Finall y, commenters’ position here is internally inconsistent in that their criticism of EPA’s approach is that it is too similar to the anal ys is that commenters contend is required.

Multiple commenters submitted comments on whether EPA has a rational ba sis **Comment 4.2**
**- 5:**  for regulating CO 2 emissions from power plants under section 111(b). Some commenters supported the conclusion that the information and discussion in the record provided a rational basis for EPA to regulate CO 2 emissions from power plants under section 111(b). Other commenters state that EPA has not shown that it has a rational basis.

As discussed in detail in Section III.A. of the preamble, EPA has concluded that **Response 4.2**
**- 5:**  it has a rational basis for regulating CO 2 emissions from EGUs under section 111. The info rmation and anal ys is in Sections II.A and B. of the preamble, as well as EPA’s responses to comments and elsewhere in the record, demonstrate that CO 2 endangers human health and welfare and that EGU CO 2 emissions contribute significantl y to CO 2 levels in the atmosphere.4

- 29 Some commenters stated that EPA cannot rationally find that CO 2 emissions **Comment 4.2**
**- 6:**  from the new power plants that will be covered b y the new source rule contributes significantly to emissions of CO 2 that endanger public health and welfare because EPA expects few, if an y, such facilities to be built. Similarly, some commenters stated that EPA cannot consider the CO 2 emissions from existing sources that would be regulated under section 111(d) in decid ing whether to regulate new sources under section 111(b). They contend that, even if it is rational to regulate existing sources, EPA must show that it is rational to regulate new sources. Finally, some commenters stated that any endangerment finding has to be based on the significant contribution of sources that will be regulated under section 111(b) and cannot include the contribution of existing sources that would be regulated under section 111(d).

These comments mistakenly focus on the emissions and re sulting **Response 4.2**
**- 6:**  endangerment arising only from sources that will become subject to the new source standard. EPA disagrees that the proper anal ys is under either a rational basis anal ys is or for an endangerment finding is based on subsets of the sources in the sour ce category . First, the rational basis anal ys is is appropriatel y done with respect to the source category as a whole, because the issue is whether it is rational to regulate the emissions of a given pollutant from that source category

and that encompasses both regulation of new sources under 111(b) and of existing sources under 111(d). It is important to remember that the pollutants regulated under section 111(b) limits the scope of what pollutants can be regulated under 111(d), see section 111(d)(1)(A)(ii ), and thus the consideration of what pollutants should be regulated under section 111(b)(1)(B) also implicates what pollutants can be regulated under section 111(d). Further, where (as here, with CO 2 ) the pollutant at issue is not a criteria pollutant or a HAP, regulation under section 111(d) is where emissions from existing sources will be covered. For these reasons, EPA reasonabl y considers emissions from both new and existing sources in determining what pollutants should be regulated under section 111 from listed source categories. Since endangerment determinations under section 111 (b) must be made on the basis of the source category (“[h]e shall include a category of sources in such list if in his judgment it causes , or contributes to, air pollution which may reasonably

be anticipated to endanger public health or welfare”), it is rational to do so. With respect to an endangerment finding (if one were required here), Section 111(b)(1)(A) clearl y requires that the finding will be made with respect to th e source category as a whole and say s nothing that would support the argument that limits the analy sis to new sources. Multiple commenters submitted comments on whether, if an endangerment **Comment 4.2**
**- 7:**  finding is necessary , the information and discussion in the record demonstrate that power plants contribute significantly

to emissions of CO 2 that endangers public health and welfare. Some commenters supported EPA’s view that, if an endangerment finding is necessary, the information and discussion in the record provide a basis for EPA to conclude that emissions of CO 2 endanger public health and welfare. Other commenters assert that EPA’s 2009 endangerment finding cannot be used as the endangerment finding here and that EPA’s information and anal ys is here is not adequate to support an endangerment finding. Further, some commenters argue that EPA cannot rel y on the 2009 endangerment finding for the cause

- or - contributes

- significantl y component of the endangerment finding because it was made with respect to motor vehicle em issions and because the relevant CAA provision at issue there (CAA section 202(a)) requires no finding of significance.4

- 30 EPA’s explanation of the basis for an endangerment finding, if required, is in **Response 4.2**
**- 7:**  Section III of the preamble. The information and analys i s supporting the conclusions that CO 2 endangers public health and welfare, and that EGUs significantly contribute to that endangerment, are discussed in Section II of the preamble. The arguments that, if an endangerment finding is necessary here, EPA cann ot use the 2009 endangerment finding as the necessary finding are based on a misunderstanding of the role of the 2009 endangerment finding in EPA’s anal ys is in this rule. EPA is not say ing that the 2009 finding is the requisite finding here. Instead, if an endangerment finding is required, then the information and analys is in that finding, coupled with the more recent information that confirms and expands on that finding, support a finding that CO 2 endangers human health and welfare. Finally, the comments that state that the 2009 endangerment finding cannot support the “cause

- or - contribute significantly” finding here attack a position that EPA is not taking. EPA’s discussion of the 2009 endangerment finding relates to the issue of whether CO 2 endangers pub lic health and welfare, not whether EGUs contribute significantly to CO 2 emissions. I

n short, as discussed in detail in Section III.A. of the preamble, if EPA is required to make an endangerment finding here, the information and anal ys is support both that CO 2 endangers human health and welfare and EGU CO 2 emissions contribute significantl y to CO 2 levels in the atmosphere.

Some commenters stated that EPA cannot determine whether a source category **Comment 4.2**
**- 8:**  meets the “significantl y contributes” component of an endanger ment finding without determining a minimum threshold for what is “significant.” Other commentors agreed with EPA that the agency

can determine that a given contribution is significant without determining the smallest contribution that would be considered significant.

EPA’s view is that it does not need to set a minimum threshold for what is **Response 4.2**
**- 8:**  “significant” when it considers the “contributes significantly” component in making an endangerment finding. Here, if an endangerment finding is required, the informat ion demonstrates that the emissions from EGUs constitutes a “significant contribution.”

Commenters state that EPA’s logic is flawed in that the agency assumes that **Comment 4.2**
**- 9:**  because a listed source category has been found to contribute significantly to emissions o f one pollutant, that source category must cause or contribute significantly to an endangerment of public health and welfare for a different pollutants.

These comments misstate EPA’s position. EPA’s view is not that a source **Response 4.2**
**- 9:**  category that was listed under section 111(b)(1)(A) for one pollutant necessarily causes or significantl y contributes to an endangerment of public health and welfare for a different pollutant. EPA’s view is that once a source category is listed under section 111(b)(1)(A), the CAA requir es no further endangerment finding for that source category when EPA sets standards for the pollutants that it emits under section 111. Instead, EPA determines which pollutants emitted by

the listed source category should be regulated based on a rational b asis anal ys is. 

### CALCULATING **"CONTRIBUTION" 4.3**  Commenter 9682 states the NSPS provisions must be interpreted in pari **Comment 4.3**
**- 1:**  materia with the NAAQS standard setting provisions and, in particular, the NSPS provisions, like the NAAQS provisions, must be construed as limi ted to preventing exposures to localized4

- 31

pollutants

- that is, pollutants whose concentrations vary b y localit y as opposed to dispersing throughout the globe as do GHG emissions.

The comment is misplaced. There is no reference to the NAAQS in section **Response 4.3**
**- 1:**  111 (a), section 111 (a) and (b) set technology

- based NSPS unlike the purely health

- based ambient standards, there is no language in the text of section 111 (a) limiting consideration to localized air pollution effects (and of course, PM, P M precursors, and oz one precursors are all pollutants with regional as well as local effects, and are routinely the subject of NSPS), and section 111 (a) and (b) do not limit standards under these provisions to criteria pollutants. EPA, in fact, has routinel y issued section 111 (b) standards of performance for non

- criteria pollutants since the inception of implementation of these provisions. See, e.g. 40 CFR part 60 .192 (standards for fluorides emitted by primary aluminum facilities, first issued in June 1980). Commenter 95 14 states the courts (including Coal. for Responsible Regulation, **Comment 4.3**
**- 2:**  In c. v. EPA, 684 F.3d 102, 116

- 27 (D.C. Cir. 2012) and Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 418, 2013 U.S. LEXIS 7380 (Oct. 15, 2013)) found that the Endangerment Finding was procedurally

sound, consistent with Supreme Court case law, and amply supported b y the administrative record, observing that "[t]he body of scientific evidence marshaled b y EPA in support of the Endangerment Finding is substantial."

EPA agrees with this comment, and notes that this decisive judicial precedent **Response 4.3**
**- 2:**  has not dissuaded commenters from presenting identical or nearly identical arguments to EPA again in this rulemaking. See section 4.1 above.

Commenter 10025 supplies documents that address the effects of cl imate **Comment 4.3**
**- 3:**  change in humans, especially in children. Commenter 9589 states it is our obligation to put people before polluters and protect our children and future generations from the effects of climate change. This historic standard is a game changer for the c limate and health in America and around the world.

EPA acknowledges these commenters’ general support for the proposed **Response 4.3**
**- 3:**  standards. Commenter 9514 states the Regulatory I mpact Analy sis (RIA) provides an **Comment 4.3**
**- 4:**  overview of the pressing threats posed b y greenhouse ga s emissions and ably canvasses the dangers that the New Source Performance Review (NSPS) must combat. Commenter provided extended discussion of the harms associated with climate change, and provided extensive citations; discussed new research, reports and assessments showing the increasing severit y of harm. This comment is consistent with EPA’s own reading and interpretation of the **Response 4.3**
**- 4:**  scientific evidence. See section 4. 2 above.

Commenter 10025 states EPA should explain the specific goal of the proposed **Comment 4.3**
**- 5:**  rule, what it means for our children and posterity in terms of global heating, and how much the economic interests of the fossil fuel industry have played a role in this proposed r ule versus atmospheric health. Commenter calls for EPA to disclose to the public how this rule compares to4

- 32

the science

- based emission reduction levels needed from power plants. Commenter adds nothing in this proposed rule say s that the rule is aimed at ade quatel y reducing carbon emissions from these sources at levels that are in line with a national plan to achieve atmospheric health and climate recovery

according to the best available science. Commenter 5605 states agreement that carbon dioxide and other global warming pollutants that endanger public health and welfare should be limited and that we have an obligation to protect our children and future generations from these effects by addressing these causes and impacts, including carbon pollution.

EPA is addressing GHG emissions. The agency has issued standards for GHG **Response 4.3**
**- 5:**  emissions from all cars, SUVs, light trucks, pickups and vans, vocational vehicles, and combination tractors, in some instances up to model year 2025. The agency recentl y proposed further G HG standards for heav y dut y vehicles and engines (including trailers attached to combination tractors) through the 2027 model year. In this proceeding EPA is addressing CO 2 emissions from the largest stationary source emitting source category . In doing s o, of course, EPA can onl y act within the limits of its delegated statutory authorit y, and so lacks legal authority to adopt some of the more wide

- ranging actions urged b y this and other of the commenters on this issue.

Commenter 10119

- states EPA must "ta k[e] into account . . . any nonair quality **Comment 4.3**
**- 6:**  health and environmental impact and energy requirem ents" of the standard 11 stating that EPA did not undertake such an analysis in the 2012 Proposed Rule and in the new Proposed Rule. Commenter adds hydraulic fractu ring and other unconventional gas drilling and production techniques have a wide array of adverse effects on public health and the environment, citing additional studies have been publish ed since the 2012 Proposed Rule c omments. Commenters 10087, 10087 sta te using CCS for EOR would result in a net increase in CO 2 emissions. Commenter 10087 states that using the CO 2 captured from CCS for EOR will likely lead to an increase in net CO 2 emissions because the CO 2 from the power plant may be stored, but only

b y a iding in the production of oil. 12 Much of the oil will be turned into fuel with resulting CO 2 emissions, and thus, the CO 2 emissions from the oil would be greater than the stored CO 2 emissions. Commenter 9396 states EPA's assertion that non

- air impacts of Section 111(b) NSPS standards are not within the scope of the rulemaking seems at odds with legal standards. I n Sierra Club, the court noted that "crucial issues such as waste disposal...which may continue to limit overall acceptability

of this technology remain to be answered." 13 This, coupled with the direct description of Congressional intent that the Administrator must "consider non

- air qualit y health and environmental impacts in making [a 111 NSPS] determination" 14 suggests that waste stream anal ys is is indeed a required component of an NSPS determination. As part of the waste stream

11 CAA Section 111(a)(1); 42 U.S.C. Section 7411(a)(1). 12 William Yeatman, EPA's Carbon Pollution Standard May INCREASE CO2 Emissions!, GlobalWarming.org, Sept. 25, 2013, http://www.globalw arming.org/2013/09/25/epas

- carbon

- pollution

- standard

- ma y - increase

- co2

- emissions. 13 Sierra Club v. Costle , 657 F.2d at 341, fn157. 14 H.R. 95

- 294. 95th Cong., 2 Leg. His.2478 (1977).4

- 33

evaluation, EPA must consider where disposal is appropriate and not cost prohibitive. The record does not support that this evaluation was adequately undertaken. Based on the SAB letter to the Administrator, while the SAB has deferred to EPA's erroneous assertion that waste streams are not subject to analy sis, the SAB has concluded that the concern regarding "unintended multi

media consequences" warrant a review of the underly ing science by the National Research Council or the SAB. 15 This assertion should serve as a clear warning to EPA that it has failed to sufficiently

review and establish the efficacy of sequestration for the purposes of establishing CCS as NSPS. Commenters 9 201 states there are many other environmental effects related to the proposed NSPS that EPA fails to examine. Several include: Groundwater quantity and quality from increased shale gas development; Air Quality impacts from shale development: Impacts from b uilding out natural gas infrastructure to meet power sector demand for natural gas; I mpacts of new CO 2 pipelines; Water Use; and Impacts on Wildlife.

The EPA agrees, emphatically, that it must consider nonair quality health and **Response 4.3**
**- 6:**  environmental impact as part of the process of assessing whether a system of emission reduction is “best” and is “adequately demonstrated”. EPA’s consideration of these issues with respect to the standard of performance for new coal

- fired steam electric generating units is set out i n preamble section V.O. We further disagree with the commenters’ statement that EPA failed to consider either the efficacy or cost of disposal of captured CO 2 . See preamble section V.I .5 and V.N. The comment urging the EPA to account from the rule’s impacts on hy draulic fracturing are misplaced. Natural gas use is increasing, but is doing so for reasons unrelated to this rulemaking. See RIA chapter 4. The commenter also evidently assumes CH 4 em issions associated with natural gas production and transport are uncontrollable, which the EPA does not believe to be the case. The commenters also do not fully represent the facts regarding SAB consideration of issues relating to geologic sequestration. In developing the rules for injection of CO 2 for permanent disposal

– the Class VI

rules

-- EPA engaged with the SAB, providing detailed information on key issues relating to geologic sequestration

– including monitoring schemes; methods to predict and ver ify

capacity , injectivity , and effectiveness of subsurface CO 2 storage; and characterization and management of risks associated with plume migration and pressure increases in the subsurface. 16 Inaddition, EPA developed a peer reviewed Vulnerability Evalua tion Framework, which served as a technical support document for both the Class VI and Subpart RR rules. 17 This extensive interaction preceded the present rulemaking. In the section 111 (b) rulemaking here, the SAB Work Group, in a letter endorsed b y the full SAB Committee, found that “while the scientific and technical basis for carbon storage

15 Letter to Regina McCarthy from EPA Science Advisory Board. January 29, 2014. EPA

- SAB

- 14

- 03 p. 3. 16 S ee: http://yosemite.epa.gov/sab/sabproduct.nsf/0/AD09B42B75D9E36D85257704004882CF?OpenDocument. 17 See: http://www.epa.gov/climatechange/Downloads/ghgemissions/VEF

- Technical_Document_072408.pdf.4

- 34

provisions is new and emerging science, the agency is using the best available science and has conducted peer review at a level required b y agency guidance.” 18

Com menter 10951 states the policies EPA is promoting have been proven to **Comment 4.3**
**- 7:**  drive up electricity

prices every

where those policies have been tested. These economic impacts will in turn impair public health and welfare because the effect will be felt by those leas t able to afford them. Dollars spent on higher energy bills will in turn crowd out dollars that would otherwise be available to pay for good nutrition and health care. Jobs lost because of higher electricit y costs means less money for health insurance. It is a truism that wealth equals health, and it is equally

true that health will deteriorate as electricit y costs rise, particularly for lower income people and those living on fixed incomes. Commenter continues That in a report prepared for the American Coa lition for Clean Coal Electricity entitled Energy Cost Impacts on American Families, 2001

- 2012, attorney and economist Eugene Trisko reported that electricity cost increases fall disproportionately on those least able to afford them. These effects were als o described in the attached report, The Social Costs of Carbon No, the Social Benefits of Carbon and are graphically

display ed in the following chart. Further, Commenter 10951

- 6171 states energy povert y is the great global challenge of the future. 3.5 bil lion people, including 1.2 billion children, do not have access to an adequate supply of energy.8 There can be no improvement in living standards in developing societies unless energy povert y is solved. Every

single one of the United Nations Millennium Dev elopment Goals requires access to electricity as a necessary perquisite.9 (Global Energy Institute, 2008). The U.N. Secretary General has called energy the golden thread that connects economic growth, increased social equit y and an environment that allows the world to thrive. 19 As discussed below, every ten

- fold increase in electricity is linked to a stunning 10

- ye ar increase in life spans, and coal is the only sustainable fuel with the scale to meet the primary energy needs of the world's rising population s and economies. As a result, coal is the world's fastest growing fuel, and coal use expanded nearl y 50 percent this past decade. The example the United States sets for the rest of the world thus cannot be that electricit y should be made scarcer and more e xpensive. The world needs more, not less, electricity, and coal remains the leading global and domestic electricity resource.

The EPA is required to consider energy requirements as part of its **Response 4.3**
**- 7:**  determinations under section 111 (a), and has done so here. Se e preamble section V.O.3. As found there, and in RIA chapter 4, the standards of performance here are not anticipated to have significant impact on energy prices because .in the baseline, all projected unplanned capacity -- projected capacity

additions th at are not under construction.

-- affected b y this standard during the anal ys is period would already b e compliant with the rule’s requirements (e.g., natural gas combined cycle units, low capacity factor natural gas combustion turbines, and small amounts o f coal

- fired units with carbon capture and storage (CCS) supported by Federal and State funding).

18 Memorandum of Jan. 7, 2014, from SAB Work Group Chair to M embers of the Chartered SAB and SAB Liaisons, p. 3. The letter was subsequently endorsed by the full SAB. Work Group Letter of Jan. 24, 2014, as edited by the full Committee. 19 http://www.un.org/News/Press/docs/2012/sgsm14242.doc.htm4

- 35



### SOCIAL COST OF CARBO **N 4.4**  **4.4.1 Methodology** 

Commenter 9681 states the I WG's use of Integrated Assessment Models **Comment 4.4**
**- 1:**  (IAMs) reflects the best available, peer

- reviewed science to tall y the benefits and costs of specific regulations with impacts on carbon dioxide emissions. The IAMs include benefits and costs that have been quantified to date. Other modeling assumptions represent reasonable choices on the part of the IWG . For example, cutting off the anal ys is after around 300 years simply reflects the fact that any benefits and costs thereafter are de minimis given the strong impact discounting has on reducing the value of distant effects in the SCC. The I WG should indeed periodicall y update its choice of socio

- economic scenarios to reflect major changes in economic growth projections and other factors influencing emissions trajectories. However, the long

- term emissions impact of any

one particular energy

efficiency

or oth er carbon reduction standard is only marginal to the trajectory of socio

- economic scenarios, minimizing any risk of double counting the regulatory

benefits. Commenter 9194 states multiple experts indicate that the modeling used does not provide a sufficien t range of accuracy for policy

- making purposes. OMB and the I WG failed to use the latest science which indicates that the equilibrium climate sensitivity (ECS) distributions used by the modelers caused the SCC to be over

- stated. The models employed and the assumptions used were not subjected to peer review nor were the 2010 and 2013 SCC estimates developed b y the IW G. Commenter 10501 states that f urthermore, the SCC calculation assumes there is only one, and as ye t unproven, solution to all potential probl ems that a warming planet might cause, i.e. CO 2 emissions control. Clearly there may be other high

- confidence approaches to mitigating specific problems that global warming may cause, such as building sea walls in the US to prevent coastal flooding from se a level rise. Such alternatives may be much less costly than the impact of unilateral USA CO 2 emissions control regulations that have very little chance of success, given the current world political environment and lack of a world

- wide CO 2 emissions contro l agreement. China, India and other rapidly developing countries will dominate world

- wide CO 2 emissions for the next several hundred y ears, rendering unilateral USA CO 2 emissions control totally ineffective in avoiding the damages purportedly represented b y the SCC. Therefore, the SCC cannot in any

rational, credible argument be considered to be an appropriate economic metric that can be used to justify the proposed new EPA rule. The rational decision process normally used in US government and industry to weigh cost and benefits of several competing alternative solutions to anticipated problems appears to be totally absent from the SCC methodology . In our t ypi cal research team member's more than 50 years of experience in addressing complex problems and critical decisions with life or death consequences for manned space mission crew members, we can onl y view the IWG's rationale and process for computing SCC as totally

lacki ng in common sense or any true scientific value. It is unthinkable in our experience to expose the entire population of the USA to such economic risks from electrical power cost increases expected from this new EPA rule, without a more certain outcome regarding avoidance of SCC damages used to justify the regulation.4

- 36

Commenter 9401

- 4769 continues history provides an important lesson on how increased energy costs have both a direct and indirect impact on reduced emplo ym ent and GHG leakage. Figure 2 details the relationship between rising natural gas prices and falling employment in the manufacturing sector. According to EIA, electricity prices rose 210 percent from 1999 to 2008. During the time period of 2000 to 2008, the manufacturing sector shut down an es timated 54,905 facilities, decimating the econom y of thousands of communities across the country. During that same time period, net manufactured goods imports grew b y 46 percent, a clear indication of loss of US manufacturing competitiveness. A key point that needs to be emphasized is that if electricit y prices rise because of the EPA GHG rule, manufacturing employment and GHG leakage would have the same effect as higher natural gas prices. Commenter 3593

- 7453 states EPA fully recognizes that increased re gulatory costs fall more heavily on minorities, on women and especiall y mothers who are single parents, and on the elderl y, and if they did not before receiving this comment, they do now. EPA acknowledges its responsibilities with regard to equal protectio n of citizens. These considerations were ignored for the reason that impacting climate which occurs under no scenario of this rule was not the objective. Indeed, research shows that such regulations will create massive job losses and a major loss of GDP. T hese impacts

-- both those flowing directly from the higher electricity rates and those flowing indirectly therefrom, and flowing directly or indirectl y instead from the industrial policy

which the proposed rule represents

-- have human and environmental c onsequences, also not considered. The onl y rational reason for declining to consider this is that this outcome is the objective, which is to say , it was not attained by consideration but predetermined. This is particularl y troublesome given the failure of the regulation to achieve its stated goal, by

the admission of senior EPA officials. Commenter 9650 states EPA uses a flawed methodology in calculating the social cost of carbon ("SCC") valuation that inflates the costs associated with climate change. Commenter 502 states there are too man y uncertainties in both the integrated assessment models used to derive SCC values to derive values to be useful in regulatory decision making. Commenter 9650 states the integrated assessment models ("IAMs") constructed to estimate the SCC have flaws (e.g. the discount rate is arbitrary ; the model's descriptions of climate change impact are ad hoc, and no theoretical or empirical foundation). Commenter 9685 states emissions input errors: concentrations generated for th e IAMs are seriously flawed. The models are based on emissions scenarios that have not been validated. The SCC report then raises a major transparency issue: "we decided to rel y on the recent Stanford Energy Modeling Forum exercise, EMF

- 22. EMF

- 22 uses ten well

- recognized models to evaluate substantial, coordinated global action to meet specific stabilization targets." A key advantage of rel yi ng on these data is that GDP, population, and emission trajectories are internally consistent for each model and sce nario evaluated. The problem with this approach: the Stanford Energy

Modeling Forum is not a public process. EPA needs to assure that any participation by

government employ ees conforms to the DQA requirements. EPA needs to: a. Id entify the EPA emplo yees who participated in the EMF 22 exercise, b. Post the information provided to the EMF 22 exercise, and c. Provide the results of the exercise related to EPA input, especiall y for EPA anal ysis.4

- 37

Commenter 9685 states SCC recognizes the problems with the I PCC standard SRES scenarios as "extreme outliers" but then the SCC inexplicably chooses to use even less reliable scenarios but, there is no detailed justification for the selection of the models. As can be seen in the table above, the divergence in the emissi ons begins in 2030. And by 2050 the divergence is substantial and it grows even larger by 2100. The SCC makes the assumption that the scenarios have equal probability . EPA needs to explain this rationale. Commenter 9685 states that a major question is: wh y were the four scenarios selected? Since the EMF is a secret process, there is no documentation that describes the rationale for the "modelers' judgment". Nor do we know who the "modelers" were or whether their "judgment" has ever been validated b y compar ing their projections with data. The IAMs use these scenarios under the assumption that the scenarios are equall y likel y, a highl y suspect assumption. Commenter 9685 states the IWG attempted to justify its selection of emissions scenarios by a casual "comparison" to the EIA AEO 2009. However, the selected emissions scenarios are well above EIA AEO2013/IEO2013 projections. For some reason the IW G chose to ignore the most recent E IA analysis that has projections to 2040. The average of the emissions scenario s is roughl y 20% above the EIA forecast. The cumulative difference for the 10 years 2010

- 2020 is 6 Gigatons CO 2 for the U.S. alone and the cumulative difference grows to over 50 Gigatons CO 2 by 2040. Since the "damages" are attributed to the atmospheric co ncentrations (related to cumulative emissions) the distortion is egregious. The same problem can be found in comparing the scenarios for global emissions. EPA must reject the selected emissions scenarios as "extreme outliers" (the same standard that was us ed to reject the IPCC SRES scenarios). The scenarios lead to an significant overestimate of the emissions that are input to the model that lead to a significant and growing error in the atmospheric concentration of greenhouse gases. Commenter concludes that EPA should discard the SCC 2010 and SCC2013 results on this basis alone. Commenter 9685

- 7213 states damage function errors: catastrophic estimates are qualitative speculation based on "expert elicitation". The SCC attributes quantitative certainty to qua litative speculation that has a major influence on the Damage Function results. As is obvious in the table below the range of impacts is highly questionable in terms of timing and impact. OMB should have rejected this approach. EPA should expose the detail s of "expert elicitation" so that the public can provide comment. The public needs to know: 1 ) Who were the "experts" "elicited"? and 2 ) What was the specific data provided? 3. Was all data given the same weight? Commenter 9685 states model errors: if th e AR4 climate models are wrong, the IAMs are wrong. Recent House testimon y shows the failure of the models used to define the IAM equilibrium climate sensitivity

"So it's clear that the I PCC modeling communit y has known about the modeling failure (divergen ce between the model predictions and real data) for over 20 ye ars. The SCC IAMs were constructed on the backs of these same flawed models. EPA must take immediate action to correct this abuse of the taxpayer: not one more dime should be spent on the US mod els used in the I PCC AR5. Those responsible should be held accountable." The independent analy sis conducted by Dr. Christ y would have been difficult, if not impossible, to document without the contribution to transparency by the Roy al Netherlands Meteorolo gical Institute (KNMI) Climate Explorer (climexp.knmi.nl). The KNMI provided a comprehensive collection of climatic data sets and analy sis tools. All of the I PCC AR5 model runs are available to the public with a user

- friendl y interface. Wh y didn't our own government do the same? What4

- 38

did the modelers have to hide? EPA needs to follow the example of the Dutch government and implement a similar requirement for all anal ys is involved in climate policy , including posting on an archive website: 1. Documentation o f all models used by EPA, 2. An archive of all versions of models used for specific policy or regulations, and 3. An archive of all model runs used for any policy anal ys is including the input variables. The IQA guidelines provide for this, but agencies app ear to routinely

disregard their responsibility

. Commenter 9685 stats the IAMs are nested and not transparent and compound major errors at every stage. Each IAM progresses through a series of cumulative, compounding errors that result in "costs" that bear no resemblance to reality . The emissions scenarios are outliers compared to actual data and the EIA projections. The scenarios should have been rejected based on the same rationale that the IPCC SRES scenarios were rejected by the IW G. Commenter 9685 co ntinues these flawed scenarios are then used in a Monte Carlo anal ys is that cloaks the errors in an opaque process. The pseudo sophistication implied by using a Monte Carlo anal ys is is at best misleading. If the input data is wrong, the output distribution s are wrong (this is Garbage In, Garbage Out). As discussed below, the greenhouse gas emissions data are wrong. Therefore the resulting greenhouse gas concentrations are seriousl y flawed. The climate sensitivity

related to the flawed concentrations based o n flawed emissions is based on the failed IPCC AR4 models that are demonstrated failures. The Equilibrium Climate Sensitivity (ECS) probability

densit y functions (PDFs) developed using the AR4 models are fatally flawed. The resulting temperatures based on the flawed emissions driving flawed driving flawed concentrations driving flawed climate sensitivity are then input to "damage" calculations based on fictional un

- validated formulations. These results are even more egregiously flawed. Commenter 10091 stat es there is a misleading disconnect between climate change and the SCC in the IAMs. Itis generally acknowledged, the results from IAMs are highly sensitive not onl y to the model input parameters but also to how the models have been developed and what proc esses they try to include. One prominent economist, Robert Pindy ck of M.I.T. recently wrote (Pindy ck, 2013) that the sensitivity

of the IAMs to these factors renders them useless in a policy making environment: Given all of the effort that has gone into dev eloping and using IAMs, have they helped us resolve the wide disagreement over the size of the SCC? I s the U.S. government estimate of $21 per ton (or the updated estimate of $33 per ton) a reliable or otherwise useful number? What have these IAMs (and rel ated models) told us? Iwill argue that the answer is very little. As Idiscuss below, the models are so deepl y flawed as to be close to useless as tools for policy anal ys is. Worse yet, precision that is simply illusory , and can be highly misleading. [A]n IAM

- based anal ys is suggests a level of knowledge and precision that is nonexistent, and allows the modeler to obtain almost any desired result because key inputs can be chosen arbitraril y. Nevertheless, the EPA incorporates the IWG2013 determinations of th e SCC into this proposed regulation ill

- advisedly

so in our opinion. Commenter 10091 continues stating if one considers the following: the social cost of carbon should reflect the relative impact on future societ y that human

- induced climate change from greenhouse gas emissions would impose. In this way , we (policy makers and regular citizens) can decide how much (if at all) we are willing to pay currentl y to reduce the costs to future societ y. It would seem logical that we would probabl y be more willing to sacrifice more now if we knew4

- 39

that future societ y would be impoverishe d and suffer from extreme climate change than we would be willing to sacrifice if we knew that future societ y would be very well off and be subject to more moderate climate change. We would expect that the value of the social cost of carbon would reflect the difference between these two h ypothetical future worlds

- the SCC should be far greater in an impoverished future facing a high degree of climate change than an affluent future with less climate change. But if y ou thought this, you would be logically co rrect, but wrong. Instead, the IAMs as run b y the IWG2013 produce nearl y the opposite result the SCC is far lower in the less affluent/high climate change future than it is in the more affluent/low climate change future. Such a result is not only counterintuitive but misleading. We illustrate this illogical and impractical result using the DI CE 2010 model (hereafter just DI CE) used by the IWG2013 (although the PAGE and the FUND models generally show the same behavior). The DI CE model was installed and run at the Heritage Foundation by Kevin Day aratna and David Kreutzer using the same model set up and emissions scenarios as prescribed by the IWG2013. The projections of future temperature change (and sea level rise, used later in the Comment) were provided to us by

the Heritage Foundation. The figure below shows the projections of the future change in the earth's average surface temperature for the years 2000

- 2300 produced b y DI CE from the five emissions scenarios employ ed by the IWG2013. The numerical values o n the right

- hand side of the illustration are the values for the social cost of carbon associated with the temperature change resulting from each emissions scenario (the SCC is reported for the ye ar 2020 using constant $2007 and assuming a 3% discount rate numbers taken directly from Table A3 of the IWG2013 report). The temperature change can be considered a good proxy for the magnitude of the overall climate change impacts. Notice in the figure above that the value for the SCC shows little (if any) corresp ondence to the magnitude of climate change. The MERGE scenario produces the greatest climate change and yet has the smallest SCC associated with it. The "5th Scenario" is a scenario that attempts to keep the effective concentration of atmospheric carbon di oxide at 550 ppm (far lower than the other scenarios) has a SCC that is more than 20% greater than the MERGE scenario. The global temperature change by the year 2300 in the MERGE scenario is 9dC while in the "5th Scenario" it is only 3dC. The highest SCC i s from the IMAGE scenario a scenario with a mid

- range climate change. All of this makes absolutel y no logical sense

- and confuses the user. Commenter 10091 states if the SCC bears little correspondence to the magnitude of future human

- caused climate ch ange, then what does it represent? The figure below provides some insight. When comparing the future GDP to the SCC, we see, generall y, that the scenarios with the higher future GDP (most affluent future society) have the higher SCC values, while the futur es with lower GDP (less affluent societ y) have, generally , lower SCC values. Combining the results from the two figures above thus illustrates the absurdities in the IWG's use of the DICE model. The scenario with the richest future societ y and a modest amo unt of climate change (IMAGE) has the highest value of the SCC associated with it, while the scenario with the poorest future societ y and the greatest degree of climate change (MERGE) has the lowest value of the SCC. A logical, thinking person would assume the opposite. While we only directly anal yz ed output data from the DICE model, by comparing Tables 2 and Tables 3 from the IWG2010 report, it can be ascertained that the FUND and the PAGE models behave in a similar fashion. Commenter 10091 states this c ounterintuitive result occurs because the damage functions in the IAMs produce output in terms of a percentage decline in the GDP which is then translated into a4

- 40

dollar amount (which is divided by the total carbon emissions) to produce the SCC. Thus, even a small climate change

- induced percentage decline in a high GDP future yields greater dollar damages (i.e., higher SCC) than a much greater climate change

- induced GDP percentage decline in a low GDP future. In principle, the way to handle this situation i s by allowing the discount rate to change over time. In other words, the richer we think people will be in the future (say the ye ar 2100), the higher the discount rate we should apply to damages (measured in 2100 dollars) they suffer from climate change, i n order to decide how much we should be prepared to sacrifice today on their behalf. Until (if ever) the current situation is properly rectified, the IWG's determination of the SCC is not fit for use in the federal regulatory process, such as this EPA regu lation, as it is deceitful and misleading. Commenter 9681 sated that updates to the SCC should also consider other models that are similarly peer reviewed and based on the state of the art of climate

- economic modeling. One such model is Climate and Region al Economics of Development (CRED); another is the World Bank's ENVironmental Impact and Sustainability Applied General Equilibrium (ENVI SAGE) model. CRED borrows its fundamental structure from William Nordhaus's DI CE and RI CE models but also offers signif icant changes. For one, it uses updated damage functions and Marginal Abatement Cost Curves (MACC). Moreover, it uses different global equity weights, and uses additional state

- of

- the

- art methodologies. ENVI SAGE represents a broader modeling effort b y the World Bank, where perhaps the largest contribution is a more detailed sectoral breakdown, using 57 different sectors. This level of detail allows for a more detailed view of agriculture as well as food and energy sectors that are particularl y important to any climate

econom y modeling. No model fully captures the costs of climate impacts to society . In fact, virtually all uncertainties and current omissions point to a higher SCC value. That makes it essential to use the established IWG process, which provide s for updating the SCC estimates every two to three y ears in order to capture the advances in phy sical and social sciences that have been incorporated into the models during the intervening period, in order to revisit both the choice of models and the key inputs used. Commenter 9681 continues the IWG's choice of three IAMs was full y justified but should still be revisited in its next iteration. In its calculations of the SCC, the IWG relied on the three Integrated Assessment Models (IAMs) available at the time, all with a long record of peer

reviewed publications that link phy sical and economic effects: the Dy namic Integrated Model of Climate and the Economy (DICE), the Climate Framework for Uncertaint y, Negotiation, and Distribution (FUND), and Policy Anal ys is of the Greenhouse Effect (PAGE). The government's first SCC estimates, published in 2010, used the then

- current versions of the models; the recent update emplo yed revised, peer

- reviewed versions of the models but maintained the underl yi ng assumptions of the 2010 IWG analysis. As stated by the 2010 IW G, the main objective of [the 2010 IWG modeling] process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. DICE, FUND, and PAGE are well

- established, peer

- reviewed models. They represent the state

- of

- the

- art IAMs. Each of these models has been developed over decades of research, and has been subject to rigorous peer review, documented in the published literature. How ever, updates to the SCC should also consider other models that are similarly peer reviewed and based on the state of the art of climate

- economic modeling. One such model is Climate and Regional Economics of Development (CRED); another is the World Bank's ENVironmental Impact and Sustainability4

- 41

Applied General Equilibrium (ENVI SAGE) model. CRED borrows its fundamental structure from William Nordhaus's DI CE and RI CE models but also offers significant changes. For one, it uses updated damage functions and Mar ginal Abatement Cost Curves (MACC). Moreover, it uses different global equity weights, and uses additional state

- of

- the

- art methodologies. ENVI SAGE represents a broader modeling effort by the World Bank, where perhaps the largest contribution is a more det ailed sectoral breakdown, using 57 different sectors. This level of detail allows for a more detailed view of agriculture as well as food and energy sectors that are particularl y important to any climate

- econom y modeling. No model full y captures the costs of climate impacts to society. In fact, virtuall y all uncertainties and current omissions point to a higher SCC value. That makes it essential to use the established IWG process, which provides for updating the SCC estimates every two to three y ears in ord er to capture the advances in phy sical and social sciences that have been incorporated into the models during the intervening period, in order to revisit both the choice of models and the key inputs used. Commenter 9681 states the IWG should update its so cio

- economic assumptions to reflect the latest Shared Socio

- economic Pathway s (SSPs). One key input is the use of socio

- economic scenarios reflected in the choice of economic growth rates and emissions trajectories. Current IWG socio

- economic and emissions scenarios were chosen from the Stanford Energy Modeling Forum exercise, EMF

- 22, and consist of projections for income/consumption, population, and emissions ( CO 2 and non

- CO 2 ). The IWG selected five sets of trajectories, four of which represent business as usual (BAU) trajectories (MiniCAM, MESSAGE, I MAGE, and MERGE models) and a fifth that represents a CO 2 emissions pathway with CO 2 concentrations stabilizing at 550 ppm. Given the possibility of increases in emissions above those expressed b y Business As U sual Scenarios, a high

- CO 2 emissions pathway should also be considered. The assumptions used in calculating the SCC should be updated regularl y to reflect the latest thinking around possible scenarios, reflecting the latest Shared Socio

- economic Pathway s ( SSPs). These SSPs represent the latest, consistent pathway s, feeding, for example, into the latest IPCC report. Commenter 9514 states the cost of a partial CCS standard, or, indeed, a full CCS standard, is small when considering a broad view of costs that accounts for the social costs of carbon. The Joint Environmental Commenters maintain that the social cost of carbon is much higher than the values in the interagency

rule. Commenter 10525 states the financial benefit attributed to avoided CO 2 pollution i s actually

greater than estimated by the task force, explaining that other elements that should have been considered b y the task force but which were not include the effects on drought, energy , and water supply ; forest fires; temperature extremes on crops and increasing food prices; food scarcity; impacts of air pollution from enhanced smog; and the consequences of total ecosy stem losses. Commenter 8925 states the 2300 extensions are inconsistent across variables, explaining specificall y, the land

- use CO 2 emissions and non

- CO 2 radiative forcing extensions have no relationship to the population, GDP, and fossil and industrial CO 2 emissions extensions, as well as each other. Commenter 8925 states the use of a 550 ppm policy emissions/socioeconomic projectio n is inconsistent with the other scenarios. The current averaging of the results across socioeconomic/emissions scenarios requires that (a) the values being averaged are from the same4

- 42

statistical population, and (b) that the values are all equally likely. As for (a), given the 550 ppm scenario's assumption of a global climate policy (targeting 550 ppm in 2100), it is difficult to claim that it is from the same statistical population of potential futures as scenarios with no climate policy . As for (b), the s pecific 550 ppm scenarios used in the analysis assume immediate global cooperation in decarbonizing the global economy in achieving the 550 ppm target in 2100. 20 This is inconsistent with current global mitigation efforts and is therefore not equall y likely to business

- as - usual (BAU) futures. A similar assessment of likelihood would be appropriate for all the socioeconomic/emissions scenarios to avoid including scenarios that can be reasonabl y ruled out, or at least to recognize that some scenarios may be le ss likely

. One commenter 8925 states the creation of the "average" 550 ppm emissions/socioeconomic scenario is problematic because internal consistency is lost when averaging the variables, and the resulting set of average socioeconomic and emissions proj ections do not represent an internally consistent scenario. Commenter 9396 The SCC is based on three Integrated Assessment Models (IAMs). The SCC ascribes a level of certainty that far exceeds what the IAMs actually deliver. Despite the admonition that th e level of uncertainty associated with the development of the SCC reduced its relevance as a policy

making tool for the purposes of establishing cost

- benefit analy sis where GHG reductions present the predominant benefit, the US EPA is proceeding with regula tory actions that base significant regulatory burdens on industry

based on GHG reductions calculated using the SCC. The comments mirror those submitted to the Office of Management and **Response 4.4**
**- 1:**  Budget’s separate comment solicitation on the SCC (78 FR 70586; Novembe r 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefull y examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the SC

- CO 2 methodology , including the models used to estimate the SC

- CO 2 . Specificall y, EPA concurs with the I WG’s response to these comments and hereb y incorporates them by reference. 21 The remainder of this section elaborates on these comments in the context of this rulemaking. EPA appreciates the commenters’ recommendations for potential opportunities to improve the SC

- CO 2 estimates and has considered each one in the context of this rulemaking. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology

and estimates to ensure that they continue to reflect the best ava ilable science and economics. Furthermore, EPA has determined that the SC

- CO 2 methodological recommendations require additional research, review, and public comment before it can appl y them to a rulemaking context.

20 Clarke, L., J. Edmonds, V. Krey, R. Richels, S. Rose, M. Tavoni, 2009. International climate policy architectures: Overvie w of

the EMF 22 International Scenarios. Energy Economics 31 (Supplement 2): S64

- S81. 21 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 6 to 11 at https://www.whitehouse.gov/sites/default/fil es/om b/inforeg/scc

- response - to
- comments
- final

- july

- 2015.pdf

.4

- 43

To help sy

nthesize the technical infor mation and input reflected in the comments, and to add additional rigor to the next update of the SC

- CO 2 , the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC

- CO 2 estimates, including the approaches suggested b y commenters and summarized in this document. Specificall y, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC

- CO 2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer

reviewed literature, will help to ensure that the SC

- CO 2 estimates used by EPA continu e to reflect the best available science and methodologies. After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC

- CO 2 estimates until f urther updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

CO 2 estimates in the analysis of illustrative benefit

- cost scenarios for new sources in RIA Chapter 5. 22 EPA will continue to consid er these comments and will share the recommendations with the IWG as it moves forward with the Academies process. The remainder of this section provides more detailed responses to the comments and recommendations. Choice of IAMs used to estimate the SCC

. EPA agrees with the commenters who regard the selection of the three IAMs

—DI CE, FUND, and PAGE

— as the most appropriate for the purpose of estimating the SCC. EPA and all of the other IWG members made this determination when they began developing the SCC e stimates in 2009

- 2010. DICE, FUND, and PAGE are the most widely used and widely

cited models in the economic literature that link phy sical impacts to economic damages for the purposes of estimating the SC

- CO 2 . As stated in the 2010 TSD: These models are frequently cited in the peer

- reviewed literature and used in the I PCC assessment. ... These models are useful because they combine climate processes, economic growth, and feedbacks between the climate and the global economy into a single mod eling framework. ... Other IAMs may better reflect the complexity of the science in their modeling frameworks but do not link phy sical impacts to economic damages. In addition, the National Academies of Science (NAS) identified these three models as "the mo st widely used impact assessment models" in a 2010 report (NAS, 2010). Furthermore, in a comprehensive literature review and meta

- anal ys is conducted in 2008, the vast majority of the

22 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pdf.4

- 44

independent impact estimates that appeared in the peer

- reviewed literatur e were derived from FUND, DICE, or PAGE (Tol, 2008). While the development of the DICE, FUND and PAGE models necessaril y involved assumptions and judgments on the part of the modelers, the damage functions are not simply arbitrary representations of the mo delers’ opinions about climate damages. Rather they are based on a review b y the modelers of the currentl y available literature on the effects of climate change on society . The conclusions that the modelers draw from the literature, and the bases for these conclusions are documented, and all three models are continuall y updated as new information becomes available. While EPA recognizes that there are limitations with these models, including some of those discussed in Pindy ck (2013), nonetheless IAMs provide valuable information for regulatory

impact anal ys is. In a recent article in the peer

- reviewed literature, Wey ant (2014) addressed this issue as follows: While Pindyck’s observations about the empirical weaknesses of IAMs or calculations of the SCC are wo rth y of careful stud y, the conclusion that IAMs are therefore useless fundamentall y misconceives the enterprise. IAMs and the SCC are conceptual frameworks for dealing with highly complex, non

- linear, d ynamic, and uncertain sy stems. The human mind is incap able of solving all the equations simultaneously , and modeling allows making “If..., then...” anal ys es of the impacts of different factors. The models have provided important insights into many aspects of climate

- change policy

. EPA thus believes that it was ap propriate to base the SC

- CO 2 estimates on the DICE, FUND and PAGE models. Moving forward, EPA will continue to follow and evaluate the latest peer reviewed literature appl ying IAMs. As previousl y noted, EPA and all of the other IWG members will seek extern al expert advice on the technical merits and challenges of using additional models (e.g., CRED, ENVI SAGE) to estimate the SC

- CO 2 and/or removing existing models from the ensemble (DICE, FUND, and PAGE) used to estimate the SC

- CO 2 . Improving the IAMs or dam age functions To date, EPA has accepted the models as currently constituted, and omitted any damages or beneficial effects that the model developers themselves do not include. EPA recognizes that none of the three IAMs full y incorporates all climate change impacts, either positive or negative. Some of the effects referenced b y commenters (e.g., “catastrophic” effects, disease, and CO 2 fertilization) are explicitly modeled in the damage functions of one or more of the current models (although the treatment m ay not be complete), and the model developers continue to update their models as new research becomes available. In fact, EPA and all of the other IWG members undertook the 2013 revision because of updates to the models, which include new or enhanced repre sentation of certain impacts, such as sea level rise damages. In addition, some of the categories mentioned b y commenters are currentl y speculative or cannot be incorporated into the damage function for lack of appropriate data. Using an ensemble of three different models was intended to, at least partially , address the fact that no single model includes all of the impacts. EPA recognizes that there may be effects that none of the three selected models addresses (e.g., impacts from ocean acidification) or that are likel y not fully captured (e.g. catastrophic effects).4

- 45

EPA agrees that it is important to update the SC

- CO 2 periodically to incorporate improvements in the understanding of greenhouse gas emissions impacts and will continue to follow and evaluate the latest science on impact categories that are omitted or not fully addressed in the IAMs. Also, EPA and all of the other IWG members will seek external expert advice on the technical merits and challenges of potential approaches to update the damage fun ctions in future revisions to the SCC estimates. For EPA’s more detailed response to comments on climate sensitivity and other climate science components of the IAMs, see 4.4

- 2, and for treatment of CO 2 fertilization in the IAMs, see 4.4

- 6. For EPA’s more detailed response to comments on consistency with the OMB Circular A

- 4, the In formation Qualit y Act, and peer review, see 4.4

- 5. For EPA’s more detailed response to comments on aggregation issues, see 4.4

- 8. Recommendations and comments regarding socioecon omic scenarios

. The rationale for using the EMF

- 22 scenarios is explained in the 2010 TSD. In addition to the fact that they

were recent, peer
- reviewed, and publicly available, they

had the key

advantage that GDP, population, and emissions trajectories are internall y consistent for each model and scenario evaluated. As noted in the 2010 TSD, the scenarios used “span a wide range, from the more optimistic (e.g. abundant low

- cost, low

- carbon energy) to more pessimistic (e.g. constraints on the availability

of nuclear and renewables).” OMB guidance in Circular A

- 4 requires benefits and costs to be computed relative to a baseline that represents “the best assessment of the way the world would look absent the proposed action.” EPA and the other members of the IWG determined that BAU socioeconomic scenarios best reflect this approach. While the IWG agrees that, all else equal, the baseline used for the SCC calculation should be updated periodicall y to reflect the latest projections of BAU scenarios, the RCP/SSP sce narios used in support of AR5 may not be easily

adaptable for use in SCC modeling. To understand wh y, it is important to note some key differences between the criteria used b y the IWG to select socioeconomic

- emissions scenarios and what the RCP/SSP scenarios represent and how they

were developed. Each scenario in the EMF

- 22 exercise used by the IWG was clearl y identified as reflecting a reference case BAU or a specific CO 2 stabilization scenario. Lacking data on the probabilities of specific scenarios, the IW G chose four BAU scenarios and one scenario representing stabilization at 550 ppm CO 2 - e and weighted them equally in its anal ys is. The IWG acknowledges that this is not a precise characterization of the baseline but believes it is a reasonable approach at present, in light of data limitations. Some of the AR5 scenarios differ from these scenarios in way s that make them difficult to adapt to the SCC context. An ad

- hoc group was formed in anticipation of AR5 to develop new scenarios to support climate impa cts, adaptation, and vulnerability research. The initial work focused on the development of RCPs, which represent a wide range of potential radiative forcing pathway s over the 21st century . The SSPs are a series of human development pathway s that could lea d to radiative forcing pathway s described by the RCPs. The RCPs are not based on a fixed future path of key

socioeconomic parameters, which means that multiple SSPs are4

- 46

associated with an RCP. No assessment was made as to the likelihood of any particular R CP being realized, but some of the scenarios clearl y would require large

- scale global mitigation efforts to be achieved and U.S. involvement in these efforts may be necessary

for their success. In other words, the developers did not assign likelihoods that the various scenarios would achieve the RCPs in the absence of policy interventions, which means that it is not clear which scenarios could reasonably serve as BAU projections. Therefore, using the RCP/SSP scenarios would require the IW G to conduct an as sessment of which RCP/SSPs represent BAU scenarios, or of the probability

that each scenario occurs in a BAU case. The IWG believes that data are currentl y lacking to conduct such an assessment. EPA will continue to follow and evaluate the latest science on socioeconomic

- emissions scenarios and, along with the members of the IW G, will seek external expert advice on the technical merits and challenges of potential approaches to update these scenarios in future revisions to the SC

- CO 2 estimates. Regarding th e inclusion of a scenario associated with stabilization of atmospheric concentrations of GHGs at 550 ppm CO 2 - e, the 2010 TSD clearl y notes that this is “not derived from an assessment of what policy is optimal from a benefit

- cost standpoint. Rather, it is indicative of one possible future outcome.” As noted above, OMB guidance in Circular A

- 4 states that the correct baseline for regulatory impact anal ys is is an agency ’s best assessment of the state of the world without the regulation, and specifically state s that this may

include the potential for new domestic and foreign policies that would occur absent the regulation. Including a scenario representative of future mitigation actions is consistent with this guidance, as long as those future policy actions ar e expected to occur with or without the regulation under examination. As explained in the 2010 TSD, the IWG aimed to select scenarios that span most of the plausible range of outcomes for the socioeconomic variables. Given the level of uncertainty in these trajectories, the IW G felt that it was appropriate to consider a trajectory with significant global mitigation, assuming that this is a distinct possibility even in the absence of U.S. actions. Because there were five scenarios, and each received equal we ighting, the stabilization scenario received 20% of the total probability weight. Regarding potential inconsistencies between scenarios and IAMs, given the nature of estimating the SC

- CO 2 and available data/resources, a full harmonization along all possib le dimensions of the three IAMs used to estimate the SC

- CO 2 with the four models used to develop the scenarios was not possible. Therefore, the IWG chose to harmonize the models with respect to the scenario variables to which SCC estimates are most sensiti ve (GDP, population, and emissions) using common techniques in the literature. The scenarios used were developed by highly respected international modeling groups and published in the peer

- reviewed literature. In terms of potential inconsistencies across s cenario variables past 2100, an effort was made to account for some basic correlations among scenario variables in the post

- 2100 extrapolation. For example, extrapolations were based on GDP per capita growth, which implicitly correlates population and GDP growth, rather than GDP levels or growth alone. Similarly , extrapolations were based on CO 2 emissions intensity

with respect to GDP, which correlates emissions and GDP growth, rather than CO 2 emissions levels or growth alone.4

- 47

Consistent with historical o bservations, it is expected that growth rates of rapidly developing economies will exceed those of alread y developed economies in the near term. Scenarios with projections of global economic growth that exceed recent trends in developed economies are consi stent with this expectation. The chosen scenarios capture a wide range of potential future states of the world, but were not intended to represent a comprehensive accounting of the full range of uncertainty, and therefore it is possible that future outcome s will fall outside of this range. The IW G acknowledges that the projection of the scenarios beyond 2100 has greater uncertainty than shorter

- term projections and will continue to monitor the literature, including the development of extended RCP/SSP scenar ios, for way s to improve the estimated trajectories and improve internal consistency

. Other In addition, EPA disagrees with Commenter 10502’s characterization of the SC

- CO 2 as a rulemaking. The commenter has misunderstood what the SC

- CO 2 is and how it is used. The SC

- CO 2 itself is not a rulemaking, it is an estimate of the net economic damages resulting from CO 2 emissions, and therefore is used to estimate the benefit of reducing those emissions. The SC

- CO 2 calculation does not make any assumptions about a “solution to all potential problems that a warming planet might cause, i.e. CO 2 emissions control.” The SC

- CO 2 is just one component of a larger analysis that includes consideration of many other potential impacts. See EPA’s response to comments 4.4

- 3 for explanation as to why EPA uses global estimates of the SC

- CO 2 , response to comments 4.4

- 6 for details about th e treatment of CO 2 fertilization in the IAMs, response to comments 4.4

- 8 for details about the application of the SC

- CO 2 to the illustrative cost and benefit scenarios in the RIA. 

### 4.4.2 **Climate S cience Components of the Modeling Underlying SC** 
**- CO**  **2**

Commen ter 9685 states the following climate sensitivity errors: the methane **Comment 4.4**
**- 2:**  contribution to the radiative forcing is severely underestimated resulting in an over

- estimate of the relative contribution by CO 2 . Dy namic analy sis is required to estimate the radiative forcing for atmospheric concentrations of methane. Even worse, EDF claims that using the long term GWP100 (lower) for methane is incorrect, the true methane GWP requires a dynamic analysis since the emissions occur 24/7. This has the potential for quadrup ling the impact of methane concentrations and reducing the relative importance of CO 2 even more. This is another correction that the SCC has not addressed. The impact is substantial and will dramatically affect the model results in calculations for CO 2 onl y. The possible adjustment required for the non

- CO 2 gases contribution to radiative forcing: 0.48(86/21) + 0.16 + 0.34 = 2.47(v 0.98) W/m2. The result is a major shift in the relative importance on CO 2 and a major reduction in the "climate sensitivity" for increased CO 2 . Surely EPA advised the IWG of this major error. Commenter 9685

- 7210 continues stating the methane contribution to the radiative forcing is severely underestimated resulting in an over

- estimate of the relative contribution by CO 2 . The IPCC h as revised upward its estimates for the global warming potential (GWP) of methane. The GWP compares the amount of heat methane adds to the climate s ys tem against the amount of heat that carbon dioxide adds. The GWP of CO 2 is assumed to be constant, while t he GWP of methane varies substantially

over time. Over a 20

- year time frame, methane has a global warming potential (GWP20) of 86, up from 72, in the I PCC AR5. Methane is 34 times more potent a greenhouse4

- 48

gas than carbon dioxide on a 100

- year time scale (G WP100). It was previously assumed to be 25 times more potent (EPA uses an out

- dated value of 21). The SCC models do not reflect this correction. The net effect of this adjustment is lowering the "climate sensitivity " of CO 2 because the contribution of meth ane would correspondingly increase, reducing the relative importance of CO 2 . Dy namic analy sis is required to estimate the radiative forcing for atmospheric concentrations of methane. Also, Commenter 9685

- 7212 states that the methane contribution to the rad iative forcing is severel y underestimated resulting in an over

- estimate of the relative contribution by CO 2 . Also, the AR5 indicates another correction is required: Emissions of CH 4 alone have caused an RF of 0.97 [0.74 to 1.20] W m

- 2. This is very likel y much larger than the concentration

- based estimate of 0.48 [0.38 to 0.58] Wm

- 2 (unchanged from AR4). This difference in estimates is caused b y concentration changes in ozone and stratospheric water vapor due to CH 4 emissions and other emissions indirectly a ffecting CH 4 (see Figure SPM.4). These corrections of the methane GWP are another major flaw in the IAMs. Commenter 10091 states the IWG2010 notes (p.14) that the calibrated Roe and Baker distribution better reflects the I PCC judgment that "values substantiall y higher than 4.5degrees C still cannot be excluded." The IWG2010 further notes that "Although the IP CC made no quantitative judgment, the 95th percentile of the calibrated Roe & Baker distribution (7.1 dC) is much closer to the mean and the median (7.2 dC) of the 95th percentiles of 21 previous studies summarized by

Newbold and Daigneault (2009). It is a lso closer to the mean (7.5 dC) and median (7.9 dC) of the nine truncated distributions examined by the IPCC (Hegerl, et al., 2006) than are the 95th percentiles of the three other calibrated distributions (5.2

- 6.0 dC)." In other words, the IWG2010 turned towards survey s of the scientific literature to determine its assessment of an appropriate value for the 95th percentile of the ECS distribution. Now, more than three ye ars hence, the scientific literature tells a completel y different story. Instead of a 95th percentile value of 7.14 degreesC, as used b y the IWG2010, a survey of the recent scientific literature suggests a value of 3.5 degreesC

- more than 50% lower. And this is very significant and important difference because the high end of the ECS distri bution has a large impact on the SCC determination

- a fact frequently commented on by

the IWG2010. For example, from IWG2010 (p.26): "As previousl y discussed, low probability, high impact events are incorporated into the SCC values through explicit conside ration of their effects in two of the three models as well as the use of a probability

density function for equilibrium climate sensitivity . Treating climate sensitivity

probabilistically

results in more high temperature outcomes, which in turn lead to higher projections of damages. Although FUND does not include catastrophic damages (in contrast to the other two models), its probabilistic treatment of the equilibrium climate sensitivity parameter will directl y affect the non

- catastrophic damages that are a function of the rate of temperature change." And further (p.30): Uncertainty in extrapolation of damages to high temperatures: The damage functions in these IAMs are t ypicall y calibrated by estimating damages at moderate temperature increases (e.g., DI CE was calibrated at 2.5 degreesC) and extrapolated to far higher temperatures by assuming that damages increase as some power of the temperature change. Hence, estimated damages are far more uncertain under more extreme climate change scenarios. And the enti ret y of Section V [sic] "A Further Discussion of Catastrophic Impacts and Damage Functions" of the IWG 2010 report describes "tipping points" and "damage functions" that are probabilities assigned to different values of global temperature change. Table 6 f

rom the IWG2010 indicated the probabilities of various tipping points. The likelihood of occurrence of these low probability , high impact, events ("tipping points") is greatl y diminished under the new ECS findings. The average 95th percentile value of the new4

- 49

literature survey

is only 3.5degrees C indicating a very low probabilit y of a warming reaching 3

- 5 degrees C b y 2100 as indicated in the 3rd column of the above Table and thus a significantl y lower probabilit y that such tipping points will be reached. This new information will have a large impact on the final SCC determination using the IWG's methodology . The size of this impact has been directly

investigated. Commenter 10091 continues in their Comment on the Landmark Legal Foundation Petition for Reco nsideration of Final Rule Standards for Standby Mode and Off Mode Microwave Ovens, Day aratna and Kreutzer (2013) ran the DI CE model using the distribution of the ECS as described b y Otto et al. (2013) a paper published in the recent scientific literature which includes 17 authors, 15 of which were lead authors of chapters in the recent Intergovernmental Panel on Climate Change's Fifth Assessment Report. The most likely value of the ECS reported by Otto et al. (2013) was described as "2.0degreesC, with a 5

- 9 5% confidence interval of 1.2

- 3.9degreesC." Using the Otto et al. (2013) ECS distribution in lieu of the distribution employ ed b y the IWG (2013), dropped the SCC by 42 percent, 41 percent, and 35 percent (for the 2.5%, 3.0%, 5.0% discount rates, respective ly). This is a significant decline. In subsequent research, Day aratna and Kreutzer (2014) examined the performance of the FUND model, and found that it too, produced a greatl y diminished value for the SCC when run with the Otto et al. distribution of the e quilibrium climate sensitivity . Using the Otto et al. (2013) ECS distribution in lieu of the distribution employ ed b y the IWG (2013), dropped the SCC produced by the FUND model to $11, $6, $0 compared with the original $30, $17, $2 (for the 2.5%, 3.0%, 5.0 % discount rates, respectivel y). Again, this is a significant decline. The Dayaratna and Kreutzer (2014) results using FUND were in line with alternative estimates of the impact of a lower climate sensitivity on the FUND model SCC determination. Waldhoff e t al. (2011) investigated the sensitivity of the FUND model to changes in the ECS. Waldhoff et al. (2011) found that changing the ECS distribution such that the mean of the distribution was lowered from 3.0 degrees C to 2.0degrees C had the effect of lower ing the SCC by 60 percent (from a 2010 SCC estimate of $8/ton of CO 2 to $3/ton in $1995). While Waldhoff et al. (2011) examined FUNDv3.5, the response of the current version (v3.8) of the FUND model should be similar. Additionally , the developer of the PAG ES model affirmed that the SCC from the PAGES model, too drops by 35% when the Otto et al. (2013) climate sensitivity distribution is employ ed (Hope, 2013). Further, Commenter 10091 states these studies make clear that the strong dependence of the social cost of carbon on the distribution of the estimates of the equilibrium climate sensitivity (including the median, and the upper and lower certainty bounds) requires that the periodic updates to the IWG SCC determination must include an examination of the s cientific literature on the topic of the equilibrium climate sensitivity . There is no indication that the IWG undertook such an examination. But what is clear, is that the IWG did not alter its probability distribution of the ECS between its 2010 and 2013 SCC determination, despite a large and growing bod y of scientific literature that substantially alters and better defines the scientific understanding of the earth's ECS. It is unacceptable that a supposed "updated" social cost of carbon does not include u pdates to the science underlying a critical and key aspect of the SCC. Commenter note that there has been one prominent scientific study in the recent literature which has argued, on the basis of recent observations of lower tropospheric mixing in the trop ics, for a rather high climate sensitivity

(Sherwood et al., 2014). This research, however, suffers from too narrow a focus. While noting that climate models which best match the apparent observed behavior of the vertical mixing characteristics of the trop ical troposphere tend to be the models with high climate4

- 50

sensitivity

estimates, the authors fail to make note that these same models are the ones whose projections make the worst match to observations of the evolution of global temperature during the past several decades. The figure below shows the observed global surface temperature history from 1951

- 2013 compared with the temperature evolution projected by the collection of models used in the new IPCC 2013 report. We broke the climate models down into two groups - those which have a climate sensitivity greater than 3.0 degreesC (as suggested by Sherwood et al., 2014) and those with a climate sensitivity less than 3.0 degreesC. The Figure shows that while neither model subset does a very good job is capturing evolution of global temperature during the past 15

- 20 y ears (the period with the highest human carbon dioxide emissions), the high sensitivity

models do substantially

worse than the lower sensitivity models. Commenter 10091 adds while Sherwood et al. (20 14) prefer models that better match their observations in one variable, the same models actually do worse in the big picture than do models which lack the apparent accuracy in the processes that Sherwood et al. (2014) describe. The result can onl y mean that there must still be even bigger problems with other model processes which must more than counteract the effects of the processes described b y Sherwood et al. After all, the overall model collective is still warming the world much faster than it actually is (see Figure below). In fact, for the observed global average temperature evolution for the past 30 y ears largel y lies below the range which encompasses 95% of all climate model runs an indication that the observed trend is statistically different from the trend simulated by climate models. And for periods approaching 40 ye ars in length, the observed trend lies outside of (below) the range that includes 90% of all climate model simulations and indication that the observed trend is marginally inconsistent with climate model simulations. These results argue strongl y against the reliability of the Sherwood et al. (2014) conclusion and instead provide robust observational evidence that the climate sensitivity has been overestimated by both climate models, and the IWG alike. Commenter 10091 states regarding equilibrium climate sensitivity that in May

2013, the Interagency

Working Group (IWG) produced an updated SCC value by applying updates to the underlying three Integrated Assessment Models (IAMs) used in its initial 2010 SCC determination, but did not update the equilibrium climate sensitivity (ECS) employ ed in the IAMs. This was not done, despite there having been, since January 1, 2011, at least 11 new studies and 17 experiments (involving more than 44 rese archers) examining the ECS, each lowering the best estimate and tightening the error distribution about that estimate. Instead, the IWG wrote in its 2013 report: "It does not revisit other interagency modeling decisions (e.g., with regard to the discount r ate, reference case socioeconomic and emission scenarios, or equilibrium climate sensitivity )." The earth's equilibrium climate sensitivity is defined in the Interagency

Working Group on Social Cost of Carbon 2010 (hereafter, IWG2010) report as "the long

- term increase in the annual global

- average surface temperature from a doubling of atmospheric CO 2 concentration relative to pre

- industrial levels (or stabilization at a concentration of approximately

550 parts per million (ppm))" and is recognized as "a ke y input parameter" for the integrated assessment models used to determine the social cost of carbon. Commenter 10091 continues that the IWG2010 report has an entire section (Section III.D) dedicated to describing how an estimate of the equilibrium climat e sensitivity and the scientific uncertainties surrounding its actual value are developed and incorporated in the IWG's anal ys is. The IWG2010, in fact, developed its own probability density function (pdf) for the ECS and used4

- 51

it in each of the three IAMs, superseding the ECS pdfs used b y the original IAMs developers. The IWG's intent was to develop an ECS pdf which most closely matched the description of the ECS as given in the Fourth Assessment Report of the United Nation's Intergovernmental panel on Climate Change which was published in 2007. The functional form adopted by the IW G2010 was a calibrated version of Roe and Baker (2007) distribution. It was described in the IWG2010 report in the following Table and Figure (from the IWG2010 report): The calibrated Roe and Baker functional form used by the IWG2010 is no longer scientificall y defensible; neither was it at the time of the publication of the IWG 2013 SCC update. The figure below vividly illustrates this fact, as it compares the best estimate and 90% confidence range of the earth's ECS as used by the IWG2010/2013 (calibrated Roe and Baker) against findings in the scientific literature published since January

1, 2011. Whereas the IWG2010/2013 ECS distribution has a median value of 3.0 dC and 5th and 95 th percentile values of 1.72 dC and 7.14 dC, respectivel y, the corresponding values averaged from the recent scientific literature are 2.0 dC (median), 1.1 dC (5th percentile), and 3.5 dC (95th percentile). These differences will have large and significant impacts on the SCC determination. Commenter adds (10091) the IWG2010 report noted that, concerning the low end of the ECS distribution, its determination reflected a greater degree of certaint y that a low ECS value could be excluded than did the IPCC. F rom the IW G2010 (p. 14): "Finall y, we note the IPCC judgment that the equilibrium climate sensitivity "is very likely larger than 1.5dC." Although the calibrated Roe & Baker distribution, for which the probability of equilibrium climate sensitivity being greater than 1.5 degrees C is almost 99 percent, is not inconsistent with the I PCC definition of "very likely " as "greater than 90 percent probability ," it reflects a greater degree of certainty about very

low values of ECS than was expressed by the IPCC." In other words, the IWG used its judgment that the lower bound of the ECS distribution was higher than the IPCC 2007 assessment indicated. However, the collection of the recent literature on the ECS shows the IWG's judgment to be in error. As can be seen i n the chart above, the large majority of the findings on ECS in the recent literature indicate that the lower bound (i.e., 5th percentile) of the ECS distribution is lower than the I PCC 2007 assessment. And, the average value of the 5th percentile in the r ecent literature (1.1dC) is 0.62dC less than that used by the IWG

- a sizeable and important difference which will influence the SCC determination. In fact, the abundance of literature supporting a lower climate sensitivity was at least partiall y reflected in the new IPCC Fifth Assessment Report issued in 2013. In that report, the IPCC reported: Equilibrium climate sensitivity

is likel y in the range 1.5dC to 4.5dC (high confidence), extremely unlikel y less than 1dC (high confidence), and very unlikely greate r than 6dC (medium confidence). The lower temperature limit of the assessed likely range is thus less than the 2dC in the AR4

.... Clearl y, the IWG's assessment of the low end of the probability densit y function that best describes the current level of scie ntific understanding of the climate sensitivity is incorrect and indefensible. But even more influential in the SCC determination is the upper bound (i.e., 95th percentile) of the ECS probability

distribution. Commenter 10502 included a report (BOUNDING GH G CLIMATE SENSITIVITY FOR USE IN REGULATORY DECI SI ONS) published in February 2014 to argue that the computing Social Cost of Carbon (SCC) is scientifically flawed. In the Purpose section of the report they also state that: "We believe that a metric, the Eq uilibrium Climate Sensitivity (ECS), is being misused by

the Interagency

Working Group (IWG) that developed the SCC calculation process. The IWG included participants from a number of US Government agencies in their attempt to4

- 52

justify the economics of CO 2 and other "Green House Gas" (GHG) emissions control regulations". They

explain that: "This report provides rigorous scientific documentation of how the ECS metric is being misused in a number of way s as described in the TSDs and proposes a more scientifica lly

based metric to replace ECS use in regulatory activity ." In the 86 pages report they provided the following tables and figures: Table 1.1 (page 15) describing all the metrics used and derived in the report. Table 1.2 (page 29) presents the Climate Mod el TCR/ECR Ratio. Table 5.0 (page 72) shows Statistical Distributions for ECS. Figure 1.1 (page 18) which is the Dr. John Christy

Study

- Climate Model Comparison to Actual Phy sical Data of the mid

Troposphere Temperature Anomalies. Figure 1.2 (page 30) s how the IP CC AR4 Climate Model TCR/ECS Trends vs . ECS. Figure 1.3 (page 30) showing the IP CC AR4 Climate Model ECS/TCR Trends VS. TCR. Figure 2.1 (page 34) showing the Simple Spring

- Mass

- Damper Dy namic Sy stem. Figure 3.1 (page 38) presents Atmospheric CO 2 Concentration 1832

- 2013 and Projections to 2100. Figure 4.1 (page 46) shows Comparison of Several Popular Global Average Temperature Databases. Figure 4.2 (page 49) presents L jungqvist Temperature Reconstruction for the Northern Hemisphere. Figure 4.3 (pag e 51) shows HadCRUT4 Global Yearl y Average Temperature Anomal y. Figure 4.4 (page 53) presents Case 1 HadCRUT4 Data Curve Fit, TCSTRF = 1.5 deg. C. Figure 4.5 (page 56) presents HadCRUT4 Data Fit with TCSTRF = 0.8 deg. C and 1000 Year Climate Cy cle. Figure 4.6 (page 58) shows determining an Upper Bound for Transient Climate Sensitivity , TCSTRF. Figure 4.7 (page 60) presents Historical Reconstruction of TSI b y Kopp

- (1610

- 2010). Figure 4.8 (page 61) presents Total Solar Irradiance (TSI) Variation: 1650

- P resent and Beyond. Figure 4.9 (page 65) presents Recent Published Trends in ECS Uncertaint y Range. Figure 4.10 (page 68) shows Bounding Maximum Possible AGW Temperature Rise. Figure 5.1 (page 74) shows the Comparison of ECS Probability

Densit y Functions. Commenter 10502 states the SCC attempts to weigh possible future damage to the world

- wide society from US CO 2 emissions, against the immediate and certain increases to US energy and related economic cost created b y issuance of each new regulation. Such unilateral US CO 2 emissions regulations imposed on US citizens, without an enforceable world

- wide agreement to limit CO 2 emissions, will have insignificant effect on global warming, and will almost certainly cause a migration of US energy intensive manufacturing jobs to other countries that do not impose CO 2 emission regulations on themselves. Total curtailment of US

- only CO 2 emissions could not prevent the joint statistical probability of high climate sensitivity to CO 2 and high atmospheric CO 2 levels that lead to high computed values of SCC. Such conditions using the IWG's scientifically

unsupported ECS distribution of Figure 6 <page 11> are related to a significant computed probability of high temperatures and high CO 2 levels that could melt permanent ice sheets on Greenland and West Antarctica and cause rapid sea level rise. There is not much scientific agreement on the probability that significant portions of these permanent ice sheets will be melted b y rising GHG levels. Therefore, the assumptions in the SCC process that lead to high values of SCC must be carefull y scrutinized. These are key issues that need to be reviewed in detail by

an independent scientific review team to ensure that no unnecessary harm to the US population results from unilateral US CO 2 emission regulations. Commenter states 10502 that the ECS method used to determine the Social Cost of Carbon (SCC) is flawed and compared it with other metrics that in their opinion are more appropriate. In the current SCC calculation process, temperat ure rise estimates from present until the y ear 2300, a key driver of SCC damage estimates, are highl y corrupted b y the inappropriate use of the ECS metric for4

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computing temperature changes due to atmospheric CO 2 changes over the next 300 y ears. The "best available science" that the IWG is required to employ in computing SCC should be based on a less uncertain transient climate sensitivity metric, such as the IP CC's Transient Climate Response (TCR) metric or our research team's Transient Climate Sensitivity (TCS) metric, defined and very

accurately

determined and bounded from actual climate data as documented in Ref. 1 (Attached document ending with Docket ID ending with 10502

- A1). Commenter say s that these transient climate sensitivity metrics are much more scientificall y appropriate than ECS for computing temperature changes over the next 300 y ears and do not include highl y disputed and uncertain effects that have been postulated to occur much more than 300 ye ars from now, and that have led to so much uncert aint y in establishing a confident value for ECS. Both the IPCC AR4 report and AR5 report that compute global average temperature rise from slowly increasing levels of GHG, inherently use the transient climate sensitivity aspects of climate simulation model s, as opposed to the much larger effects that develop over 1000's of years in the totall y inappropriate ECS simulations. However, as we have demonstrated in Ref.1 (Docket ID ending with 10502

- A1) , it is not necessary to use complex and un

- validated climat e simulation models to accuratel y estimate and bound global average surface temperature rise due to CO 2 emissions over the next 300 y ears. There is ample climate data to accuratel y determine the TCS metric and to use it in an algebraic equation that captur es the direct and climate feedback warming effects of GHG forcing of the climate as a function of various proposed Representative Concentration Pathway s (RCP). The IWG's SCC is computed for climate changes they expect only

from the present until the y ear 2 300. At present, global atmospheric CO 2 levels are only about 397 ppm and increasing at a rate of about 0.5 percent per ye ar. But, ECS is defined by the IPCC to be the climate response that would occur after the atmospheric CO 2 level is suddenly doubled fr om pre industrial levels of about 280 ppm to about 560 ppm and held at that level until the climate stabilizes at a new equilibrium condition. Because of long feedback responses of the oceans to give up even more CO 2 as they graduall y warm, and cause ampli fied GHG warming, the final equilibrium state imbedded in the ECS value is not reached until 1000 or more years later after the sudden doubling of CO 2 levels. It is not clear how, or if, the IWG recognizes this fact in how it predicts global temperature ri se and related damages for each ton of CO 2 emitted between now and 2300. Moreover, at the present time, with an actual slowly increasing atmospheric CO 2 level, not at all like the sudden doubling of atmospheric CO 2 required to compute the ECS value in clim ate models, our oceans are cool enough to absorb about half of the CO 2 emitted each ye ar, leaving onl y about half of the y early emissions available to increase atmospheric CO 2 levels. Since ECS, TCR and TCS are metrics that attempt to describe temperature sensitivity to atmospheric CO 2 levels, not CO 2 emissions, the TSDs have not clearly described how the ECS value selected from the assumed statistical distribution for ECS can be used to accuratel y compute global temperature rise due to the slowl y rising CO 2 levels over the next few hundred ye ars. This critical aspect of the SCC calculation process is not based on the best science available to the IWG and its member organizations, and indicates the need for an in

- depth and independent scientific review of th e entire SCC process. The commenter included a number of Figures, some of which are also included in the attached report document (Docket ID ending with 10502

- A1). The list of Figures in this document is as follows: Figure 1 (page 6): Dr. John Christy Study - IP CC AR5 Report Climate Model Comparison to Actual Phy sical Data of the mid

- Troposphere Temperature Anomalies. Figure 2 (page 8): Merged Law Dome and Mauna Loa Datasets for Atmospheric CO 2 Concentration. Figure 3 (page 9): Extracting Transient Climate Sensitivity

(TCS) from the HadCRUT4 Data. Figure 4 (page 10): Extracting an Upper4

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Bound for TCS from the HadCRUT4 Data. Figure 5 (page 10): Max Possible GHG Warming Forecast, Present

- 2300. Figure 6 (page 11): Comparison of TRCS and IWG probability distr ibutions for ECS. Commenter 9681 counters, stating IWG' s treatment of climate sensitivity is appropriate and could go further in highlighting the costs of fundamental uncertainties. In addition to choosing an appropriate discount rate and sensitivity anal y ses around different SSPs, another important parameter to which the SCC estimates are sensitive is Equilibrium Climate Sensitivity (ECS) how the climate s ys tem responds to a constant radiative forcing, which is ty pically expressed as the temperature respon se to a doubling of CO 2 concentration in the atmosphere. In its current iteration, the IWG conducted extensive sensitivity anal ys es over a range of equilibrium climate sensitivity

estimates. (Specifying the climate sensitivity parameter as a random variabl e has a basis in PAGE02, which species a probability distribution function for the parameter. The IWG calibrated the Roe and Baker distribution, a right

- skewed distribution, to characterize the probability

distribution function of this parameter. The 2010 TSD explains the IWG's choice of the Roe and Baker distribution. The right

- skewed nature of the climate sensitivity parameter's probability

distribution function is independent of the IWG's choice of the Roe and Baker distribution. Rather, this skewness re sults from the I PCC's finding that values of the climate sensitivity

parameter above 4.5 degree Celsius cannot be excluded. As a result, all of the probability

distribution functions fit by the IWG for the climate sensitivity parameter were skewed to the r ight (see Figure 2 in the 2010 TSD), including Roe and Baker. See 2010 TSD, supra note 5, at 14, fig. 2.) The assumptions are clearly stated in the TSD. In addition to its sensitivity

anal ys is, the IWG conducted a Monte Carlo simulation over the climate se nsitivity parameter and the other random variables specified within the three IAMs.97 (A Monte Carlo simulation will run an integrated assessment model thousands of times, each time randomly picking the value of uncertain parameters from a probability distribution function, i.e. a function that assigns a probability

to each possible parameter value. In the case of the SCC, the IWG ran 10,000 Monte Carlo simulations for each of the three IAMs and five socio

- economic scenarios, randomizing the value of climat e sensitivity , i.e., the change in average global temperature associated with a doubling of CO 2 , and all other uncertain parameters in the IAMs b y the original authors. For each randomly drawn set of values, the IAM estimated the associated damages, with the final SCC estimate equaling the average value across all 10,000 runs, five socio

- economic scenarios, and then across all three models. Therefore, each SCC estimate is calculated using 150,000 runs.) The range for the Equilibrium Climate Sensitivity (ECS ) is derived from a combination of methods that constrain the values from measurements in addition to models. These include measured ranges from paleoclimate records, observed comparisons with current climate, as well as responses to recent climate forcing s. The currentl y agreed likely range for the ECS (from both the I PCC TAR and AR5) is 1.5

- 4.5 degrees Celsius, with a best estimate of 3 degrees Celsius. Ph ys ical constraints make it extremely unlikel y that the ECS is less than 1 degree Celsius and very

unl ikely greater than 6 degrees Celsius.98 (IPCC, supra note 95, at 14.) A host of anal ys es points to the costs of such uncertainty both for values that go outside the likely range and for uncertainty within it: in short, the optimal SCC tends to increase with increased uncertainty , sometimes dramaticall y so. While the current treatment of uncertainty around climate sensitivity b y the IWG is sufficient to highlight the range of possible uncertainties, a reconsideration of the assumptions feeding into the SCC o ught to take the latest advances highlighting the potentially higher costs of deep uncertaint y into account.4

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Commenter 9685 continues that Senate testimony comparing model predictions with actual observations. The data presented in testimony confirms that all of the models used by the IP CC, including the 19 U.S. models, are fatall y flawed and cannot be used in an y policy anal ys is, including the ECS input to the IAMs used in the SCC. Commenter 9685 also states estimates of climate sensitivity should be based on data, not flawed models. Although most of the I PCC AR5 models incorporate a mean sensitivity of 3.4 degreesC (range of 2.1 to 4.7 degreesC), recent studies either ignored by the IPCC or papers available after the cut

- off date for the AR5 indicate the true sensitivity is much lower as suggested by Dr. Spencer. Rather than using the demonstrabl y flawed IPCC models, these studies use a combination of simple climate models bounded by data or use onl y data. These papers indicate the ECS is substantially

lowe r than what was used as input to the IAMs and that the "fat tail" is constrained b y real data. The consequence: the SCC is as much as 90% lower based on the ECS correction alone. Commenter believes that EPA must withdraw SCC2010 and SCC2013 and proceed with a wholesale revision of the ECS input to the IAMs using the recent papers that document a substantially

lower value than used in the SCC reports. Commenter 9685 states Damage function errors: sea level rise is based on the flawed IP CC models. The Sea Le vel Rise (SL R) treatment in the IAMs is highl y suspect. Nordhaus announced "changes" in DI CE, but provided no data to show the projection of SL R versus time or temperature. This is a major problem for the IA Ms: there is no data to compare results. Dependen ce on the flawed AR4 and AR5 models for SL R projections is another major problem for the IAMs. The public is unable to examine the details because the Damage Function aggregates the results. Each element has to be unbundled, this is especially important fo r SL R. EPA must require that each IAM provide the details of each element of the Damage Function. Commenter 9685

- 7221 continues, stating the model does not properl y reflect benefits of fossil fuel use and CO 2 fertilization. The damage functions for the three IAMs are presented in SCC2010 Figures 1A and 1B, using the modeler's default scenarios and mean input assumptions. There are significant differences between the three models both at lower (figure 1B) and h igher (figure 1A) increases in global

- average temperature. But the results displayed in Figures 1A and 1B show that the FUND model has negative damages ("benefits") through roughl y 2080. Since the detailed elements of the "damage" function are not transpar ent, one can only surmise that the "benefits" are dominated by the CO 2 fertilization effects. It is apparent that the other two models either do not reflect this effect or minimize the effect and are thus seriousl y deficient. This is a substantial flaw in SCC2010, SCC2013, and SCC2013r . Rising amounts of CO 2 in the atmosphere have the effect of increasing U.S. and global crop yi elds. Other benefits of CO 2 include reducing the amount of fresh water needed to produce an y given amount of crop and improving th e response to environmental stress (NI PCC2009) The amounts of increased yields by crop have been calculated for certain elevated levels of CO 2 in the atmosphere. The benefits manifest themselves in the form of greater availability of food and lower prices which in turn contribute to improved health and qualit y of life. These benefits largel y flow to those who otherwise struggle to afford an adequate suppl y of food, in other words, the poor. This effect is the dominant "negative damage" from the effects of C O 2 emissions. The IAMs do not properl y account for this effect. Commenter 10091 continues the determination of the SCC used by the EPA in its cost comparison anal ys is is discordant with the best scientific literature on the equilibrium climate4

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sensitivity and the fertilization effect of carbon dioxide two critically important parameters for establishing the net externality of carbon dioxide emissions at odds with existing Office of Management and Budget (OMB) guidelines for preparing regulatory analy ses, an d founded upon the output of Integrated Assessment Models (IAMs) which encapsulate such large uncertainties as to provide no reliable guidance as to the sign, much less the magnitude of the social cost of carbon. Commenter 10091: Additionally , as run b y the Interagency Working Group (IWG) (whose results were incorporated by the EPA in this action), the IAMs produce illogical results that indicate a misleading disconnect between a climate change and the SCC value. And we show that the sea level rise project ions (and thus SCC) of at least one of the IAMs (DI CE 2010) cannot be supported b y the mainstream climate science. Commenter states that until this situation in its entirety can be properly

rectified, the SCC should be barred from use in this and any other federal rulemaking. It is better not to include an y value for the SCC in cost/benefit anal ys es such as these, than to include a value which is knowingly improper, inaccurate and misleading. **Response 4. 4** 
**- 2**  **:** All of the comments on the climate science compo nents of the modeling underlying the SC

- CO 2 estimates mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SCC (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation

. EPA has also carefull y examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the c omments on the OMB solicitation address the comments on the climate science components of the modeling underl yi ng the SC

- CO 2 . Specificall y, EPA concurs with the IWG’s response to these comments and hereby incorporates them by reference. 23 EPA appreciates the commenters’ recommendations for potential opportunities to improve the SC

- CO 2 estimates and has considered each one in the context of this rulemaking. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology

and estimates to ensure that they continue to reflect the best available science and economics. Furthermore, EPA has determined that the SC

- CO 2 methodological recommendations require additional research, review, and public comment before it can appl y them to a rulemaking context. To help sy

nthesize the technical information and input reflected in the comments, and to add additional rigor to the next update of the SC

- CO 2 , the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC

- CO 2 estimates, including the approaches suggested b y commenters and summarized in this document. Specificall y, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Eng ineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC

- CO 2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer

-

23 Referred to as the "OMB Response to Comments on SC

- CO2." See pgs 11 to 17 at https://www.whitehous e.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

- july

- 2015.pdf

.4

- 57

revi ewed literature, will help to ensure that the SC

- CO 2 estimates used by EPA continue to reflect the best available science and methodologies. After careful evaluation of the full range of comments and associated technical issues described in section 4.4 , EP A has determined that it will continue to use the current SC

- CO 2 estimates 24 until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific informatio n on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

- CO 2 estimates in the analy sis of illustrative benefit

- cost scenarios for new sources in RIA Chapter 5. 25 EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. The remainder of this section provides more detailed responses to the comments and recommendations. Regarding comments on equilibrium climate sensitivity (ECS), the EPA is aware that this is an active area of research and remains committed to updating the SC

- CO 2 estimates to incorporate new scientific information and accuratel y reflect the current state of scientific uncertainty regarding the ECS. While we agree with commenters that the ECS distribution, along with other climate modeling inputs to the SCC calculation, should be updated periodically to reflect the latest scientific consensus, care must be exercised in selecting an appropriate range of estimates for this important parameter. Man y studies estimating climate sensitivity have been published, bas ed on a variet y of approaches (instrumental record, paleoclimate observations, models, etc.). These individual studies report differing values and provide different information. Picking a single stud y from the high or low end of the range, or even in the m iddle, will exclude relevant information. A valid representation of uncertaint y regarding climate sensitivity should be obtained from a s ynthesis exercise such as that done by the IPCC that considers the full range of relevant studies. At the time the 2013 SC

- CO 2 update was released, the most authoritative statement about ECS appeared in the IPCC’s AR4. Since that time, as several commenters noted, the I PCC issued a Fifth Assessment Report that updated its discussion of the likely range of climate sensitivi ty compared to AR4. The new assessment reduced the low end of the assessed likely range (high confidence) from 2°C to 1.5°C, but retained the high end of the range at 4.5°C. Unlike in AR4, the new assessment refrained from indicating a central estimate of ECS. This assessment is based on a comprehensive review of the scientific literature and reflects improved understanding, the extended temperature record for the atmosphere and oceans, and new estimates of radiative forcing.

24 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pdf. 25 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- fina l

- july

- 2015.pdf.4

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Several of the post

- AR4 studies highlighted b y some commenters were cited in the AR5 assessment. In particular, both Aldrin et al. (2012) and Otto et al. (2013) were cited in both Chapter 10 and Chapter 12 of the AR5 Working Group I assessment. Eight of the authors of Otto et al. (2013) , including the lead author, were authors of Chapter 12 for AR5’s Working Group I and one was a lead author for the chapter. Hence it is clear that the IPCC considered Otto et al. (2013) in its sy

nthesis of literature on the ECS. More broadl y, the AR5 clim ate sensitivity distribution likely

incorporates much of the literature identified by the commenters. EPA will continue to follow and evaluate the latest science on the equilibrium climate sensitivity

. Furthermore, EPA and the other members of the IWG are seeking external expert advice on the technical merits and challenges of potential approaches prior to updating the ECS distribution in future revisions to the SCC estimates, including (but not limited to) using the AR5 climate sensitivity

distribution fo r the next update of the SC

- CO 2 . As discussed in preamble section II, RTC section 4.1, the 2009 Endangerment Finding, and in the OMB RTC, among other resources, the links between CO 2 and temperature are established bey ond question by

laboratory

measurements, physical theory , paleoclimate observations, instrumental observations, and observations of other planets. Climate change and its impacts, such as sea level rise, have been exhaustively documented, and s ynthesized internationally b y the IPCC and domesti call y by the U.S. National Climate Assessment. Based on the wide acceptance of these conclusions in the scientific community , EPA believes that: (1) anthropogenic emissions of greenhouse gases are causing atmospheric levels of greenhouse gases in our atmos phere to rise to levels unprecedented in human history ; (2) the accumulation of greenhouse gases in our atmosphere is exerting a warming effect on the global climate; (3) there are multiple lines of evidence, including increasing average global surface tem peratures, rising ocean temperatures and sea levels, and shrinking ice in glaciers, ice sheets, and the Arctic, all showing that climate change is occurring, and that the rate of climate change in the past few decades has been unusual in the context of the past 1000 y ears; (4) there is compelling evidence that anthropogenic emissions of greenhouse gases are the primary driver of recent observed increases in average global temperature; (5) atmospheric levels of most greenhouse gases are expected to continue to rise for the foreseeable future; and (6) risks and impacts to public health and welfare are expected to grow as climate change continues, and that climate change over this century is expected to be greater compared to observed climate change over the pa st century
. While there are inherent uncertainties associated with modeling climate s ystems over long time spans, the general circulation models (GCMs) upon which estimates of ECS and other climate science research are based have been extensively evaluate d. For example, since 1989 the DOE has had a large program (The Program for Climate Model Diagnosis and Intercomparison) dedicated to evaluating these models. The ECS parameter is a useful parameter for summarizing the strength of the climate s ys tem’s resp onse to accumulating GHG concentrations in the atmosphere. However, it is influenced by many highl y complex and uncertain natural processes, some of which adjust over very long periods of time. Therefore, persistent uncertaint y about the ECS is not surpris ing. Furthermore, persistent uncertainty

does not suggest an absence of useful information. However, EPA does not agree that progress has not been made in reducing this uncertainty . Over the last 30 y ears the scientific community

has elucidated man y aspect s of the climate s ys tem’s response to GHGs accumulating in the atmosphere. While the AR5 “likely” range is slightly larger than that of4

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AR4, the assessment presented greater confidence in the tails. AR5 found that climate sensitivity is very unlikel y to be greater than 6°C, whereas AR4 stated that the “lack of strong constraints limiting high climate sensitivities prevents the specification of a 95th percentile bound.” Similarly , while the AR5 and the IPCC’s (2001) Third Assessment Report (TAR) bounds look similar, the TAR bounds were presented as a range without estimated probabilities. In response to the commenter citing Pindy ck on climate feedbacks and the shape of the ECS distribution, we agree that potential climate feedbacks and their strength are unce rtain. However, the IWG chose a distribution from the peer

- reviewed literature based on its evaluation of the scientific literature and the relationship between this distribution and IPCC range of the ECS. Regarding the skewness of the calibrated ECS distr ibution, this characteristic is common among the many approaches that have been used to study the ECS distribution and is not unique to the theoretical approach used by Roe and Baker to define the functional form of their distribution. Consistent with the AR4 discussion on limiting the distribution to a range considered possible b y experts, such as from 0°C to 10°C, the IWG truncated the distribution at 10oC (Hegerl 2007, p 719). EPA disagrees with the comment that “AR5 moderates man y of the key findings o f AR4.” This response has alread y discussed in detail EPA’s assessment of the AR5 findings on climate sensitivity

and the implications for the SC

- CO 2 estimates. The other examples given b y the commenter

— anthropogenic warming, rate of warming, extreme temp eratures, and tropical cy clone activity

— are not findings that have been moderated in AR5. In fact, AR5 strengthened the conclusions about attribution of anthropogenic global warming b y accounting for pollutants with a cooling effect and by strengthening the likelihood of warming (“very likely ” in AR4 to “extremely

likel y” in AR5). Similarly , the AR5 findings on tropical cy clone activity strengthened from “suggestions” in AR4 to “virtually certain” increases in frequency and intensity of the strongest trop ical cy clones in the North Atlantic basin. The remaining two examples given b y the commenter highlight historical information, not projections. EPA further notes that the commenter has not identified or discussed whether and how these particular AR5 findi ngs would affect the SC

- CO 2 estimates. In addition, EPA notes that the preamble section II discusses many new assessment reports published since the 2009 Endangerment Finding, including the recent USGCRP’s 2014 Third National Climate Assessment (NCA3), the IPCC’s 2013

- 4 Fifth Assessment Report (AR5) and IPCC’s 2012 “Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (SREX). Section II of the preamble highlights changes, such as sea level rise, and ci tes the confidence in human attribution. The preamble concludes that the “findings of the recent scientific assessments confirm and strengthen the conclusion that greenhouse gases endanger public health, now and in the future .” See also section 4.2 of th is RTC for EPA’s response to comments about use of the latest climate science, including AR5 findings, in anal ys es separate from the IW G SCC estimates. Section 4.4

- 1, provides a detailed response to comments on the methodology and the integrated assessment models, including the damage functions, used to estimate the SC

- CO 2 . Section 4.4

- 5 provides a detailed response to comments regarding the transparency of the SC

- CO 2 process and compliance with OMB guidance. Other physical science components of the integrated assessment models.4

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A key objective of the IWG was to draw from the insights of the three models while respecting the different approaches to linking GHG emissions and monetized damages taken by modelers in the published literature. After conducting an extensive literature review, the interagency group selected three sets of input parameters (climate sensitivity , socioeconomic and emissions trajectories, and discount rates) to use consistently in each model. All other model features were left unchanged, rel yi ng on the model developers’ best estimates and judgments, as informed by the then

- current literature. While the IAMs are periodically updated, the rapid pace of research in the area of climate science means that at an y given time there may be new res earch that has not ye t been incorporated into one or more models. Thus, while a given model may not alway s reflect the most recent research regarding an y given climate subs ys tem, the IWG concluded that, at the time, the IAMs collectively represented the st ate of the science b y bringing all these sy stems together into a single framework. A benefit of using an ensemble of three models is that they cover a range of potential outcomes as expressed in the literature. For example the three models used collective ly span a range of carbon cy cle and climate change responsiveness that reflects the uncertainty in the literature. With regards to comments on the temperature response function, the past 15 y ears of observed atmospheric temperatures cannot be compared dir ectly to climate model simulations because (1) observed temperatures were influenced b y volcanic eruptions that were not included in simulations because the timing and spatial distribution of eruptions are not known in advance; and (2) the last 15 ye ars of atmospheric temperatures have been strongl y influenced b y natural climate variability

due to oceanic fluctuations, such as the El Niño Southern

- Oscillation; models include this variability , but no attempt is made to sy nchronize the models’ timing of this variability

with observed variability . In other words, while the models incorporate variability around a trend over time, they cannot predict how that variability affects measured temperatures in a specific ye ar. Regarding the criticisms by commenters of the sea level rise projections in DI CE, the IWG recognizes that sea level rise projections are also an area of ongoing research. One key issue involves projections of melt from the Greenland and West Antarctic ice sheets. The IPCC AR5 report notes there is a possibility of sea level rise “substantially above” their best estimate of a likely range because of uncertainties regarding the response of the Antarctic ice sheet (AR5 Working Group I, Chapter 13). In AR5 the I PCC also discusses semi

- empirical methods, stating a low confidence in projections based on such methods, which calibrate a mathematical model against observations rather than projecting individual processes. However, the I PCC did not entirely discount these methods. Further supporting the use of semi

- empirical methods, the U.S. National Climate Assessment uses an average of the high end of semi

- empirical projections in order to define their “Intermediate

- High” Scenario (Parris et al., 2012). Therefore, it is reasonable for one out of three models used b y the IWG to include some reliance upon semi

empirical methods. EPA is aware that more sophisticated y et still relatively simplified climate models, such as MAGI CC, could be used to replace the highl y simplified climate science components of the thre e IAMs. However, given the range of climate models available and the technical issues associated with such a change, replacing the climate modules or other structural features of the IAMs requires additional investigation before it can be applied to SCC es timation. EPA will4

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continue to follow and evaluate the latest science on climate modeling and, along with other members of the IWG, is seeking external expert advice on the technical merits and challenges of potential approaches to updating this component of the IAMs in future revisions to the SCC estimates. We agree with the commenters who suggested the IAMs do not fully capture the impacts associated with changes in climate variability and weather extremes. For example, as discussed in the 2010 TSD, the calibrations in FUND and DICE do not account for increases in climate variability

that may occur and would affect the agricultural sector. Similarly , we agree that the models’ functional forms may not adequatel y capture potentially discontinuous “tipping p oint” behavior in Earth s ys tems. In fact, large

- scale earth sy stem feedback effects (e.g., Arctic sea ice loss, melting permafrost, large scale forest dieback, changing ocean circulation patterns) are not modeled at all in one IAM, and are imperfectly capt ured in the others. This limitation of the three IAMs is discussed extensively in the 2010 TSD, and again in the 2013 update. The SCC estimate associated with the 95th percentile of the distribution based on the 3 percent discount rate is included in the r ecommended range partl y to address this concern. EPA and the other members of the IWG will continue to follow and evaluate the latest science on climate variability and potential tipping points, and seek external expert advice on the technical merits and challenges of potential approaches to improve the representation of these components of the modeling in future revisions. 

### 4.4.3 **Global vs. Domestic V**  **alue**

Commenter 10091 states the I WG onl y reports the global value of the SCC **Comment 4.4**
**- 3:**  which the IWG determines to a ccrue from continued carbon dioxide emissions in the United States. This is in direct violation of existing Office of Management and Budget (OMB) guidelines. OMB Circular A

- 4 (September 17, 2003) regarding Regulatory Analy sis explicitly states: Your anal ys is should focus on benefits and costs that accrue to citizens and residents of the United States. Where you choose to evaluate a regulation that is likely to have effects beyond the borders of the United States, these effects should be reported separately. In reporting the SCC, the IWG argues away the need to focus on benefits and costs that accrue to citizens and residents of the United States and instead bases its SCC solely on its determinations of effects bey ond the borders of the United States. Rather than reporting the latter separatel y, as recommended b y OMB guidelines, the I WG onl y reports the global costs and makes no determination of the domestic costs. Considering that the majority (if not all) of the federal regulations incorporating the SCC into cost/benefit analysis appl y to rules regulating domestic activities (including this one), reporting only the global impact the knowledge (in all areas, i.e., economics, social, environmental, etc.) of which is far less constrained than potential U.S. impa cts imparts a huge degree of uncertaint y and is a grossly misleading. Thus, the I WG's determination of the SCC is not appropriate for use in this or any federal regulatory anal ys is. During the public comment period associated with new regulations such as this one which incorporate the SCC, a distinction should be made between domestic costs/benefits and foreign cost/benefits such that the public can judge for itself the value of the regulation. As it currentl y stands, the public likely

has no idea that the benefits of the proposed regulations on domestic activities that supposedly accrue from incorporating the SCC are largel y conferred upon foreign nations. This is clearly not a transparent situation.4

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Commenter 10502 included a report stating: "The scientif ically flawed Social Cost of Carbon (SCC) computational process attempts to compute the future global warming damage to the entire world

- wide population that would be avoided by each ton of CO 2 not emitted by US sources and count that highl y uncertain worl d

- wide avoided damage as a benefit of the regulation. But the SCC cost/benefit anal ys is onl y burdens the US economy and population (not the entire world) with the immediate cost impacts from issuance of the US regulations. These impacts to the US economy r esult in part from effective elimination of coal fired power plants, our most inexpensive electrical power source. This will result in much higher US energy costs and loss of jobs to other countries with lower coal

- produced energy costs that do not choose to bear the burden of CO 2 emissions control. Only the Legislative and Justice Branches of our government, duly

protecting interests of US citizens, can sort out the wisdom of US citizens paying for the GHG emission sins of other nations that choose not to restrict their emissions, while willingly

accepting the transfer from the USA of energy intensive industries to their lower

cost energy

economies." Commenter 10502 remarks stating the unilateral USA CO 2 emissions regulations justified by

the SCC, commit the USA population to bear the increased costs imposed by

the regulations (a "hidden carbon tax" expressed by some critics) for highly uncertain future damages to be incurred not onl y i n the USA, but by the entire world

- wide society . This certainl y inflates the cost of SCC with respect to the cost that would accrue to the US only

. Commenter 10095 states in accordance with the White House Office of Management and Budget's (OMB) guidance on completing regulatory impact anal ys es, EPA must "focus on benefits and costs that accrue to citizens and residents of the United States." The RIA refers to the federal government's conclusion in its 2010 SCC technical support document that a global measure of the benefits from reducing U.S. emissions is preferable; however, solel y using global SCC values contradicts OMB's guidance and is an issue that was raised in public comments regarding the 2013 SCC Technical Support Document ("TSD"). EPA, when applying SCC values in the RIA, also failed to analyze a seven percent discount rate which OMB's guidance suggests using as a base

- case for regulatory anal yses. EPA, to remain in accordance with explicit OMB guidance, must reassess the proposal's impact assessment using domestic, not global, SCC values and SCC values with a discount rate of seven percent. Commenter 9194 adds that the IWG/OMB process is fatally flawed in that it fails to calculate the SCC using OMB's prescribed "base case" discount rate of 7% and impermissibly calculates global benefits instead of domestic benefits. C ommenter 10023 states because the proposed rule would govern onl y domestic activities, it is inappropriate for EPA to use a global social cost of carbon value to estimate the benefits of those activities. Cost

- benefit analy sis for domestic policy should ex amine domestic costs and benefits; including global benefits leads to bias in favoring regulation. Commenter 9396 International Benefits: The IWG chose to model the global benefits of GHG reductions and then to assign those benefits to US reductions. The i nclusion of costs of international harm is unprecedented and illegal. Administration authority to regulate international action or regulate for the international community is non

- existent. By

choosing to include international benefits the IWG has mixed app les in with oranges in the development of an appropriate SCC.4

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Commenter 9681 states that use of a global SCC value is alread y influencing other international actors to follow suit, the International Monetary Fund (IMF) applies in its policy reviews an SCC estimate based on the IWG number. 26 Given the potential influence of the IMF on the environmental policies of developing countries, 27 the pull that the IWG's global estimate has at the I MF could be very

advantageous to the United States, by motivating industrializing countries to use similar numbers in the future. In addition to this compelling strategic argument namel y, that it is rati onal for the United States and other countries to continue their reciprocal, tit

- for

- tat use of a global SCC value to achieve the economically efficient outcome on climate change (and avoid catastrophic climate impacts) legal obligations further prescribe using a global SCC value. A basic ethical responsibility to prevent transboundary environmental harms has been enshrined in customary

international law. For the United States to knowingl y set pollution levels in light of only domestic harms, willfully igno ring that its pollution directly imposes environmental risks including catastrophic risks on other countries, would violate norms of comity among countries. The United States would be knowingl y causing foreseeable harm to other countries, without compensat ion or just cause. Given that the nations most at risk from climate change are often the poorest countries in the world, such a policy would also violate basic and widely shared ethical beliefs about fairness and distributive justice. Indeed, taking a glob al approach to measuring climate benefits is consistent with the ideals of transboundary responsibility

and justice that the United States commits to in other foreign affairs. The unmistakable implication of the Convention is that parties including the Uni ted States must account for global economic, public health, and environmental effects in their impact assessments. Binding international agreements also require consideration and mitigation of transboundary environmental harms. Notabl y, the United Nations Framework Convention on Climate Change to which the United States is a party declares that countries policies and measures to deal with climate change should be cost

effective so as to ensure global benefits at the lowest possible cost. The Convention further commits parties to evaluating global climate effects in their policy decisions, by

employ [ing] appropriate methods, for example impact assessments . . . with a view to minimizing adverse effects on the econom y, on public health and on the quality of th e environment. Commenter 9681 states obligations exist in domestic U.S. law. For example, the U.S. National Environmental Policy

Act recognizes the worldwide and long

- range character of environmental problems and requires federal agencies to include reason abl y foreseeable transboundary effects in their environmental impact statements. While some individual statutes under which federal agencies will craft climate policies may be silent on the issue of considering extraterritorial benefits, arguably

the most important statute for U.S. climate policy the Clean Air Act requires the control of air emissions that affect other countries and so encourages a global assessment of greenhouse gas effects. Specificall y, Section 115 of the Clean Air Act directs EPA and th e states to mitigate U.S. emissions that endanger foreign health and welfare. The global perspective on climate costs and benefits required b y that provision should inform all regulatory actions

26 E.g., Benedict Clements et al., International Monetary Fund, Energy Subsidy Reforms: Lessons and Implications 9 (IMF Policy Paper, Jan. 28, 2013). 27 See Natsu Taylor Saito, Decolonization, Development, and Denial, 6 FL. A & M U. L. REV. 1, 16 (2010) (quoting former IMF counsel as saying today it is common to find these institutions [IMF and World Bank] requiring their borrowing member countries to accept and adhere to prescribed policies on environmental protection).4

- 64

developed under the Clean Air Act, including these proposed p erformance standards under Section 111. Commenter 9681 states two practical considerations counsel in favor of a global SCC value. First, unlike some other significant international environmental impacts, no methodological limitations block the quantitativ e estimation of a global SCC value. In recent regulatory impact anal ys es for major environmental rules, EPA has qualitatively considered important transnational impacts that could not be quantified. For example, in the Mercury and Air Toxics Standards, EPA concluded that a reduction of mercury emissions from U.S. power plants would generate health benefits for foreign consumers of fish, both from U.S. exports and from fish sourced in foreign countries. EPA did not quantify these foreign health benefits, how ever, due to complexities in the scientific modeling. Similarly , in the anal ys is of the Cross

- State Air Pollution Rule, EPA noted though could not quantify the substantial health and environmental benefits that are likel y to occur for Canadians as U.S. states reduce their emissions of particulate matter and ozone pollutants that can drift long distances across geographic borders. Yet where foreign costs or benefits are important and quantifiable, other federal agencies frequently include those calculations. Given that sophisticated models already exist to quantify

the global SCC, the global estimate is appropriate to use. Commenter 9681 continues a global SCC value is in the national interest because harms experienced b y other countries could significantly impact the United States. Climate damages in one country

could generate large spillover effects to which the United States is especially vulnerable. The mesh of the global econom y is woven tightl y, and disruptions in one place can have consequences around the world. As seen historically , economic disruptions in one country can cause financial crises that reverberate globally at a breakneck pace. In a similar vein, national securit y analysts in government and academia increasingl y emphasize that the geopolit ical instability

associated with climatic disruptions abroad poses a serious threat to the United States. Due to its unique place among countries both as the largest global econom y with trade and investment dependent links throughout the world, and as a mi litary superpower the United States is particularly vulnerable to international spillover effects. The 2010 TSD included a rigorous examination of global versus domestic SCC estimates. Consistent with the above discussion, the 2010 IWG reached the conclusi on to estimate a global SCC value, citing both the global impacts of climate change and the global action needed to mitigate climate change. The IWG restated these arguments in the 2013 TSD, and refers back explicitly to its discussion in the 2010 TSD. EPA should continue using a global SCC estimate in its regulatory impact anal ys es. Commenter 9681 states the IWG correctl y used a global SCC value. To design the economicall y efficient policies necessary to forestall severe and potentially catastrophic clim ate change, all countries must use a global SCC value. Given that the United States and many other significant play ers in the international climate negotiations have already applied a global SCC framework in evaluating their own climate policies, the conti nued use of the global value in U.S. regulatory decisions may

be strategically

important as the United States seeks to set an example for other countries, harmonize regulatory s ys tems, and take the lead in ongoing international negotiations. Binding legal obligations, basic ethical responsibilities, and practical considerations further counsel in favor of the United States using a global SCC value. To avoid a global traged y of the commons and an economically inefficient degradation of the world's climate re sources, all countries should set policy according to a global SCC value. The climate and clean air are global4

- 65

common resources, meaning they are free and available to all countries, but any one country 's use i.e., pollution imposes harms on the polluting country as well as the rest of the world. Because greenhouse gases do not stay within geographic borders but rather mix in the atmosphere and affect climate worldwide, each ton of carbon pollution emitted by the United States not only

creates domestic harm s, but also imposes additional and large externalities on the rest of the world, including disproportionate harms to some of the least

- developed nations. Conversel y, each ton of carbon pollution abated in another country will benefit the United States alon g with the rest of the world. If all countries set their greenhouse gas emission levels based on only their domestic costs and benefits, ignoring the large global externalities, the collective result would be substantially

sub

- optimal climate protections and significantl y increased risks of severe harms to all nations, including to the United States. "[E]ach pursuing [only its] own best interest . . . in a commons brings ruin to all." 28 By contrast, a global SCC value would require each country to account fo r the full damages of its greenhouse gas pollution and so to collectively select the efficient level of worldwide emissions reductions needed to secure the planet's common climate resources. Commenter 9681 continues well

- established economic principles d emonstrate that the United States stands to benefit greatl y if all countries apply a global SCC value in their regulatory decisions. A rational tactical option in the effort to secure that economicall y efficient outcome is for the United States to continue using a global SCC value itself. The United States is engaged in a repeated strategic game of international negotiations and regulatory coordination, in which several significant play ers, including the United States have alread y adopted a global SCC frame work. For the United States to now depart from this implicit collaborative dy namic by reverting to a domestic

- only SCC estimate could undermine the country 's long

- term interests in future climate negotiations and could jeopardize emissions reductions under way in other countries, which are already benefiting the United States. A domestic

- only SCC value could be construed as a signal that the United States does not recognize or care about the effects of its policy choices on other countries, and signal that i t would be acceptable for other countries to ignore the harms they

cause the United States. Further, a sudden about

- face could undermine the United States credibility

in negotiations. The United States has recentl y reasserted its desire to take a lead in b oth bilateral and international climate negotiations. To set an example for the rest of the world, to advance its own long

- term climate interests, and to secure greater cooperation toward reducing global emissions, strategic factors support the continued u se a global SCC value in U.S. regulatory

decisions. Though the Constitution balances the delegation of foreign affairs power between the executive and legislative branches, [t]he key to presidential leadership is the negotiation function. Every one agrees that the President has the exclusive power of official communication with foreign governments. The development and anal ys is of U.S. climate regulations are essential parts of the dialogue between the United States and foreign countries about climate change. Using a global SCC value communicates a strong signal that the United States wishes to engage in reciprocal actions to mitigate the global threat of climate change. The President is responsible for developing and executing the negotiation strategy to achi eve the United States long

- term climate interests. Currently , the President has instructed federal agencies to use a global SCC value as one important part of an implicit tit

- for

- tat negotiating strategy that

28 Garrett Hardin, The Tragedy of the Commons, 162 SCIENCE 1243 (1968).4

- 66

encourages other countries to take reciprocal a ctions that also account for global externalities. The President's constitutional powers to negotiate international agreements would be seriousl y impaired if federal agencies were forced to stop relying on a global SCC value. Commenter 9681 continues the United States has alread y begun to harmonize with other countries its policies on climate change and on the valuation of regulatory benefits. For example, the United States has entered into a joint Regulatory Cooperation Council with Canada, which has ado pted a work plan that commits the two countries to sy nchronizing aggressive greenhouse gas reductions, especially in the transportation sector. A separate Regulatory Cooperation Council with Mexico calls generall y for improving and harmonizing policy "b y s trengthening the anal yt ic basis of regulations," and its work plan acknowledges the transboundary nature of environmental risks. Mexico and Canada have both adopted greenhouse gas standards for vehicles that harmonize with the U.S. standards and that calcu late benefits according to a global SCC value. Canada has also used the IWG's global SCC value in developing carbon dioxide standards for its coal

- fired power plants, estimating $5.6 billion (Canadian dollars) worth of global climate benefits. The direct U .S. share of the net benefits from that Canadian regulation will likely

total in the hundreds of millions of dollars. Commenter 9681 states further efforts at regulatory harmonization are currently underway . For example, the United States is now negotiat ing a Transatlantic Trade and In vestment Partnership with the European Union, and a key element is regulatory

coordination. The European Union has alread y adopted an Emissions Trading Scheme (ETS) to cap its greenhouse gas emissions, and its Aviation Direc tive (which extends the ETS cap to international flights) is just one of the climate policies that could be shaped b y these negotiations. The European Commission has indicated its willingness to further reduce its ETS cap if other major emitters make propo rtional commitments a result that will only occur if countries consider more than their own domestic costs and benefits from reducing greenhouse gas emissions. Moreover, several individual European nations including the United Kingdom, France, German y, and Norway

- have adopted a global SCC value for use in their regulatory analy ses. Some other European countries, such as Sweden, have adopted high carbon taxes that implicitly operate as a high SCC that accounts for global externalities. Even countries that have proposed setting carbon prices below the global SCC value acknowledge that, in an optimal sy stem, prices worldwide would fully reflect the global harms of greenhouse gas emissions. Commenter 9666 states that RIA should not use global SCC to estimate benefits, citing UARG on OMB's recent proposed rule to require agencies to use the SCC in rulemaking proceedings. Commenters explain that because the proposed SCC value would govern only domestic activities, it is inappropriate for the asserted benefits of the activities to be measured on a global scale. Cost

- benefit anal ysis for domestic policy should examine domestic costs and benefits. Commenter 7977 states the use of the SCC (social cost of carbon) overinflates the social benefits of the proposed rule. Commenter 7977

- 4861 states that the SCC is modeled to estimate the global benefit of CO 2 reductions, wherein the proposed rule is specific to U.S. EGUs. Therefore, the social benefits calculated b y EPA should represent those specific to the U.S. rather tha n worldwide. This is also contrary to OMB Guidance as stated in the SCC Technical Support Document.4

- 67

Commenter 9423 The TCEQ, PUC, and RRC understand that the SCC estimates are based on the global benefits of C02 reductions vs. the benefits that would occur domestically in the United States. Given that the SCC estimates will be used to compare benefits to the domestic costs of a regulatory

action, the SCC estimates should be directly related to domestic benefits. TCEQ, PUC, and RRC note that 0MB Circular A

- 4 states that "analy sis of economically significant proposed and final regulations from the domestic perspective is required, while anal ys is from the international perspective is optional." In the 2010 Technical Support Document: Social Cost of Carbon for R egulatory

I mpact Anal ys is Under Executive 0rder 12866, the I nteragency

Working Group concluded that a global measure of benefits from reducing U.S. emissions is preferable in order to address the global nature of climate change and to show that internation al action is necessary since "even if the United States were to reduce its greenhouse gas emissions to zero, that step would be far from enough to avoid substantial climate change." The TCEQ, PUC, and RRC disagree that a global measure is preferable in tha t the public has the right to know the domestic benefits vs. the domestic costs of a regulatory action. The use of a global SCC could show that benefits exceed costs when they actually may not provide any

net benefits for the United States. I

n addition, th e Interagency Working Group determined that the models were currentl y inadequate to determine region

- or country
- specific estimates of the SCC, but "that a range of values from 7 to 23 percent should be used to adjust the global SCC to calculate domestic e ffects." This range was based on very generalized key

parameter assumptions using a 2.5 or 3 percent discount rate (which in itself is a subjective and questionable rate) or alternativel y b y proportionally determining benefit by the U.S. share of gross dom estic product. The Working Group itself acknowledged that this range was highl y speculative. The TCEQ, PUC, and RRC submit that the method of translating global benefits to domestic benefits is so speculative at this time that its use is not appropriate. I n summary , EPA should not use the SCC estimates in the current 111(b) rulemaking project until there has been a complete and thorough independent peer review of the process and model data.

The comments regarding the scope of the SC

- CO 2 estimates mirror th ose **Response 4.4**
**- 3:**  submitted to the Office of Management and Budget’s separate comment solicitation on the SCC (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefully examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the I WG responses to the comments on the OMB solicitation address the comments on the sco pe of SC

- CO 2 estimates and use of the estimates in this RI A. Specificall y, EPA concurs with the IW G’s response to these comments and hereb y incorporates them by reference. 29 After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to repres ent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

-
29 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 30 to 32 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

- july

- 2015.pdf.4

- 68

CO 2 estimates i n the analysis of illustrative benefit

- cost scenarios for new sources in RIA Chapter 5. 30 In addition, the comments regarding consistency with OMB Circular A

- 4, including selection of discount rates, are addressed in 4.4

- 5; response to comments about the selection of discount rates applies to the SC

- CO 2 is in 4.4

- 7. The remainder of this section elaborates on these comments in the context of this rulemaking. EPA agrees with the commenters who stated that a focus on global SC

- CO 2 estimates in RIAs is appr opriate. As discussed in the 2010 TSD, the IWG determined that a global measure of SC

CO 2 is appropriate in this context because emissions of most greenhouse gases contribute to damages around the world and the world’s economies are now highl y interconnect ed. To reflect the global nature of the problem, the SC

- CO 2 incorporates the full damages caused b y CO 2 emissions and other governments are expected to consider the global consequences of their greenhouse gas emissions when setting their own domestic polic ies. As stated in the OMB R esponse to C omments on SC

- CO 2 , if all countries acted independentl y to set policies based onl y on the domestic costs and benefits of carbon emissions, it would lead to an economically

inefficient level of emissions reductions which could be harmful to all countries, including the Unit ed States, because each country would be underestimating the full value of its own reductions. This is a classic public goods problem because each country ’s reductions benefit every one else and no country can be excluded from enjoying the benefits of other countries’ reductions, even if it provides no reductions itself. In this situation, the only way to achieve an economically efficient level of emissions reductions is for countries to cooperate in providing mutually

beneficial reductions bey ond the level that would be justified only by their own domestic benefits. By adopting a global estimate of the SC

- CO 2 , the U.S. government can signal its leadership in this effort. In reference to the public good nature of mitigation and its role in foreign relations, thirteen prominent academics noted that these " are compelling reasons to focus on a global [ SC

- CO 2 ]" in a recent article on the SC

- CO 2 (Pizer et al., 2014). In addition, as noted by commenters, there is no bright line between domestic and global damages. A dverse impacts on other countries can have spillover effects on the United States, particularl y in the areas of national security, international trade, public health and humanitarian concerns. GHG emissions in the United States will have impacts abroad, some of which may , in turn, affect the United States. For this reason, a purely domestic measure is likely to understate actual impacts to the United States. Also, as stated above, the EPA and th e other members of IWG believes that accounting for global benefits can encourage reciprocal action by other nations, leading ultimatel y to international cooperation that increases both global and U.S. net benefits relative to what could be achieved if eac h nation considered onl y its own domestic costs and benefits when determining its climate policies. Further, as explained in the 2010 TSD, from a technical perspective, the development of a domestic SC

- CO 2 was greatly complicated b y the relativel y few reg ion

- or country
- specific

30 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pdf.4

- 69

estimates of the SC

- CO 2 in the literature, and impacts bey ond our borders have spillover effects on the United States, particularly in the areas of national security , international trade, and public health. As a result, it was only possible to include an " approximate, provisional, and highl y speculative " range of 7 to 23 percent for the share of domestic benefits in the 2010 TSD. This range was based on two strands of evidence: direct domestic estimates resulting from the FUND model , and an alternative approach under which the fraction of GDP lost due to climate change is assumed to be similar across countries. Regarding the comments on Clean Air Act Section 115 and the implications for use of a global SC

- CO 2 , EPA notes that these c ommenters reads into section 115 limitations and requirements that do not appear in the statutory text. Section 115(a) of the Clean Air Act requires the Administrator to give formal notification to the Governor of a State in a very specific and limited c ircumstances. Specifically , the provision provides: " Whenever the Administrator, upon receipt of reports, survey s or studies from any duly constituted international agency has reason to believe that an y air pollutant or pollutants emitted in the United St ates cause or contribute to air pollution which may reasonably

be anticipated to endanger public health or welfare in a foreign country or whenever the Secretary of State requests [her] to do so with respect to such pollution which the Secretary of State alleges is of such a nature, the Administrator shall give formal notification thereof to the Governor of the State in which such emissions originate. " Section 115(b) further provides that notices issued under 115(a) are deemed to be findings under section 110(a)(2)(H)(ii) of the Clean Air Act and thus any state receiving such a notice must revise its state implementation plan to address the offending emissions. Section 115(c), in turn, provides that the section only applies " to a foreign country which th e Administrator determines has given the United States essentiall y the same rights with respect to the prevention or control of air pollution occurring in that country as is given that country

by this section. " In other words, unless the Administrator dete rmines a foreign country has given the United States the same rights section 115 gives to foreign countries, the Administrator is not required issue an y notification that would otherwise be required under 115(a). Contrary to the commenter’s assertion, sec tion 115 does not mention or refer to " reciprocity agreements. " Moreover, section 115(c) does not in any way limit the Administrator’s discretion to act under other statutory

provisions. It simply

limits the reach of 115(a) by defining which countries ar e covered b y the requirement for the Administrator to give formal notification under that section regarding pollution originating in the United States that affects health and welfare in a foreign country
. There is also no support in section 115 or an y pr ovision of the Clean Air Act for the commenter’s assertion that EPA is forbidden from counting harms or benefits occurring in other countries without first taking action under section 115. Section 115 requires the Administrator to issue a formal notificat ion in the limited set of specific circumstances outlined above and identifies the obligations that flow from the issuance of such notifications. It does not, as the commenter suggests, include language prohibiting the EPA from considering the impact of U .S. emissions on foreign countries in other contexts. Indeed, the United States has a long history of working together with other countries to address air quality issues. As explained above, the reciprocity

provision in section 115(c) merel y defines the applicability of section 115. Nothing4

- 70

in the text of the section addresses the extent to which EPA may consider or address the impacts bey ond its borders that are related to air pollution originating in the United States, or suggests that action under sec tion 115 is a prerequisite to counting international harms and benefits in an y anal ys is. Finally , there is no support for the assertion that section 115 requires EPA to list CO 2 and/or other GHGs as criteria pollutants and notify state Governors to submit plans under section 110 before taking an y action to mitigate the impact of U.S. emissions on public health and welfare in foreign countries or counting international benefits in other rulemaking contexts. Not only does the limitation commenters identify s imply not appear in the statutory text, but section 115(d) explicitly retains certain prior recommendations with respect to pollutants for which NAAQS have not been established. It would be absurd to interpret a section that explicitly retains recommendati ons relating to the impact of non

- NAAQS pollutants on foreign countries as prohibiting the Administrator from considering such impacts unless a NAAQS has been established for the pollutant. Regarding the comment that EPA lacks authorit y to regulate GHG emissions outside the fenceline, EPA notes that application of the SC

- CO 2 to estimate the social benefits of emission reductions is entirel y separate from regulating emissions. Conducting an economic anal ys is does not confer an y legal or regulatory obligations. See the preamble , including section III , for discussion about the scope of the final rule and the legal justification. As stated in the OMB Response to Comments on SC

- CO 2 , the IWG concluded that the only way to achieve an efficient allocation of resources for emissions reduction on a global basis is for all countries to base their policies on global estimates of damages. T he IWG has therefore continued to recommend the use of global SC

- CO 2 estimates in regulatory impact anal ys es . EPA agrees with the IWG conclusion and has used the global SC

- CO 2 estimates in the anal ys es of illustrative costs and benefit scenarios in the RI A. 

### 4.4.4 **Uncertainty Comment 4.4** 
**- 4**  **:** Commenter 9396 states that fo r the electric sector and the commenting parties associated with this filing, EPA's use of the SCC as a valuation tool in major rulemakings is especiall y important for consideration. The IW G and the National Research Council (NRC) have flagged increased un certainty regarding the relevance and accuracy of the SCC as developed by the IWG for the purposes of regulatory actions that derive the bulk of their benefits from reductions in GHGs. Despite the serious limits of both quantification and monetization, SCC estimates can be useful in estimating the social benefits of reducing carbon dioxide emissions. Under Executive Order 12866, agencies are required, to the extent permitted by law, "to assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify , propose or adopt a regulation onl y upon a reasoned determination that the benefits of the intended regulation justify its costs." The purpose of the SCC estimates presented here is to make it possible for agencies to incorporate the social benefits from reducing carbon dioxide emissions into cost benefit anal ys es of regulatory actions that have small, or marginal, impacts on cumulative global emissions. Most federal regulatory actions can b e expected to have marginal impacts on global emissions.4

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Commenter 9396 states the SCC as derived b y the IAMs is an extremely subjective metric that was developed to try

and quantify

the benefits of reducing only domestic GHG emissions. The degree of subje ctivity

is best captured in the 2010 IWG report which states, "When attempting to assess the incremental economic impacts of carbon dioxide emissions, the anal ys t faces a number of serious challenges. A recent report from the National Academies of Science (NRC 2009) points out that any

assessment will suffer from uncertaint y, speculation, and lack of information about (1) future emissions of greenhouse gases, (2) the effects of past and future emissions on the climate sy stem, (3) the impact of changes in cl imate on the phy sical and biological environment, and (4) the translation of these environmental impacts into economic damages. As a result, an y effort to quantify and monetize the harms associated with climate change will raise serious questions of scienc e, economics, and ethics and should be viewed as provisional." In other words, as with an y economic model, the outcome is only as reliable as the input. The IWG made a number of assumptions that are questionable and worth y of a broader policy review inclus ive of public participation and public comment prior to finalization and application in the regulatory

development process. The IWG estimated benefits of reductions hundreds of y ears into the future, well bey ond any reasonabl y predictable time horizon. Any rational assessment of future climate activity

must ascribe an increasingly discounted view of future economic harm as the level of uncertaint y regarding the probable outcome becomes correspondingl y uncertain. Commenter 9681: First, as a matter of law an d economics, uncertaint y in benefits estimates does not mean they

should be excluded from regulatory impact anal ys es. No benefit or cost estimate is certain. Further, the courts have explicitly rejected this argument with respect to the SCC, and executive orders dating back as far as the Reagan administration have all issued guidelines specifying explicit consideration of benefits even if the precise size of the benefit is uncertain. In 2008, the U.S. Court of Appeals for the Ninth Circuit determined that a gencies could not assign a zero dollar value to the social costs of the impacts of climate change. It determined that failing to count SCC benefits would be illegal. L ike the Court of Appeals, executive orders dating back to 1981 have also required agencie s to assess benefits and costs even when significant uncertainty exists. Every

president since (and including) Ronald Reagan has issued directives requiring that agencies conduct cost

- benefit anal ys es of proposed regulations where permitted by statute. Spe cificall y, agencies are directed to take into account benefits and costs, both quantitative and qualitative . . . and use the best available techniques to quantify anticipated present and future benefits and costs as accuratel y as possible. In this case, the National Highway Traffic Safet y Administration (NHTSA) had decided not to count any avoided climate damages in issuing fuel econom y standards. The court concluded: NHTSAs reasoning is arbitrary and capricious for several reasons. First while the record shows that there is a range of values, the value of carbon emission reductions is certainly not zero. The court's decision directly contradicts the petitioners argument that uncertainty renders the SCC invalid, as well as their demand that agencies use a v alue of zero. Commenter 9681 states the IWG used solid economic tools to address uncertainty and ought to go further in capturing the full extent of its implications. The IWG was rigorous in addressing uncertaint y. First, it conducted Monte Carlo simulati ons over the IAMs specifying different possible outcomes for climate sensitivity (represented by

a Roe and Baker Distribution). It also used five different emissions growth scenarios and three discount rates. Second, the IWG reported the various moments an d percentiles of the resulting SCC estimates. Third, the IWG put4

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in place an updating process, e.g., the 2013 revision, which updates the models as new information becomes available. As such, the IWG used the various tools that economists have developed ov er time to address the uncertaint y inherent in estimating the economic cost of pollution: reporting various measures of uncertainty, using Monte Carlo simulations, and updating estimates as evolving research advances our knowledge of climate change. The Mo nte Carlo framework took a step toward addressing what is probably the most concerning aspect of climate change, the potential for catastrophic damages, i.e., low probability /high damage events. These damages come from: uncertainty in the underlying parame ters in IAMs, including the climate sensitivity

parameter; climate tipping point thresholds that, when crossed, cause rapid, often irreversible changes in ecosy stem characteristics; and black swan events which refer to unknown unknowns. The anal ys is used a right

- skewed distribution of temperature (as captured in the Roe Baker climate sensitivity parameter) and an increasing, strictly convex damage function; this correctl y results in right

- skewed distributions of damage and SCC estimates. By using the mean v alues of these estimates instead of the median, IWG estimates partially captured the effects of small probability , higher damages from high

- level warming events, and as a result come to the wrong conclusions. An every day analogy might be if an individual trying to watch his weight b y dieting focused on median calorie intake per meal in a given month instead of the mean: the median calorie meal would be the meal such that half of all meals had calories below its value, and half above; the mean calorie meal w ould be the total number of calories in a month divided by

the number of meals eaten. Dieters often deviate from their plan by occasionall y having normal or excessive

- calorie meals. If they focused on their median calorie intake, they 'd never count the high calorie deviations and would undermine their efforts to lose weight (or, indeed, could even gain weight). Rather than the median, the mean would be the correct metric to use because it would capture these infrequent, high

- calorie breaks with the diet. An other analogy is airplane safet y regulation: safet y is protected b y guarding against the low

- probability but highly

dangerous events. With climate change we do not have the luxury of knowing how damaging the extremes could be; all we know is that there is a very real possibility

they could be devastating.) To reflect uncertaint y in estimates resulting from the right

- skewed distribution of SCC estimates, the IWG reported the SCC value for the 95th percentile from the central 3% discount rate distribution. This is done to reflect the estimation uncertaint y in terms of the possibility

of higher

- than

- expected economic impacts from climate change. While the IAMs take different approaches to explicitly modeling tipping points, which to a great extent is lacking in current versions of FUND and DICE, the IWG improved (but in no way fixed) the representation of uncertain catastrophic damages with the Monte Carlo anal ys is. Still, black swan events go completely

unaddressed in the IWG modeling framework, and to the ex tent that society has a strong desire to prevent the occurrence of catastrophic events that is not reflected in the estimates. Commenter (8925) states the uncertaint y in SCC estimates has not yet been fully characterized, nor the sensitivity

of the SCC ful ly

evaluated. Commenter adds that this is true for uncertainties that were considered in the USG methods, as well as uncertainties that were not considered. Commenter continues that for man y of the assumptions, the documentation does not discuss alternativ es and their potential implications, nor establish that the sensitivities currentl y evaluated are representative and therefore justified. Commenter similarly states that a number of uncertainties were not evaluated, including emissions and energy intensiti es and technological change, carbon cy cle modeling , radiative forcing , damage functions , adaptation, and 2300 extensions.(See comment for reference) Commenter concludes that without more comprehensive4

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consideration of uncertainty , it is difficult to kno w whether the current estimates are biased, or if the uncertaint y reflected in current estimates is sufficient and the estimates robust to alternative assumptions and additional uncertainties. One commenter 8925 states the robustness of the current USG SCC estimates has not been established, or sufficiently evaluated. **Response 4. 4** 
**- 4**  **:** The comments regarding the consideration of uncertainty in SC

- CO 2 estimates mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SC

- CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefull y examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefully examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the process comments summarized in this section. Specifically , EPA concurs with the IWG’s response to these comments and hereb y incorporates them by reference. 31 After careful evaluation of the full range of comments and associated technical issues desc ribed in section 4.5, EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

CO 2 estimates in the analys is of illustrative benefit

- cost scenarios for new sources in RIA Chapter 5. 32 EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. The remainder of this section elabor ates on the uncertaint y comments in the context of this rulemaking. EPA agrees with the comments that supported the rigor of its uncertaint y analysis. Uncertaint y is inherent in all regulatory

impact anal ys is. It is especiall y salient in regards to the S C

- CO 2 estimates because of their broad spatial and temporal dimensions. In addition to conducting Monte Carlo anal ys is for a subset of key parameters, the EPA and the other members of the IWG included extensive discussion of uncertaint y in the TSDs, and th e documentation for the individual IAMs themselves contains additional discussion of the assumptions and uncertainties in the models. The 2010 TSD and the updated 2013 TSD provided visual depictions of the distributions of the SC

- CO 2 estimates in addition to detailed statistics including percentiles and higher order moments. In addition to the extensive information provided in the TSDs, the IWG has provided the full range of model results to outside researchers upon request and will continue to do so.

31 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 28 to 30 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

- july

- 2015.pdf

. 32 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pdf.4

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Regarding comments on uncertaint y in the context of the socioeconomic

- emission scenarios, see 4.4

- 1. The 2010 TSD reports SC

- CO 2 estimates out to one decimal place (i.e., at least two significant digits) and the current TSD reports to the nearest dollar (i.e., two or three significant digits, depending on the ye ar and discount rate/statistic). EPA and the other members of the IWG chose not to use decimal places in the 2013 TSD to avoid the impression of artificial precision but will also explore presentat ion with a consistent number of significant digits. EPA and the other IWG members welcome the recommendations to strengthen the characterization of uncertainty and plan to seek external expert advice on the technical merits and challenges of potential approaches to improve the characterization and analy sis of uncertaint y in future updates. Regarding comments on the modeling of uncertainty in the SC

- CO 2 analy sis, including the uncertaint y explicitly

represented in the IAMs and whether it captures the full r ange of uncertaint y of the “true” value of the SC

- CO 2 , see section 4.4

- 8. EPA disagrees with the comments stating that the SC

- CO 2 is neither useful nor appropriate because of uncertaint y, the broad range of estimates. EPA also disagrees that it is inap propriate to try to value the impacts of reductions in CO 2 emissions. EPA notes that in 2007, the Ninth Circuit Court remanded a fuel econom y rule to DOT for failing to monetize the benefits of the CO 2 emissions reductions in its regulatory impact anal ys i s, noting that “the value of carbon emissions reduction is certainly not zero.” All regulatory

impact analy sis involves uncertainty . EPA acknowledges uncertaint y in the SC

CO 2 estimates but disagrees that the uncertaint y is so great as to undermine use o f the SC

- CO 2 estimates in regulatory

impact anal ys is. The uncertainty in the SC

- CO 2 estimates is fully acknowledged and comprehensivel y discussed in the TSDs and supporting academic literature. While uncertainty

must be acknowledged and addressed in regulatory impact anal ys es, even an uncertain anal ys is provides useful information to decision makers and the public. For example, if an anal ys is shows that benefits of a policy option consistently

do (or do not) justify

costs even over a broad range of estimate s, this may increase confidence in the robustness of this conclusion. Conversel y, if choices among parameter estimates within a plausible range significantl y affect the conclusions of the anal ys is, this is an important consideration in deciding how to weigh the anal yt ical results in the decision making process. The presence of uncertainty is thus not a reason to exclude the best available estimates of quantified/monetized benefits, as long as it is appropriatel y characterized. Rather, good regulatory practi ce requires that agencies use the best available scientific, technical and economic information to derive the best estimates of costs and benefits that they can, and then communicate to the public the limitations and uncertainties of the anal yses. The RIA for this rulemaking and the SCC TSDs clearl y discuss the limitations and uncertainties of the anal ys is. As noted in the RIA and TSDs, EPA is committed to periodic updates in the estimates to reflect ongoing developments in our understanding of the science and economics of climate change, including the treatment of uncertainty

.4

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### 4.4.5 Process
**- related C**  **oncerns**

Many commenters either voiced support for or criticized particular aspects of **Comment 4.4**
**- 5:**  the interagency

process used to develop the SC

- CO 2 estimates. Process issues raised included consistency

with applicable OMB guidance documents, peer review, transparency, opportunity for public comment, and appropriate use of the estimates. Numerous comments were made concerning peer review of the SC

- CO 2 and supporting models (9685 , 9396, 10618 , 9194, 8966 , 9423, 8032, 8925, 8966, 10095, 10662, 8032, 9194, 9422 , 9195). Commenter 8925 states the USG SCC modeling application has not been explicitly peer reviewed, and two commenters (8925, 9592) state that the Administration should also consider model

- specific peer review. Commenter explains that there is a significant difference between model peer review and peer review of an application of the model. Commenter adds that peer review of all three models coul d substantiate whether or not all of the models used are of equivalent caliber, and similar enough structurally. Commenter 9592 concludes that EPA should withdraw the SCC from use in any rulemaking where the SCC is used to justify and regulation until the peer review and public comment process has transpired. Other comments regarding peer

- review, transparency , and public comment included:

 EPA, as a participant in the I WG, must subject the Technical Support Documents on the Social Cost of Carbon to independ ent peer review as directed b y the President and mandated b y the Information Quality Act (IQA) guidelines for Highly Influential Assessments. President Obama has stressed the importance of adhering to established scientific procedures, including independen t peer review, when making policy decisions. EPA has chosen to ignore this clear mandate in the instance of the SCC TSD's and the use in rulemaking. In addition to general public comment, independent peer review of scientific assessments is essential inclu ding: the models and the formulations of key drivers of the models including emissions, CO 2 concentrations, temperature response to the natural forcings, sea level rise, and the details of the elements of "damage function" is required.

 The EPA should subj ect the Interagency Working Group's Social Cost of Carbon TSD to independent peer review before it can use the SCC any rulemaking. The principles for this process are stipulated in the I nformation Quality

Act (signed b y President Clinton in 2000) implement ed through the 2005 guidelines for peer review. The OMB guidance recognizes that OMB is responsible for overseeing compliance with its rules regarding the quality

of disseminated information, which include the peer review guidance. This is a statutory

resp onsibility

under 44 U.S.C. Section 3504(d)(1), which is incorporated b y reference into the IQA. The OMB peer review guidance states "OI RA [of OMB], in consultation with OSTP, shall be responsible for overseeing implementation of this Bulletin."

 OIRA could not approve any final rule using the SCC without ensuring that its peer review guidance has been fully implemented. At this time, it would be impossible for4

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OI RA to do so until EPA has completed the required peer review. The SCC assessment is a "highl y in fluential scientific assessment" ("HISA") under the definition of a HISA in the 2005 OMB IQA peer review guidance. The OMB guidance contains "requirements" for the conduct of impartial outside peer reviews of highl y influential scientific assessments. The U.S. Court of Appeals for the D.C. Circuit determined in Prime Time Int'l, Inc. v. Vilsack (599 F.3d 678, 685 (D.C. Cir. 2010)) that OMB guidance issued pursuant to the Information Quality Act is legally

binding. Other legal precedents confirm that the pee r review guidance is a legall y binding and enforceable "legislative rule."

 The provisions for HISAs are mandatory . A key term in the HISA definition concerns the meaning of the term "assessments." The OMB guidance also distinguishes between what is discre tionary

and what is mandatory , based on use of the terms "requirements," "shall," and "must." The term "scientific assessment" is defined in the OMB guidance as requiring a s ynthesis of various inputs. The OMB guidance definition states that it means "an e valuation of a bod y of scientific or technical knowledge, which t ypically sy nthesizes multiple factual inputs, data, models, assumptions, and/or applies best professional judgment to bridge uncertainties in the available information." The definition expres sly includes "model assessments."

 The OMB guidance contains numerous mandatory "requirements" for what must be done. The OMB peer review guidance has been recognized as mandatory by the EPA Inspector General. On September 26, 2011, the Inspector General transmitted a report focusing on whether EPA had complied with OMB's and its own peer review requirements in issuing its greenhouse gas endangerment finding. The Inspector General concluded that EPA had not complied with OMB's peer review "requirements" for HI SAs in certain respects. He also recommended that EPA revise its internal PEER REVI EW HANDBOOK "to accuratel y reflect OMB requirements..." Unfortunately EPA has chosen to ignore the IG's clear directive in its application of the SCC. All HISA's (highl y influential scientific assessment(s)) must be peer reviewed independent of the sponsoring agency. Public comment on a rulemaking proposal is not a substitute for peer review. EPA must instruct the peer reviewers to prepare a peer review report that will be made public. In the case of HI SAs, EPA must prepare a written response to the report. The IAMS have not been subjected to the required "Highl y Influential Scientific Assessment" peer review.

 Even though the new versions of the three integrated assessment models (IAM) used by the U.S. government to estimate the SCC (DI CE, FUND, and PAGE) were published in the "peer reviewed literature", the IQA requires a higher standard of peer review as described above. The fact that all of the models have been "peer re viewed" does not mean that any of them have been deemed to have any skill for predicting future emissions, temperatures, sea level rise or damages. EPA apparently has assumed that "new" means "better". EPA surel y knows this is not the case in terms of the IPCC models (AR4, AR5) that are used to provide the critical climate sensitivity input. The "appearance" in economics journals is not adequate since the main drivers of the impacts are related to science and technology

issues, not economics. The competence of the journal review should have been questioned by EPA and the requirements of the IQA followed.4

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 SCC2013 acknowledged the continued limitations of the approach taken b y the interagency

group in 2010 (documented in the original 2010 TSD). SCC2013 did no t revisit other assumptions with regard to the discount rate, reference case socioeconomic and emission scenarios, or equilibrium climate sensitivity . This was another major failure of EPA. Man y additional peer review papers were available and should have been considered in the SCC2013 update. The developers of the models have an inherent conflict and are not acceptable judges of the adequacy of the peer review for their "updates".

 The issue of public access to documentation and data is also a serious concern. All of the model documentation, formulations based on specific papers or interpretations, validation data and results, model code and cited papers should be available on a publ ic website so that the public can examine the material and independently confirm the calculations of the models and use alternative input. As EPA knows, this is not the case. EPA has established the CREM website for all of the models it uses in regulatory analy sis. The IAMs are missing. EPA claims that the IAMs were "updated" and "used" in peer

reviewed literature. However there is no documentation that the IAMs used in either SCC 2010 or SCC 2013/2013rev were ever independently peer - reviewed and validated as required b y OMB's legally binding guidelines. EPA should immediately terminate this proceeding until the current OMB process of comment, response and resolution on Docket OMB

- 2013:0007

- 0001 has been completed.

 The SCC fails in terms of process and tran sparency . The SCC is the product of a closed secretive process. The SCC fails to comply with OMB's guidance for developing influential policy

- relevant information under the Information Quality Act, especiall y for a Highl y Influential Scientific Assessment (H IS A). The Integrated Assessment Models (IAMs) with inputs used for the SCC analy sis were not subject to independent peer review. The results of the SCC are fatall y flawed as a result of significant cumulative errors. Some commenters stated that the model ing used does not provide a sufficient range of accuracy for policy

- making purposes. OMB and the IWG failed to use the latest science which indicates that the equilibrium climate sensitivity (ECS) distributions used by the modelers caused the SCC to be ove r - stated. The models employ ed and the assumptions used were not subjected to peer review nor were the 2010 and 2013 SCC estimates developed b y the IWG. To meet to its obligations under the Information Quality Act guidelines and President Obama's directive on Transparency , EPA should promptly post on regulations.gov the following information: 1. Initial and all subsequent drafts of the SCC2010, SCC2013 and SCC2013r reports, 2. All comments provided on each draft and documentation on how the comments were res olved, 3. The names of the individuals responsible for the drafts and the resolution of the comments, 4. Full documentation of every version of the Integrated Assessment Models (DICE, FUND, PAGE), including: a. The versions of the model used in SCC 2010, S CC 2013 and SCC 2013r, b. The input to each run used in the anal ys is, c. The output of each model run, including the emissions as a function of time, the concentrations as a function of time, the temperature as a function of time, and the sea level rise as a function of temperature, d. Complete documentation of the formulas programmed in the models, e. Complete user instructions that will allow the4

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public to run the models and replicate the results, f. All data used to validate the models, and g. All valid ation run results. 5. The journal articles where each version of the IAMs used was "peer reviewed", and a. All cites to articles in which the results of the models were used (if an y articles appear in pay

- walled journals arrangements must be made for free public access), and b. All comments by

EPA and any

other USG agencies, employ ees, or contractors made as either peer reviewers or potential users. Commenter 9396 states use of the Social Cost of Carbon (SCC) in EPA Rulemaking violates statutory administrat ive requirements, Administration guidelines and the norms of peer review. The SCC is a metric developed b y an Inter

- agency Working Group (IWG) to place a cost on CO 2 emissions. The IWG defines the SCC as an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given y ear. The IWG issued an initial estimate of the SCC in 2010 without notice and public comment. In May of 2013, the IWG, without notice and public comment, adjusted the calculations used to account for the SCC. The change implemented in the TSD 2013 revision substantially increased the cost estimate to a degree that will have an identifiable and meaningful impact on future regulatory decisions. The IWG held no public meetings and no public input was sol icited prior to either the 2010 or 2013 publication of the SCC. Commenter 9396 Commenter's concerns with the SCC are outlined in detail later in these comments. It is critical that the models, assumptions used in the models and the entire IWG administrati ve process, including access to all data and analy ses used, be opened to all stakeholders for comment and review and that the entire process fully comply with Executive Branch guidelines, the Administrative Procedures Act (APA) and the Data Quality Act (DQ A.) Commenter 9396 states that the development of the Social Cost of Carbon violates the Administrative Procedures Act (APA) and the Information Quality Act (IQA) and cannot be used by the EPA in this rulemaking. Uncertainties with the models and assumptio ns used to develop the SCC render the SCC inappropriate for policy and rulemaking. EPA refers to the social cost of carbon (SCC) in the Regulatory Impact Anal ys is (RIA) for this proposed rule. The SCC is a metric developed by an Inter

- agency

Working Group (IWG) formed by the Administration, headed by the Office of Management and Budget (OMB) and the Council of Economic Advisors (CEA), to place a cost on CO 2 emissions. According to an EPA letter to ranking member of the Senate Environment and Public Works Co mmittee (EPW), it appears that much, if not all, of the analy sis developing the SCC was done by EPA. The IWG defines the SCC as an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given ye ar. The same repor t goes on to state that [i]t is intended to include (but is not limited to) changes in net agricultural productivity , human health, property damages from increased flood risk, and the value of ecos ys tem services. In this rulemaking, EPA used the SCC as one of its screens to justify the designation of partial CCS as BSER for new coal plants. In response to an IQA petition submitted to OMB on September 4, 2013 b y a group of trade associations, OMB solicited public comment on the SCC through a public comment p rocess that applies to all Federal rulemakings and indicated that the SCC was intended for use b y all agencies measuring the social cost of carbon emissions as they evaluate costs and benefits of rules. Thus OMB identified development of the SCC as a rulem aking to be used in other rulemakings.4

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The Interagency

Working Group's (IWG) use of the Integrated Assessment Models (IAMs) do not meet the IQA standards for policy

- making including utility , transparency , and robustness. Commenters 9685 and 9687 raised iss ue with EPA's use of the Social Cost of Carbon (SCC). The commenters believe that E.O. 12866's mandate to perform a transparent cost

- benefit anal ys is was not met with EPA's significant errors using the SCC in its regulatory anal ys is. The commenters state d that EPA violated E.O. 12866 and offer a numbered list of requirements that EPA must comply

with prior to issuing any SCC technical support document or proposing any rule pursuant to E.O. 12866 that include the following: 1. EPA must post a peer review plan in the peer review Agenda on its Science Inventory and establish a mechanism whereb y the public can comment on the plan. It should also consider inviting public and/or professional society nominations for the independent peer review group. EPA should post a draft charge to the peer reviewers and request comment on the draft charge. 2. EPA must select a group of peer reviewers. The selected peer reviewers must be independent from the government, be impartial experts, and be sufficient in number to fairl y and impartiall y represent expertise in science, technology, economics, statistics, and modeling. The peer reviewers must be free of any conflict of interest. Selection should be in conformance with National Academy procedures, as indicated in the OMB guidance. 3. EPA must develop a charge for the peer reviewers that instructs them to address all the assessment issues (including costs) reflected in the SCC, while avoiding allowing an y policy considerations that would bias their deliberations and conclusions to intrude. The charge must also include instruction on the information quality standards in OMB's 2002 general IQA government

- wide guidance. The agency (either in the charge or otherwise) must instruct the peer reviewers to prepare a written report stating thei r conclusions in response to the charge, and advise them that the report will be made public. 4. EPA must give the peer reviewers and the public access to all materials relevant to their review, including the ability to run the models. 5. EPA must sponsor at l east one public meeting of the peer review group at which interested members of the public can make oral comments. It must also provide an opportunity

for written public comments. OMB must ensure that the peer reviewers have access to all significant publi c comments on the scientific/technology /economics evaluation issues. 6. Upon completion of the peer review, EPA must make available to the public the peer reviewers' report, the charge, and the reviewers' names, affiliations, and areas of expertise. 7. EPA must provide a written response to the peer review report in which it discusses whether and wh y it agrees or disagrees with its conclusions. EPA must require that any agency include in the administrative record for any final rule that relies on the SCC a "cer

tification" explaining how the agency has complied with the OMB peer review guidance and the applicable (2002) general information quality guidelines. Other commenters expressed support in a joint letter (9681) for the process used to develop the SCC estim ates:4

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The IWG's choice of three IAMs was fully justified but should still be revisited in its next iteration. In its calculations of the SCC, the IWG relied on the three Integrated Assessment Models (IAMs) available at the time, all with a long record of peer - reviewed publications that link phy sical and economic effects: the Dy namic Integrated Model of Climate and the Economy (DICE), the Climate Framework for Uncertaint y, Negotiation, and Distribution (FUND), and Policy Analy sis of the Greenhouse Effect (P AGE). The government's first SCC estimates, published in 2010, used the then

- current versions of the models; the recent update emplo yed revised, peer

- reviewed versions of the models but maintained the underlying assumptions of the 2010 IWG anal ys is. As stated by the 2010 IWG, the main objective of [the 2010 IWG modeling] process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. They represent the state

- of

- the

- art IA Ms. Each of these models has been developed over decades of research, and has been subject to rigorous peer review, documented in the published literature. The anal yt ic work of the IWG has been transparent. The 2010 Technical Support Document (TSD) set out in detail the IWG's decision

- making process with respect to how it assessed and employ ed the models. Because the 2013 IWG made no changes to the input assumptions and procedures for deriving its SCC estimates, the 2013 TSD discusses only how the three Integrated Assessment Models (IAMs) used in the anal ys is were updated in the academic literature over the three

- ye ar interim period by the independent researchers who have developed these models. The 2013 TSD also establishes that the increase in the SCC est imate from 2010 to 2013 resulted solely from updates to the three underl yi ng IAMs. The OMB recently

created a further opportunity for public comments and transparent review specificall y on the calculation of the social cost of carbon. Additionall y, the comment period on these greenhouse gas proposed performance standards for power plants are y et another opportunity

for continued dialogue about areas requiring further study . Such repeated comment processes demonstrate that the IWG's SCC estimates were develo ped and are being used transparentl y. Given their strong grounding in the best science available, nothing should prevent the current, continued use of this well

- established estimate. As economic and scientific research continues to develop, future revision s will be able to further refine existing estimates based on the latest peer

- reviewed literature and the latest updates to the quality of the overall modeling exercise. Commenter contends that the SCC is an important and accepted tool for regulatory policy

- making based on well

- established law and fundamental economics. Despite recent attacks from fossil fuel and other industry groups, the legal and anal yt ic basis for using the SCC is clear and well established. Several industry groups recently

submitted a p etition to OMB and the individual agencies involved in the IWG requesting the prohibition of the use of the 2010 and 2013 SCC estimates by

the government and the withdrawal of the supporting documents that describe the calculation of the SCC. In addition s ome of the same parties recently weighed in on the use of the SCC in a Department of Energy rulemaking. In parti cular, petitioners contend: 1) that estimates of the SCC are purportedl y too uncertain and imprecise to be used for regulatory anal ys is. The pet itioners argue that alleged uncertainty and imprecision renders the SCC an illegitimate tool for use in regulatory impact analy ses. They

discuss a number of technical methodological approaches reflected in SCC models used by the IW G, such as the time horiz on of the anal ys is and the choices of which direct and indirect benefits to include, and mistakenl y conclude that the limitations of SCC estimates preclude the IWG' s use of them. Petitioners4

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misrepresent both the view of the Intergovernmental Panel on Clim ate Change (IPCC) and economists own assessments of SCC limitations. 2) That the IWG supposedly did not follow appropriate protocols in either its estimation or use of the SCC. The petitioners claim that the IWG failed to sufficiently describe the uncertai nties in its analy sis; made inappropriate technical choices with respect to discount rates and the choice of a global rather than domestic SCC; failed to go bey ond the extensive peer review of the underlying models and have its use of the models peer revie wed; and denied stakeholders proper notice or opportunit y to comment on the IWG's use of updated versions of the underl yi ng models. 3) In light of these two claims, these industry critics argue that the SCC must be banned from use while it undergoes a whol ly new public review process. They

assert that the IWG' s SCC estimates are arbitrary and capricious, and likel y overestimated. While the SCC would be under re

- review, the petitioners request that OMB require agencies to assign a value of zero to carbon pol lution damages. The call for best available techniques addresses all of the petitioners’ specific comments around appropriate time periods and other modeling choices: The IWG's use of Integrated Assessment Models (IAMs) reflects the best available, peer

- re viewed science to tall y the benefits and costs of specific regulations with impacts on carbon dioxide emissions. The IAMs include benefits and costs that have been quantified to date. Other modeling assumptions represent reasonable choices on the part of t he IWG. For example, cutting off the analy sis after around 300 y ears simpl y reflects the fact that any benefits and costs thereafter are de minimis given the strong impact discounting has on reducing the value of distant effects in the SCC. Similarly , peti tioners assert that assumptions around socio

- economic pathway s do not properly reflect the impact of current regulations and, therefore, lead to double counting. The IW G should indeed periodically update its choice of socio

- economic scenarios to reflect ma jor changes in economic growth projections and other factors influencing emissions trajectories. However, the long

- term emissions impact of an y one particular energy

efficiency

or other carbon reduction standard is only marginal to the trajectory of socio

- economic scenarios, minimizing any risk of double counting the regulatory benefits. Second, while agencies are expected to use the best available science to inform their regulatory impact anal ys es, there is no legal basis for demanding that an agency 's ana ly sis itself undergo academic peer review. What is required is that agencies undertaking rulemakings provide public notice and an opportunity for public comment on their anal ys es, and respond to those comments. The petitioners have had multiple opportuniti es to comment on the IWG's analy sis and will have additional opportunities to do so in future rulemakings. The IW G's cost of carbon estimates have been referenced in more than fort y rulemakings to date, and agencies have responded to relevant comments subm itted thus far. Indeed, man y of the changes the IW G made in its updated methodology

were in response to such comments. This comment period from EPA provides y et another opportunit y for feedback. The bottom line is that the IWG has properly and lawfully use d the best available techniques to quantify the benefits of carbon emission reductions, basing its analy sis on the peer

- reviewed literature. When agencies use the IWG' s estimates of the SCC to calculate the benefits of a rulemaking, they have taken, and wi ll continue to take, comment on the SCC and the process used to derive that value. That is what the law and good policy requires. The petitioners offer no alternative estimation procedure. They simply ask OMB and rulemaking agencies to contravene the Ninth Circuit's decision by substituting zero for the IWG's best estimate of the costs of carbon pollution. This should be seen for the cy nical tactic that it is: an attempt to delay

any action to cut carbon pollution. Commenter 9681 continues the IWG's anal yt i c process was science

- based, open, and transparent. To facilitate accounting for the costs of climate impacts and the benefits of reducing carbon4

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pollution in regulatory

proceedings undertaken b y different agencies, the United States government assembled the IWG in 2010 to develop an estimate of a social cost of carbon that can be utilized in rulemakings and other pertinent settings across the federal government.5 The 2010 estimate of carbon pollution reduction benefits has been used in several benefit

- cost anal ys es related to federal rulemakings. The IWG recentl y released an updated set of SCC estimates, centered at approximately $37 per metric ton of CO 2 for emissions in the y ear 2015, in 2007 dollars at a 3% discount rate. The 2013 SCC estimates are highe r than those from 2010, reflecting the growing understanding of the costs that climate impacts will impose on society

. (The 2010 central estimate for 2015 was $24/ton.) The increase in the SCC estimate is important because it reflects the growing scientifi c and economic research on the risks and costs of climate change, but is still very

likely an underestimate of the economic cost of carbon emissions. The increase is also necessary given the costs of climate change that we are already experiencing, such as those associated with sea level rise and rising temperatures. Climate change is making coastal flooding, drought, and impacts from extreme weather worse. Commenter 9194 states the SCC calculation ignores requirements of OMB's Circular A

- 4 to calculate both benefits and costs for regulatory purposes. Commenter 9681 states they strongl y affirm that the current Social Cost of Carbon (SCC) values are sufficientl y robust and accurate to continue to be the basis for regulatory anal ys is going forward. As demonstr ated below, if an ything, current values are significant underestimates of the SCC. As economic and scientific research continues to develop in the future, the value should be revised, and we also offer recommendations for that future revision. Presidential orders on regulatory

anal ys is also support use of a global SCC value. In 2012, President Obama issued Executive Order 13609 on promoting international regulatory cooperation. The Order built on his previous Executive Order 13563, which in turn had affirme d its 1993 predecessor, Executive Order 12866, in requiring benefit

- cost anal ys is of significant federal regulations. Though White House guidance published in 2003 on regulatory impact anal ys is under E.O. 12866 assumed that most analy ses would focus on dom estic costs and benefits, it ultimately deferred to the discretion of regulatory

agencies on whether to evaluate "effects bey ond the borders of the United States." More importantly , since the publication of that guidance, President Obama has issued his own supplemental orders on regulatory anal ys is, including E.O. 13609, which clarified the importance of international cooperation to achieve U.S. regulatory goals. This 2012 order explicitly recognizes that significant regulations can have "significant intern ational impacts," and it calls on federal agencies to work toward "best practices for international regulatory cooperation with respect to regulatory development." By

employing a global SCC value in U.S. regulatory

development, and by

encouraging other countries to follow that best practice and account for the significant international impacts of their own climate policies, federal agencies will advance the mission of this presidential order on regulatory harmonization. Commenter 9194 states the IWG/OMB p rocess is fatally flawed in that it fails to calculate the SCC using OMB's prescribed "base case" discount rate of 7% and impermissibly calculates global benefits instead of domestic benefits. Commenter 9194

- 6571 continues the SCC calculation ignores requi rements of OMB's Circular A

- 4 to calculate both benefits and costs for regulatory

purposes. Also, Commenter 9194

- 6573 states that rulemaking is subject to the Administrative Procedures Act (APA) which requires public notice and identification of the legal authority for the rulemaking. OMB has provided no identification of a statutory authority or4

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basis for development of the SCC for use in all federal rulemaking. Use of the SCC in this rule making will constitute a violation of the APA and the Information Q ualit y Act (IQA). Commenter 9396 states the SCC estimates are considered under the premise that U.S. citizens will forego GHG generating activities (wealth creation/GDP) in the present to potentially forestall global change for the benefit of future global generations 100

- 300 years into the future. For the purposes of environmental review, the increased estimated benefit of GHG emission reductions helps justify

the cost of new regulations by increasing the presumed benefits of the regulation. The IWG issue d an initial estimate of the SCC in 2010 without notice and public comment. In May

of 2013, the IWG, without notice and public comment, adjusted the calculations used to account for the SCC. The change implemented in the TSD 2013 revision 33 substantially

in creased the cost estimate to a degree that will have an identifiable and meaningful impact on future regulatory decisions. The IWG held no public meetings and no public input was solicited prior to publication of either SCC. Efforts by non - governmental ent ities to secure information regarding which officials served on the IWG were thwarted and virtually no information regarding the meetings held b y the IWG, meeting minutes, background materials, underlying data or preliminary anal ys es have been made availab le to the public. Indeed, at this time, the public has not even been advised who actually attended the meetings. The SCC estimate adjustments made for 2013 are much higher than the ones reported in the 2010 TSD. By way of comparison, the four 2020 SCC (mea sured as the benefit per metric ton of CO 2 emissions) estimates reported in the 2010 TSD were $7, $26, $42 and $81 using 2007 dollar values. The updated SCC estimates for 2020 now are almost double that of the 2010 TSD. The updated numbers for 2020 are $12 , $43, $65 and $129 using 2007 dollar values. Each of these numbers ascribes a deemed damage function to each ton of CO 2 emitted into the atmosphere in a manner that ascribes a level of certainty that far exceeds what the Integrated Assessment Models (IAM) actuall y deliver. This unfounded level of certainty is further exacerbated b y the ascription of a single number based on averaging these numbers to develop the single number of $39 in 2013. Commenter's major concern is how the SCC will be used to influenc e decisions regarding energy generation options in the future. In the table below by using the IWG SCC median value, a ty pical coal

- fired power plant would have an annual social cost of over $210 million, with over $154 million attributed to CO 2 based on the SCC.75 Even with an environmentally preferred NGCC power plant, the annual social cost is over $74 million with $73 million of that cost coming from the SCC. That is a startling 98% of the social cost being attributed to CO 2 and the SCC. The question is , does this seem reasonable? Commenter 9396 states the decisions rendered b y the IWG regarding how best to account for these variables result in outcomes that are significant for the regulated industry . As Resources for the Future explained in a recent White Paper on the SCC: The impa ct of SCC numbers is not theoretical and has consequences for the government regulatory process and therefore for the strength of regulations on climate change that emerge from it. Application of this tool can be problematic to achieving optimum outcomes f or society . A growing literature indicates that developing the SCC requires assumptions that go well bey ond the usual boundaries of science or

33 TSD May 2013 found at http://www. whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_ria_2013_update.pdf.4

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economics. It requires many judgment calls that are hidden in complex economic models and largel y invisible to po licymakers and stakeholders. Commenters 10098, 8925, 8925, 8925, 10087 state generally that the SCC should not be used in any rulemaking procedure due to issues that include lack of transparency in formulating the SCC estimates, reliance upon modeling wi th inputs that lacked peer review, the failure to disclose and quantify key uncertainties involved in the modeling, and the use of a global benefit estimate that severel y limits the SCC's utility . Commenter 8925 states the description and discussion of the 2013 revisions is insufficient for understanding and interpreting the changes in the USG SCC results and that additional justification for many of the revisions would be helpful (e.g., space heating expenditure reductions, transient temperature responses, constant indirect methane radiative forcing effect, saturation, regional scaling factors, probability of a discontinuity , adaptation, CO 2 absorption, regional climate modeling). Commenter continues that discussion of uncertaint y would be helpful, and it w ould be reasonable to explain differences across models for similar components (e.g., sea level rise, transient temperature response, saturation, adaptation). Commenter closes stating it is unclear which revised elements were peer reviewed, and that a clear citation for each of the revisions in each model would be useful. Commenter 8925 states the SCC TSDs methods are not fully clear, basic information is lacking, and commenter requests additional detail and discussion regarding the following: PAGE and FUN D probabilistic methods and their differences; undiscounted damages over time from each model and for different scenarios; 2013 vs. 2010 GDP loss curves with respect to temperature (i.e., similar to Fig. 1a in USG, 2010); regional 2300 extensions; temperat ure projections to 2100 and 2300; and key

differences across models and their implications. Commenter further states it would be valuable to make all the results available for download, that information critical to the results should appear in the TSDs, an d that the documentation should be written to facilitate peer review. The comments regarding the process issues mirror those submitted to the Office **Response 4.4**
**- 5:**  of Management and Budget’s separate comment solicitation on the SC

- CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefull y examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefull y examined and evaluated all comments received regarding SC

- CO 2 through this rul emaking process and determined that the IWG responses to the comments on the OMB solicitation address the process comments summarized in this section. Specificall y, EPA concurs with the IWG’s response to these comments and hereby incorporates them by

refer ence. 34 After careful evaluation of the full range of comments and associated technical issues described in section 4.4 , EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

CO 2 estimates in the analysis of illustrative benefit

- cost scenarios for new sources in RIA

34 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 34 to 41 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

- july

- 2015.pdf

.4

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Chapter 5

. 35 EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. S ee section 4.1 for EPA’s detailed response to comments on climate change science and section 4.4

- 3 EPA’s detailed response to comments on the use of a global versus domestic SC

- CO 2 . See section 4.4

- 7, for EPA’s detailed response to comments about the selection of the discount rate. See also EPA’s detailed response to comments on the IAMs and damage functions in 4.4

- 1, EPA’s response to comments on uncertaint y in 4.4

- 4, and EPA’s response to comments regarding the application of the SC

- CO 2 estimates to this rulemaking in 4.4

- 8. The remainder of this section elaborates on the process comments in the context of this rulemaking. Legal/statutory authority for issuing the SC

- CO 2 estimates EPA agrees with commenters who believe that federal agencies have legal authority to develop these estimates, and notes that the IWG was cognizant of the Ninth Circuit decision referenced by thes e commenters when it decided to do so. EPA does not agree that the IWG’s issuance of the SC

- CO 2 estimates constituted an APA rulemaking. As noted in the OMB Response to Comments on SC

- CO 2 , t

he IWG did not agree with comments that issuance of the SCC estimates constitutes an APA rule making (page 34). The APA definition of a rule is " an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy

. " The SCC estimates are not designed to implement, interpret, or prescribe law or policy . Rather they are intended to provide guidance to agencies on a science

based methodology

for estimating the benefits of CO 2 reductions in regulatory impact anal ys is. EPA notes that OMB has long

- establ ished authority to oversee the regulatory review process, including preparation of regulatory impact anal ys es. OMB’s authority in this area is contained in Executive Orders 12866 and 13563, among others, and has been acknowledged b y Congress in a series of statutes, including the Small Business Regulatory Enforcement and Fairness Act, the Congressional Review Act, the Information Quality Act, and the Regulatory Right to Know Act. It is full y consistent with this authority for OMB to offer guidance to agenci es on best practices for conducting regulatory impact anal ys is, as it did, for example, in issuing Circular A

- 4. In the case of the SC

- CO 2 estimates and underlying TSDs, OMB determined that it was appropriate to exercise this authority

through a consensus

- based process involving a broad range of agencies that may issue rules affecting CO 2 emissions. The TSDs explain in detail the factual and policy basis for all of the various methodological choices involved in developing the SC

- CO 2 estimates. The IAMs are documented in the scientific literature. In addition, EPA has assisted interested members of the public in obtaining additional information on the workings of the models. It has also provided full technical details of its own use of the models, including o utput of model runs, to interested parties upon request. However, because the SC

- CO 2 estimates are not a rule, as a legal matter they are not subject to the arbitrary

and capricious standard of the APA.

35 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pd f.4

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Consistency with applicable OMB guidance documents, transparency, opportunity for public comment EPA agrees with the commenters that concluded the anal yt ic work of the IWG has been transparent and provided clear examples in support of this conclusion. As discussed below, EPA disagrees with the comments that (1) the process to develop the SC

- CO 2 was non - transparent and (2) that this process was inconsistent with the Administration’s goals for transparency in scientific information. Furthermore, EPA strongly disagrees with the claim that the Agency has not pr ovided information necessary

to understand the SC

- CO 2 estimates and that it " deprives the IWG, OMB and other executive rulemaking agencies of the benefit of an y public input on the critical decisions, inputs, and assumptions that form the basis of the SCC estimates. " First, EPA notes that the estimates and supporting TSDs are developed and issued through a consensus based process involving the entire working group. Second, EPA has assisted individual requestors in obtaining more detailed information about the modeling. For example, one requestor noted publically that the EPA " modelers have been very open, collegial, and helpful. " 36 EPA has also responded to numerous letters from members of Congress regarding the SC

- CO 2 estimates as well as requests under FOI A. 37 In particular, EPA believes that the process was inclusive, transparent, and appropriatel y considered public input. The TSDs fully document the methodology used to develop the estimates and the considerations that led the IWG to adopt this methodology. While the details of the IWG’s internal processes were not discussed in the TSDs, this is common for most government (and non

- government) documents. Such details were not considered germane to the public’s understanding of the SC

- CO 2 estimates and the methodology used to produce them, but a general overview is provided here. In developing the 2010 estimates, the EPA and other members of the IWG met frequentl y in the ye ar preceding the release of the February 2010 TSD. For the 2013 update, only a few meetin gs were needed because the group decided to make no changes bey ond incorporating the most recent versions of the IAMs. IWG members, in particular professional economic staff with modeling expertise oversaw the primary modeling and calculations for both the 2010 and 2013 SCC estimates using the most recent versions of the three IAMs available at the time. To develop the 2010 estimates, the staff members ran two of the three models and contracted with the developer of the third model to perform those runs. Th e contractor did not participate in an y of the interagency

meetings but rather received instructions for how to conduct the model runs (e.g., specification of the three sets of input assumptions as determined b y the working group). The staff members ran al l three models to develop the 2013 estimates. Decision making for both the 2010 and 2013 processes was b y consensus of IW G members. The details of internal discussions are deliberative, but the discussions were generall y technical in nature and the issues discussed

36 See http://dailysignal.com/2013/11/06/w hite

- house

- reopens - the

- scc/. 37 For example, January 16, 2014 letter from Joel Beauvais, Associate Administrator, to Senator Vitter. EPA also responded to FOIA requests submitted by Sidley and Austin (EPA

- HQ

- 2013

- 009517, EPA

- HQ

- 2013

- 009518, EPA

HQ

- 2013

- 009523).4

- 87

and conclusions reached are well documented in the TSDs. Regarding the transparency of the underlying models themselves, the IWG notes that they are well documented in the academic literature. The Government Accountability Office (GAO) also compl eted a review of the process used to develop the SCC estimates. In its 2014 report, GAO concluded that according to IWG participants, all major issues discussed were documented in the TSDs, which is consistent with Federal standards for internal control, and the processes and methods used were based on the principles of (1) consensus

- based decision

- making, (2) reliance on existing academic literature and modeling, and (3) disclosure of limitations and incorporation of new information through consideration o f public comments and revision of the estimates as updated research became available. Regarding the explanation in the TSD for the 2013 revisions, no changes were made to the input assumptions developed by the IWG between the 2010 and 2013 estimates. Th e only changes were those made b y the model developers themselves to the underl yi ng models, which are documented in the academic literature. To assist the public in understanding these changes, the 2013 TSD provides a brief summary of the most important on es, as well as references to the relevant literature where more detailed information can be found. As with the 2010 TSD, the IWG did not attempt to evaluate the modeling choices made b y the modelers. As noted in the OMB Response to Comments, by selecting the three “most widel y used impact assessment models” (NAS, 2010), the IWG intended to reflect a reasonable range of modeling choices and approaches that collectively reflect the current literature on the estimation of damages from CO 2 emissions. As explained in the 2010 TSD: The parameters and assumptions embedded in the three models vary widely . A key objective of the interagency process was to enable a consistent exploration of the three models while respecting the different approac hes to quantifying damages taken by the key modelers in the field. An extensive review of the literature was conducted to select three sets of input parameters for these models: climate sensitivity , socio

- economic and emissions trajectories, and discount r ates...All other model features were left unchanged, relying on the model developers’ best estimates and judgments...The sensitivity of the results to other aspects of the models (e.g. the carbon cycle or damage function) is also important to explore in the co ntext of future revisions to the SCC but has not been incorporated into these estimates. Accordingl y, the IWG did not attempt to explain in detail how the damage functions in the models were constructed or their strengths and weaknesses, either for the ear lier model versions used in the 2010 estimates or for the updated versions used for the 2013 estimates. Rather, stakeholders who are interested in these details are encouraged to consult the model documentation and the related academic literature reference d in the TSDs, as well as the model developers themselves. As noted in the OMB Response to Comments on SC

- CO 2 , the IWG accepts the point that clearer citations to specific model versions and revisions would be helpful and will attempt to address this in th e next update of the TSD. Regarding opportunities for public comment, EPA notes that such opportunities have been provided on all aspects of the SCC estimates in the interim estimates (2009) selected b y the IWG4

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and in the numerous proposed rules, including the proposal for this rulemaking, issued by EPA since February

2010 that made use of the estimates. As a general practice, EPA requests comments on all aspects of the regulatory impact anal ys is, thereby

providing ample opportunity for the public to commen t on SC

- CO 2 estimates used in these anal ys es. These comments helped inform the development of the 2013 revised estimates. In addition, OMB provided a stand

- alone comment period on the 2013 estimates. Regarding the adequacy

of the information provided to the public as a basis for comment, the TSDs provide a complete record of the methodology and assumptions used to develop the SCC estimates, including references to the academic literature. As previousl y noted, independent anal ys ts have sought and received i nformation from EPA allowing them to implement the IWG’s SC

- CO 2 approach and modify it further if they

choose. Additional documentation is available in the academic literature on the IAMs themselves. With regard to peer review, the assumptions and models employ ed in generating the SC

- CO 2 estimates are all drawn from the peer

- reviewed academic literature. According to the OMB Final In formation Qualit y Bulletin for Peer Review and guidelines in the EPA's Peer Review Handbook, if the Agency has determined that information has already been subject to adequate peer review, then it is not necessary to have further peer review of that information. See **Part II.2 of OMB’s Final Information Quality Bulletin for Peer Review, and EPA’s Peer Review**  **Handbook (3 rd**  **ed.) pa ges B**  **- 15 and B** 
**- 26.**  To further strengthen the robustness of the SCC estimate, EPA and the other members of the IWG plan to seek external expert advice on technical opportunities to improve the SCC estimates in future updates, including man y of the approach es suggested b y commenters and peer

- reviewed literature, and summarized in this document. Regarding comments that the estimates not be used until a future update that corrects the commenters’ perceived flaws is completed, EPA does not feel that it is appro priate to withdraw the current estimates. As previously noted, EPA has carefull y examined and evaluated the full range of comments and associated technical issues described in section 8.7.2, and determined that it will continue to use the current SC

- CO 2 e stimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate f

or incorporating the damages from incremental CO 2 emissions changes into regulatory

anal ys is. EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. EPA disagrees that the TSDs and SC

- CO 2 estimates are inconsistent with OMB and EPA guidance, including OMB Circular A

- 4 and guidelines under the Information Quality Act. To ensure that the SC

- CO 2 methodology is transparent, the TSDs are comprehensive and technicall y rigorous in explaining the sources of data, the assumptions employ ed, the anal yt ic methods applied, and the statistical assumptions employ ed. To ensure that the results are reproducible, EPA and other IWG members have provided technical assistance and modeling res ults to exter nal stakeholders upon request. Circular A

- 4 is a living document, which may be updated as appropriate to reflect new developments and unforeseen issues. OMB was fully involved in the development of the SC

- CO 24

- 89

estimates as a working group co

- c hair and supports the recommendations regarding the discount rate and the focus on global damages. The departure from the standard discount rate recommendations in Circular A

- 4 is explained in detail in the TSDs and in Section 8.7.2, comment 7, of this doc ument. Briefl y, the use of 7 percent is not considered appropriate for intergenerational discounting. There is wide support for this view in the academic literature, and it is recognized in Circular A

- 4 itself. The emphasis on global rather than domestic d amages is also explained in detail in the TSDs. Bey ond the fact that good methodologies for estimating domestic damages do not currentl y exist, basing decisions on only the domestic damages from carbon emissions will lead to an inefficient allocation of re sources to reducing them, especiall y if all countries adopt a similarly short

- sighted approach. An efficient outcome can onl y be achieved if all countries consider the full costs and benefits of their actions; the United States continues to be a leader in working to establish such a regime internationally

. In addition, consistent EPA

- wide implementation of its peer review and information quality act guidelines has been an agency priorit y for man y ye ars. The most recent document describing this EPA guidance , Guidance for Evaluating and Documenting the Qualit y of Existing Scientific and Technical Information, was issued in December 2012 as an addendum to a 2003 EPA guidance document entitled, A Summary of General Assessment Factors for Evaluating the Quality of Scientific and Technical Information. The December 2012 addendum does not create new standards for assessing and accepting data from other organizations

– the Agency ’s existing information quality

guidance continues to be applied to previous and future actions. Rather, the December 2012 addendum references EPA’s comprehensive existing information quality guidance and creates a consistent Agency

- wide approach for reviewing and documenting the use of existing scientific and technical information from other organizations. The 2010 TSD for the SC

- CO 2 estimates provides documentation of the interagency decisions and the 2013 TSD documents the technical update. Consistent with EPA’s 2003 data quality guidance document and the December 2012 addendum referenced above, the 2010 and 2013 TSDs for the SC

- CO 2 estimates describe the t yp e and quality of information used to estimate the social cost of carbon as well as the sources for the information used (documentation of modeling inputs

— e.g., climate sensitivity and s ocioeconomic scenarios

— in the peer reviewed literature). The 2010 and 2013 TSDs also provide exhaustive documentation of how the USG’s review identified, evaluated, and adopted the data, assumptions, and analy tical framework used to develop the SCC estimat es. Furthermore, the IA Ms used to develop the USG SCC estimates are documented within the peer reviewed literature and source code is available on the model developers’ websites or upon request from the relevant developer. Finally , commenters significantl y misstate the law regarding both the rights afforded under the Data Qualit y Act and the nature of guidance implementing it. First, Prime Time Int’l Inc. v. Vilsack, 599 F.3d 678, 685 (D.C. Cir. 2010) does not stand for the proposition that I QA claims are judiciall y reviewable, contrary to commenters’ assertions. The case makes no such statement, and the D.C. Circuit has indicated otherwise b y its citation, in State of Mississippi , of Salt Institute ’s holding that such claims are not reviewable (see text above). See also Mississippi Comm’n on Environmental Quality v. EPA , No. 12

- 1309 at n. 29, 2015 WL 3461262, (D.C. Cir. June 2, 2015) noting that Prime Time dismissed an IQA challenge “without addressing argument that the statute creates no legal rights in third parties”, and, as quoted above, stated that “almost every court that has addressed an Information Quality Act challenge has held that the statute4

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‘cr eates no legal rights in any third parties’”(quoting Salt Institute )). The commenter also fails to acknowledge all of the other cases uniforml y rejecting this claim, and indeed, fails to acknowledge the text of the IQA itself. See Styrene Info. &Researc h Ctr., Inc. v. Sebelius , 944 F. Supp. 2d 71, at 82 (D.D.C. 2013) (concluding “that the IQA and OMB guidelines do not provide judicially

manageable standards); Harkonen v. U.S. Dept. of Justice , 2012 U.S. Dist. LEX IS 171415, at **30

– 36 (N.D. Cal. 2012) (di smissing argument that D.C. Circuit reached the merits of an IQA claim in Prime Time ); Family Farm Alliance v. Salazar , 749 F. Supp. 2d 1083, 1096

– 1100 (E.D. Cal. 2010) (rejecting argument that D.C. Circuit in Prime Time found an implicit right of action under the IQA). The commenter also reads Prime Time as holding that the OMB Guidelines are binding legislative rules. Guidelines are just that: they provide assistance and are not binding. Describing these OMB Guidelines, the D.C. Circuit noted that th e Guidelines provide “‘policy and procedural guidance’”, are meant to be “flexible” and are to be implemented differentl y b y different agencies accounting for circumstances. State of Mississippi , 744 F.3d at 1347; see Styrene Info. & Research Ctr, Inc. , 9 44 F. Supp. 2d at 82. State of Mississippi antedates Prime Time . EPA consequentl y believes that the OMB Guidelines are not binding legislative rules. Nor are EPA’s Peer Review guidelines binding legislative rules. EPA first issued its Peer Review Pol icy

in 1993, and in 1998 issued its Peer Review Handbook to provide non

binding guidance for implementation of the Peer Review Policy . In 2004, OMB issued its Final Information Quality Bulletin for Peer Review (OMB Bulletin) to provide government

wide guid ance to enhance the practice of peer review. EPA subsequentl y updated its Peer Review Policy

and Peer Review Handbook to incorporate the provisions of the OMB Bulletin. EPA’s IQGs, Peer Review Policy , and Peer Review Handbook do not bind the Agency , but in stead guide EPA’s exercise of discretion when making decisions about information quality

and peer review. API v. EPA, 684 F. 3d 1342, 1348 (D.C. Cir. 2012) (chastising industry

petitioners for characterizing the EPA peer review guidance as binding (“perhap s the API should have had its brief peer

- reviewed”); State of Mississippi v. EPA , 744 F.3d at 1347 (D.C. Cir. 2013). The suggestion in the comments that EPA’s Inspector General has decreed that the Peer Review guidance is binding both mischaracterizes the IG ’s statements and that Office’s function. It does not determine the legal status of agency documents, much less countermand the holding of the D.C. Circuit just cited. Regarding the comment that the IAMs are not available via EPA’s website, EPA notes that the CREM is no longer an active body at EPA. In addition to obtaining information via the peer

reviewed literature and the SC

- CO 2 TSDs, the public can instead find information about the models in EPA’s Science Inventory database: DICE 38 , FUND 39 , and PA GE 40 )

38 http://cfpub.epa.gov/si/si_public_record_report.cfm?dirEntryId=240426&searchAll=DICE&sear chAll=integrated+assessment&actTy pe=&TIMSTy

pe=+&TIMSSubTy

peID=&DEID=&epaNum ber=&ntisID=&archiveStatus=Both&ombCat= Any&dateBeginCreated=&dateEndCreated=&dat eBeginPublishedPresented=&dateEndPublishedPresented=&dateBeginUpdated=&dateEndUpdat4

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Regarding comments on SC

- CO 2 and BSER: The SC

- CO 2 was not used, as one commenter stated, as a screen to justify the BSER. RIA chapters 3 and 5 present the SC

- CO 2 and the application of these estimates to consider the illustrative benefit and cost scenarios. Please see Section V.A of the preamble for discussion about the factors used to determine the Best S ys tem of Emission Reduction (BSER). **Carbon dioxide fert ilization**  **Comment 4.4**
**- 6:**  Commenter 9685 states the benefits of CO 2 fertilization and improved crop resilience are significant and must be reflected in any cost
- benefit anal ys is. Commenter includes excerpt from attached documents to support point. Comment ers disagreed about whether the integrated assessment models overestimate or underestimate CO 2 fertilization effects in the agriculture and forestry sectors. For example, commenter 9685 states the benefits of CO 2 fertilization and improved crop resilience are significant and must be reflected in an y cost
- benefit analy sis and referenced Id so (2013)

. However, commenter 9861 stated that “the models do not reflect recent research on agricultural changes, which suggests that CO 2 fertilization is overestimated, p articularl y in the FUND model, and that much, if not all, of the fertilization benefits may be cancelled out by

negative impacts on agriculture.” Commenter 9681 states the current inclusion of CO 2 fertilization benefits likely overstates its effects. The m odels do not reflect recent research on agricultural changes, which suggest the CO 2 fertilization is overestimated, particularly in the FUND model, and that much, if not all, of the fertilization benefits may be cancelled out by

negative impacts on agricul ture (e.g., extreme heat, pests, and weeds). If the agency is not able to adequately

model all agricultural impacts it should, at a minimum, remove CO 2 fertilization benefits. **Response 4.4**
**- 6:**  The comments regarding CO 2 fertilization effects in the agricul ture and forestry sectors and "greening effect" issues mirror those submitted to the Office of Management and ed=&dateBeginCompleted=&dateEndCompleted=&person ID=&role=An y&journalID=&publish erID=&sortBy=title&count=25&CFID=24359216&CFTOKEN=320 90976

. 39 http://cfpub.epa.gov/si/si_public_record_report.cfm?dirEntryId=240425&searchAll=FUND&sea rchAll=integrated+assessment&actTy pe=&TIMSTy

pe=+&TIMSSubTy

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. 40 http://cfpub.epa.gov/si/si_public_r ecord_report.cfm?dirEntryId=240711&searchAll=PAGE09&s earchAll=integrated+assessment&actTy pe=&T IMSTy

pe=+&TIMSSubTy

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Budget’s separate comment solicitation on the SC

- CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- C O 2 , EPA has carefull y examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefull y examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the CO 2 fertilization effects in the agriculture and forestry sectors and "greening effect" issues summarized in this section. Specificall y, EPA concurs with the IWG’s response to these comments and hereb y incorp orates them by reference. 41 After careful evaluation of the full range of comments and associated technical issues described in section 8.7.2, EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made t o reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incrementa l CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

- CO 2 estimates in the analy ses of illustrative costs and benefits in the RIA

. 42 EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. The remainder of this section elaborates on the comments in the context of this rulemaking. As noted in the OMB Response to Comments on SC

- CO 2 , t o date, the IWG has accepted the models as currently

constituted, and omitted any damages or beneficial effects that the model developers themselves do not include. The IWG recognizes that none of the three IAMs full y incor porates all climate change impacts, either positive or negative. Some of the effects referenced b y commenters (e.g., " catastrophic " effects, disease, and CO 2 fertilization) are explicitly modeled in the damage functions of one or more of the current models (although the treatment may

not be complete), and the model developers continue to update their models as new research becomes available. In fact, the IWG undertook the 2013 revision because of updates to the models, which include new or enhanced representation of certain impacts, such as sea level rise damages. In addition, some of the categories mentioned b y commenters are currentl y speculative or cannot be incorporated into the damage function for lack of appropriate data. Using an ensemble of three dif ferent models was intended to, at least partially , address the fact that no single model includes all of the impacts. We recognize that there may be effects that none of the three selected models addresses (e.g., impacts from ocean acidification) or that are likely not fully captured (e.g. catastrophic effects). EPA also recognizes that the impacts of climate change on agriculture is an area of active research and that methodological and data challenges persist. As a result there is uncertaint y as to the magnitude of these impacts and the role of interactions between changes in the climate and other factors, such as CO 2 fertilization, temperature, precipitation, ozone, pests, etc.

41 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see p gs 7

- 11 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

july

- 2015.pdf . 42 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- tsd

- final

- july

- 2015.pdf

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Additionally , these effects are likel y to vary widely across regions and crops. However, with high confidence the IPCC (2013) stated in its Fifth Assessment Report (AR5) that " [b]ased on many studies covering a wide range of regions and crops, negative impacts of climate change on crop yi elds have been more common than positive impacts. " As noted above, the I WG’s approach to date has been to rely on the damage functions included in the three IAMs by their developers. EPA agrees that it is important to update the SC

- CO 2 periodically to incorporate improvements in the understanding of greenhouse gas emissions impacts and will continue to follow and evaluate the latest science on impact categories that are omitted or not fully addressed in the IAMs. Also, EPA and the other members of the IWG will seek external expert advice on the technical merits and challenges of potential approaches to update t he damage functions in future revisions to the SC

- CO 2 estimates. See also 4.1

- 9 , for EPA’s response to comments about carbon fertilization, including EPA’s general treatment of the impact of increased CO 2 on plant growth and about treatment of CO 2 fertiliz ation in models. **Discount rate** Commenter 8925 states constant discount rates are inconsistent with the **Comment 4.4**
**- 7:**  economic growth models being used for this analysis and that discounting should be dynamic and a function of the consumption growth rate. Commenter 10091 states regarding discount rates that the I WG ignores OMB guidelines in its selection of discount rates to use in calculating the SCC. OMB Circular A

- 4 refers to OMB Circular A

- 94 which states that "a real discount rate of 7 percent should b e used as a base

- case for regulatory

anal ys is" and to show the sensitivity of the results to the discount rate assumptions "[f]or regulatory

anal ys is, y ou should provide estimates of net benefits using both 3 percent and 7 percent." Instead, the IWG opted to determine the SCC using discount rates of 2.5, 3, and 5 percent, and did not include results for a 7 percent rate. This has ramifications throughout the federal regulatory

agencies. For example, in previous Environmental Protection Agency discussions of a proposed new rule regulating discharges from steam electric power plants (and how the rule may

impact emissions from the plants), the EPA included a Table of the annualized benefits of the emissions reductions from NOx, SO 2 , and CO 2 . Following OMB guide lines on how to calculate costs and benefits

- the EPA reports its findings using both a 3% and a 7% discount rate. Yet as explained in a footnote to the Table (see below), the CO 2 benefits are calculated using the 3% and the 5% discount rate "because SCC ca lculations are not available for the 7 percent discount rate." The reason they are "not available" is that the IWG ignored the OMB guidelines and did not provide the SCC at a 7 percent discount rate for use in regulator anal ys es. Regulatory

agencies, like the EPA, have in the past, tried to follow the rules and calculate cost and benefits using both the 3 percent and 7 percent discount rates. Yet, when they express the benefits of reducing carbon dioxide emissions at the recommended 7 percent rate, they ar e actuall y going to use a number that is incorrect and inaccurate, and explain in a footnote why they are doing so. This is an unacceptable excuse, and is y et another example of why the IW G's determination of the SCC is inappropriate for use in federal reg ulatory anal ys es. Commenter states that in this proposed Rule, the EPA does not investigate the results of using a 7% discount rate on the comparison of new coal

- fired power plants with and without CCS4

- 94

technology

in direct violation of OMB guidelines. Co mmenter 9396 states that in violation of the Information Quality Act October 2002 OMB Bulletin, the IWG failed to run discount anal ys is using OMB guidelines, instead choosing to inflate estimated benefits by using a lower discount rate for calculations. Th e IWG has the flexibility to run modeling at whatever rate it chooses so long as the models include both 3% and 7%. The failure to run a 7% anal ys is has the consequence of skewing the average SCC to a higher level than if OMB policy was followed. Commenter 9681 provides recommendations on further refinements to the SCC. Industry groups have argued that the IWG anal ys is is flawed in its use of consumption discount rates, consideration of scientific uncertainty , and in counting both domestic and global damage s caused by our emissions. None of these criticisms have merit. Indeed, the IWG process uses assumptions that accord with economic and scientific theory . Economic models, and the scientific anal ys es they

draw from, are of course improving continuousl y. Future updates to the SCC should build on these and go further. As further refinements better account for climate change impacts not y et incorporated into the modeling, all indications are that the estimated benefits of curbing carbon pollution will rise subs tantially over current estimates. Commenter 9681 continues the IWG appropriatel y used consumption discount rates rather than returns on capital. With respect to the discount rate, the IWG conducted sensitivity analy sis of the results to three constant con sumption discount rates: 2.5%, 3%, and 5%; for each of the discount rates, the TSDs reported the various moments and percentiles64 (The moments of a distribution (of SCC estimates in this case) are, loosely speaking, the various values that describe the di stribution's shape: what value is the distribution centered around (mean); how wide is the distribution (the variance); whether the distribution is lopsided (skewness); and whether it is tall and skinny

or short and fat (kurtosis). A percentile is a statis tical measure of the value (the SCC value in this case) below which a specified percentage of (SCC) observations falls. The 1st percentile indicates the SCC value above which (the other) 99% of observed SCC values fall. The 99th percentile indicates the SC C value below which 99% of all observed SCC values fall. ) of the SCC estimates. The discount rate is one of the most important inputs in models of climate damages, with plausible assumptions easily leading to differences of an order of magnitude in the SC C. The climate impacts of present emissions will unfold over hundreds of y ears. When used over very

long periods of time, discounting penalizes future generations heavily due to compounding effects. For example, at a rate of 1%, $1 million 300 y ears hence equals over $50,000 today ; at 5% it equals less than 50 cents. The discount rate changed by a factor of five, whereas the discounted value changed b y more than five orders of magnitude. Depending on the link between climate risk and economic growth risk, e ven a rate of 1% may be too high. Uncertaint y around the correct discount rate pushes the rate lower still. The IWG correctl y excluded a 7% discount rate, a t ypical private sector rate of return on capital, for several reasons. First, ty pical financial de cisions, such as how much to save in a bank account or invest in stocks, focus on private decisions and utilize private rates of return. Private market participants ty pically have short time horizons. However, here we are concerned with social discount rat es because emissions mitigation is a public good, where individual emissions choices affect public well

being broadl y. Rather than evaluating an optimal outcome from the narrow perspective of investors alone, economic theory would require that we make the optimal choices based on societal preferences (and discount rates). Second, climate change is expected to affect primaril y4

- 95

consumption, not traditional capital investments. OMB guidelines note that in this circumstance, consumption discount rates are appro priate. Third, 7% is considered much too high for reasons of discount rate uncertainty and intergenerational concerns (further discussed below). Commenter 9681 also states that the IWG correctly adopted as one of its discount rates a value reflecting long

- term interest rate uncertaint y, and

- as a primary extension to current results should go further b y directl y implementing a declining discount rate. The IW G was correct in choosing as one of its discount rates an estimate based upon declining discount rate s (2.5%). Since the IWG undertook its initial anal ys is, a consensus has emerged among leading climate economists that a declining discount rate should be used for climate damages to reflect long

- term uncertainty in interest rates. Arrow et al (2013) presents several arguments that strongl y support the use of declining discount rates for long

- term benefit

- cost anal ys is. Perhaps the best reason is the simple fact that there is considerable uncertainty around which interest rate to use: uncertaint y in the rate points directl y to the need to use a declining rate, as the impact of the uncertaint y grows exponentially

over time. The uncertainty about future discount rates could stem from a number of reasons particularl y salient to climate damages, including uncerta inties in future economic growth, consumption, and the interest rate reaped by investments. A possible declining interest rate schedule for consideration by the IW G is the one proposed b y Weitzman (2001). It is derived from a broad survey of top economists and the profession at large in a climate change context and explicitly

incorporates arguments around interest rate uncertainty . Cropper et al (forthcoming) similarl y argues for a declining interest rate schedule and lays out the fundamental logic. Moreove r, the United States would not be alone in using a declining discount rate. It is standard practice for the United Kingdom and French governments, among others. The U.K. declining discount rate schedule that subtracts out a time preference value. France's schedule is roughl y similar to the United Kingdom's. Importantly , all of these discount rate schedules yi eld lower present values than the constant 2.5% Newell

- Pizer rate, suggesting that even the lowest discount rate evaluated by the IWG is too high. The consensus of leading economists is that a declining discount rate schedule should be used, consistent with the approach of other countries like the United Kingdom. Adopting such a schedule would increase the SCC substantially from the administration's central estimate, suggesting that even the high end of the range presented by the administration is likely too low. Commenters 9194, 7977 states the IWG/OMB process is flawed in that it fails to calculate the SCC using OMB's prescribed "base case" discount rat e of 7% and impermissibly calculates global benefits instead of domestic benefits. Commenter 9423 states a key variable in estimating the SCC is the discount rate. OMB Circular A

- 94 states that a discount rate of 7 percent should be used as a base case for regulatory anal ys is as a default position while acknowledging that in some cases, other discount rates may be appropriate. OMB Circular A

- 4 states that "For regulatory anal ys is, one should provide estimates of net benefits using both 3 percent and 7 perce nt." The impact of the use of different discount rates can be significant. In the revised Technical Support Document, the social cost of carbon for 2050 is $97/metric ton of C02 using a 2.5 percent discount factor while it is $26/metric ton of C02 using a 5 percent discount factor. EPA should include an analy sis using a discount rate of 7 percent, as suggested b y OMB. **Response 4.4**
**- 7**  **:** The comments regarding discount rates applied to the SC

- CO 2 estimates mirror those submitted to the Office of Management an d Budget’s separate comment solicitation on the4

- 96

SCC (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefull y examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also c arefull y examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the discount rates applied to the SC

- CO 2 estimates. Specifically, EPA concurs with the IWG’s response to these comments and hereb y incorporates them by reference. 43 The remainder of this section elaborates on these comments in the context of this rulemaking. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology and estimates to ensure that they continue to reflect the best available science and economics. Furthermore, EPA has determined that the SC

- CO 2 methodological recommendations require add itional research, review, and public comment before it can appl y them to a rulemaking context. To help sy

nthesize the technical information and input reflected in the comments, and to add additional rigor to the next update of the SC

- CO 2 , the EPA and a ll of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC

- CO 2 estimates, including the approaches suggested b y commenters and summarized in this document. Specificall y, EPA and all of the other IWG memb ers plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC

- CO 2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer

reviewed literature, will help to ensure that the SC

- CO 2 estimates used by EPA continue to reflect the best available science and methodologies. After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimate s continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

CO 2 estimates in the analysis of illustrative benefit

- cost scenarios for new sources in RIA Chapter 5. 44 EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process. The remainder of this section provides more detailed responses to the comments and recommendations.

43 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 20 to 25 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
- final

july

- 2015.pdf 44 See https://www.whitehouse.gov/sites/default/files/omb/in foreg/scc

- tsd

- final

- july

- 2015.pdf

.4

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OMB guidance in Circular A

- 4 recommends that discount rates of 3 percent and 7 percent be used in regulatory

impact anal ys is. The 7 percent rate is an estimate of the average before

- tax real rate of return to private capital in the U.S. economy . It is a broad measure that reflects the returns to real estate and small business and corporate capital and is meant to approximate the opportunity

cost of capital in the United States. The 3 percent rate is an estimate of the real rate at which consumers discount future consumption flows to their present value, often referred to as the social rate of time preference or the consumption rate of interest. As stated in the 2010 TSD, in a market with no distortions, the return to savings would equal the private return on investment, and the market rate of interest would be the appropriate choice for the social discount rate. In the real world, however, risk, taxes, and other market imperfections drive a wedge between the risk

- free rate of return on capital and the consumption rate of interest. While most regulatory

impact anal ys is is conducted over a time frame in the range of 20 to 50 ye ars, OMB guidance in Circular A

- 4 recognizes that special ethical considerations arise when comparing benefits and costs across generations. Although most people demonstrate time preference in their own consumption behavior, it may not be appropriate for societ y to demonstrate a similar pr eference when deciding between the well

- being of current and future generations. Future citizens who are affected b y such choices cannot take part in making them, and today 's societ y must act with some consideration of their interest. Even in an intergener ational context, however, it would still be correct to discount future costs and benefits generall y (though perhaps at a lower rate than for intragenerational anal ys is), due to the expectation that future generations will be wealthier and thus will value a marginal dollar of benefits or costs less than the current generation. Therefore, it is appropriate to discount future benefits and costs relative to current benefits and costs, even if the welfare of future generations is not being discounted. Estimates of the discount rate appropriate in this case, from the 1990s, ranged from 1 to 3 percent. After reviewing those considerations, Circular A

- 4 states that if a rule will have important intergenerational benefits or costs, agencies should consider a further sensitivity

anal ys is using a lower but positive discount rate in addition to calculating net benefits using discount rates of 3 and 7 percent. EPA and the other members of the IWG examined the economics literature and concluded that the consumption rate o f interest is the correct concept to use in evaluating the net social costs of a marginal change in CO 2 emissions, as the impacts of climate change are measured in consumption

- equivalent units in the three IAMs used to estimate the SC

- CO 2 . This is consiste nt with OMB’s guidance in Circular A

- 4, which states that when a regulation is expected to primarily affect private consumption

— for instance, via higher prices for goods and services

-- it is appropriate to use the consumption rate of interest to reflect how private individuals trade

- off current and future consumption. As explained in the 2010 TSD, after a thorough review of the discounting literature, the IWG chose to use three discount rates to span a plausible range of constant discount rates: 2.5, 3, and 5 percent per ye ar. The central value, 3 percent, is consistent with estimates provided in the economics literature and OMB’s Circular A

- 4 guidance for the consumption rate of interest. The upper value of 5 percent represents the possibility that climate damages are positively correlated with market returns, which would suggest a rate higher than the risk

- free rate of 3 percent. Additionally , this discount rate may be justified by

the high interest rates that many consumers4

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use to smooth consumption across periods. The low value, 2.5 percent, is included to incorporate the concern that interest rates are highl y uncertain over time. It represents the average rate after adjusting for uncertainty

using a mean

- reverting and random walk approach as described in Newell and Pizer (2003), starting at a discount rate of 3 percent. Further, a rate below the riskless rate would be justified if climate investments are negativel y correlated with the overall market rate of return. Use of this lower value also responds to the ethical concerns discussed above regarding intergenerational discounting. EPA recognizes that disagreement remains in the academic literature over the appropriate discount rate to use for regulatory anal ys is of actions with significant intergeneratio nal impacts, such as CO 2 emissions changes that affect the global climate on long time scales. EPA and the other members of the IWG will continue to follow and evaluate the latest science on intergenerational discounting and seek external expert advice on issues related to discounting in the context of climate change. Regarding recommendations for lower discount rates or a declining rate: As noted above, the EPA and the other members of the IWG selected a range of discount rates from 2.5 to 5 percent; a review of the literature and the reasoning that led to the selection of this range are discussed in detail in the 2010 TSD. Several of the issues raised by commenters were explicitly considered and were part of the rationale for the selected range. The 2010 TSD discusses both des criptive and prescriptive approaches to selecting discount rates. A descriptive approach reflects a positive (non

- normative) perspective based on observations of people’s actual choices (e.g., savings versus consumption and allocation of savings over more and less risky

investments). The prescriptive approach adds a normative component and incorporates judgments that decision makers believe should be reflected in the policy choices that the discount rate is intended to inform. For example, some have argued on ethical grounds that in the Ramsey

formula

— which dissects market rates into three components, the pure rate of time preference (ρ), growth rate of per

- capita consumption (g), and coefficient of relative risk aversion (η)

—the ρ component should be set to zero so that the welfare of all generations is valued equall y. After considering a range of plausible values from the literature for g and η, the IWG concluded that setting a very low ρ (e.g., 0.1 percent per y ear) could yield rates in the range of 1.4 to 3.1 percent. The 2010 TSD also discussed uncertaint y and its effects on discount rates. The certainty equivalent values of the future benefits of reducing current CO 2 emissions will be lower than the expected value if the benefits and future consumption are positively correlated, assuming people are risk averse on average. This in turn implies that when discounting expected future benefits a discount rate that accounts for uncertainty should exceed a riskless rate. As explained in the TSD, this consideration was part of the logic for setting the upper end of the selected range at 5 percent. EPA and other members of the IWG also considered the issue of “climate catastrophes.” To the extent that such outcomes may not be adequately

represented in the IAMs, the central tendency estimates from these models may not capture the full range of potential damages from CO 2 emissions. For this reason, in addition to the three mean SC

- CO 2 estimates using discount rates4

- 99

of 2.5, 3 and 5 percent, EPA and other members of the IWG recommended including a rate based on the 95th percentile damage estimate (with a 3 percent discount rate) for the upper end of the range of plausible SC

- CO 2 estimates. With respect to declining discount rates, EPA and other members of the IWG agrees that this is an important area of emerging research. However, no widely

- accepted declining discount rate schedule has yet been developed. Some key technical issues warrant careful consideration before adopting a declining discount rate schedule, such as determining how to update the discount rate schedule as uncertaint y i s resolved over time and ensuring that the use of declining discount rates does not lead to the possibility of time

- inconsistent choices. A recent workshop sponsored by the federal gov ernment resulted in a paper in Science authored by thirteen prominent economists who concluded that a declining discount rate would be appropriate to anal yze impacts that occur far into the future (Arrow et al., 2014). However, additional research and anal ys is is still needed to develop a methodology for implementing a declining discount rate and to understand the implications of applying these theoretical lessons in practice. The EPA and other members of the IWG will continue to follow and evaluate the lat est science on the use of declining discount rates in intergenerational contexts and seek external expert advice on issues related to discounting in the context of climate change. Finally , regarding the comment about the consistency of discount rates appl ied to the climate benefits versus other monetized impacts: while EPA continues to find the discount rates applied to the SC

- CO 2 estimates to be appropriate, it recognizes that different discount rates are applied to other impacts. The workshop mentioned in the preceding paragraph discussed how to apply discounting in a regulation where some costs and benefits accrue intra

- generationall y while others accrue inter

- generationally . The experts noted that one solution to this problem is to apply a declining d iscount rate schedule to all regulations. As previously noted, additional research and anal ys is is needed to develop a methodology for implementing a declining discount rate. The EPA and other members of the IWG will continue to follow and evaluate the latest science on the use of declining discount rates in intergenerational contexts and seek external expert advice on issues related to discounting in the context of climate change. **Application and a ggregation**  **Comment 4.4**
**- 8:**  Commenter 9666 states EPA sh ould update its modeling to include the most recent SC

- CO 2 estimates, noting that EPA has not updated its modeling since the rule was first proposed in 2012 and that OMB's current SCC estimates were updated twice in 2013. Commenter 9666 states EPA should refrain from utilizing SCC values until OMB has finalized its rule on the use of SCC among federal agencies. Commenter 9423 states EPA should not use the Office of Management and Budget's (OMB) Revised Social Cost of Carbon Estimates in the Cost/Benefit An al ys is. In Section 5.7 of the RIA, EPA uses the OMB's revised estimates for the Social Cost of Carbon (SCC) in estimating the cost and benefits of the subject regulatory proposal for new electric generating units. The TCEQ provided comments to 0MB regardin g their Technical Support Document: Technical Update of the Social Cost of Carbon (SCC) for Regulatory Impact Anal ys is under Executive 0rder No. 12866 published in the Federal Register on November 26, 2013. Given that OMB has requested comments on the SCC estimates, TCEQ, PUC, and RRC believe it is inappropriate for EPA to4

- 100

use the revised estimates in the 111(b) rulemaking as it deprives stakeholders the opportunity to comment on the final version of the OMB guidance. Notwithstanding TCEQ's objection to the use of the OMB guidance in the 111(b) rulemaking, TCEQ, PUC, and RRC offer the following further comments on EPA's use of the SCC estimates in the RIA. The assumptions, both scientific and economic, of the Interagency Working Group that developed the init ial SCC estimates are largel y unknown and were not subject to independent peer review as called for b y the Information Qualit y Act and 0MB's own internal guidelines. The TCEQ, PUC, and RRC strongl y recommend that the SCC estimates not be used in the 111(b) rulemaking until the entire process and data used in developing the SCC estimates are subjected to thorough, independent, external peer review. The models used to derive SCC estimates suffer from considerable uncertaint y and speculation in critical inputs including the amount of future carbon emissions, the impact of those emissions on the climate, and the monetization of those impacts. The uncertaint y associated with temperature increases is just one example. The models used by the United Nations Intergov ernmental Panel on Climate Change (IPCC) have not predicted the current stoppage of global warming, as evidenced by global temperature measurements, over the last 15 y ears. To the extent that I PCC model data was used in developing the SCC estimates, their use for the short term is clearl y circumspect and extrapolation of temperature increases and its impacts over a longer modeling time horizon is of even greater uncertainty

. Commenter 10618 states EPA uses the Social Cost of Carbon (SCC) to characterize pot ential carbon benefits associated with the rule, with even though it is widely acknowledged that these cost estimates are inaccurate, uncertain, and highly speculative. 45 EPA acknowledges in the RIA that "an y effort to quantify and monetize the harms associ ated with climate change will raise serious questions of science, economics, and ethics and should be viewed as provisional." As such, these calculations cannot form the basis of an adequate RIA. AEP has submitted comments on the SCC in its development and use and they are attached as Appendix F to this document. Commenter 9194 questions the appropriateness of using the IWG estimates of the SCC for regulatory

purposes whether for justifying BSER for CO 2 for coal plants under this rulemaking or in any other EGU rulemaking that will serve as a predicate for econom y - wide CO 2 regulations in the future. Commenter 9194 continues that EPA should not use the social cost of carbon (SCC) in this or any other rulemaking affecting electric generating units until the IWG process headed by the OMB has been subjected to public notice and comment and until the models, all assumptions used in the models, all underlying data used and all analy ses used by OMB and the IWG have undergone peer review and public notice and comment. Commenter 10091 states the social cost of carbon as determined b y the Interagency Working Group in their May

2013 Technical Support Document (updated in November 2013) and used by the EPA in this proposed Standards of Performance for Greenhouse Gas Emis sions from New Stationary

Sources: Electric Utility

Generating Units is unsupported by the scientific literature, not in accordance with OMB guidelines, fraught with uncertaint y, illogical and thus completely

45 S ee RIA 5

- 36 through 5

- 39

.4

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unsuitable and inappropriate for federal rulemaking. As such, use of the SCC in cost/benefit anal ys es in this proposed rulemaking should be suspended. Commenter 9396 states the use of the IWG SCC Can Produce Irrational Energy Choices: The SCC as produced by

the IAMs could also produce some irrational c onclusions in selecting the most cost
- effective sources for electric energy production. As seen in the table below, by using SCC values that could be developed well within the input assumptions of the IAM developers, it is possible to select base load gene rating choices that many in the industry

would consider absurd. The values developed in the table above assume that lower carbon energy will replace existing coal

- fired generation. By using the IWG central value SCC, all generating alternatives are more co st
- effective than coal

- fired generation with wind energy and biomass being more cost
- effective than an NGCC unit. By using the SCC high value, which is lower than one of the PAGE model developer recommends, wind, biomass and solar photovoltaic energy are c heaper than an NGCC base load unit. 46 Based on the SCC, one could easil y conclude that it would be very economical to shut

- down all fossil fuel electric generation and replace it with zero carbon generating sources. This conclusion would be considered absur d by most experts in the electric utility industry ; especially

since base load solar and wind powered generating plants are not y et commerciall y available. Commenter 9401 states EPA has not performed an anal ys is of carbon leakage which will occur as a result of the rule, thus overstating the benefits. Because manufacturing uses 25 percent of all U.S. electricit y, we are significantly impacted b y electricity p rices. Figure 1 illustrates that coal consistently

provides the lowest cost energy to generate electricit y. The rule would stop the use of coal for use in new power generating units and deprive manufacturing from the lowest cost power generation, thereby i mpacting competitiveness. It is important to note, that having coal as a major component of electricity fuel diversit y provides for increased reliability . Higher electricit y costs and reduced reliabilit y will shift EITE industries to other countries along with their jobs and GHG emissions, and accomplish nothing. The EPA must perform an analysis of carbon leakage that will occur as a result of the rule. Not having done so, the EPA has overstated the projected benefits of emission reductions and not accounte d for the associated loss of economic activity

and jobs moving outside the U.S. Without including the GHG leakage, an y benefits are arbitrary

and capricious. And, since most countries have higher power generation GHG rates, it would result in a net increas e in global GHG emissions. Commenter 9396 Averaging Model Results: The IWG provides an estimated benefit that fails to capture model uncertainty. For example, a $43/ton average benefit in 2020 is ascribed to model outcomes that range from $

- 22/ton (i.e. $ 22 in societal cost) to $727 in benefits. The variability associated with model run outcomes is sufficiently significant that an informed anal yt ical evaluation would conclude that determining a single number for the purpose of developing regulations is unw arranted and imprudent. Commenter 9681 states EPA should continue to use the current IWG estimate of the SCC. The current SCC estimates are biased downwards: more can and should be done to improve the SCC
46 The Social Cost of Carbon in US Regulatory I mpact Anal ys is: an Introduction and Critique, Johnson and Hope Journal of Environmental Studies and Science, September 12, 2012.4

- 102

and to ensure, through regular updates, that it ref lects the latest science and economics. But the necessary process of improving the ability of the SCC to fully

reflect the costs of climate impacts to society cannot hold up agency

rulemaking efforts. The SCC provides an important, if conservative, estimat e of the costs of climate change and the benefits of reducing carbon pollution. To ignore these costs would be detrimental to the health and well

- being of Americans and contrary

to law and Presidential directives to agencies to evaluate the cost of polluti on to society when considering standards to abate that pollution. In the context of agency rulemakings, the SCC provides the best available means to factor those costs into benefit

- cost anal ys es. Commenter also suggest that EPA encourage the IWG to continu ously update the SCC, as new economic and scientific consensus emerges. Such updates are in line with the stated intentions of the IWG, which committed to updating these estimates as the science and economic understanding of climate change . . . improves. Accordingl y, EPA should continue to use the IWG's latest SCC estimates in its regulatory impact analy ses on greenhouse gas performance standards under Section 111 of the Clean Air Act. Commenter 9514 states EPA properl y relied on the federal government's m ost recent estimate of the social cost of carbon and that the agency 's analy sis comported with the standard guidance for regulatory

anal ys is of costs and benefits. Commenter 9592 states that EPA's discussion of SCC in the RIA, as well as the sample calcul ations in the supporting technical document, "Technical Support Document: Social Cost of Carbon for Regulatory

I mpact Anal ys is, Executive Order 12866, Interagency Working Group on Social Cost of Carbon, United States Government" provide a pathway for futur e economic anal ys es that can justify

the use of natural gas as a future existing source GHG standard of performance. Commenter 8925 states the 2010 USG SCCs are problematic for evaluating non

- incremental changes in global emissions and, if applied, could result in misleading conclusions; that substantial management of future climate does not have a fixed future; and that good practice application guidance is needed to avoid misuse. Commenter 9396 also states the IWG's initial finding that the SCC was a use ful tool in assessing costs associated with incremental benefits or costs that are derived from federal actions is underscored when it goes on to highlight the concern about rules which have a primary purpose of reducing GHG emissions stating, "For policie s that have a large (non

- marginal) impact on global cumulative emissions, there is a separate question of whether the SCC is an appropriate tool for calculating the benefits of reduced emissions." Despite the admonition that the level of uncertaint y associ ated with the development of the SCC reduced its relevance as a policy making tool for the purposes of establishing cost

- benefit analy sis where GHG reductions present the predominant benefit, EPA is proceeding with regulatory actions that base significant r egulatory burdens on industry

based on GHG reductions calculated using the SCC. EPA and other federal agencies use the social cost of carbon (SCC) to estimate the climate benefits of rulemakings the projected net present value of carbon dioxide mitigation benefits over the next forty y ears from three vehicle rulemakings was estimated to range from $78 billion to $1.2 trillion ($2010), depending on which of the four SCC estimates were used (i.e., the average SCC at 5, 3, and 2.5 percent and the 95th percenti le SCC at 3 percent). Finding $1.2 trillion dollars of benefits derived from application of the SCC meaningfull y and substantially deviates from the warning4

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by the IWG that application of the SCC may be inappropriate in circumstances where the benefits fro m the SCC are large to the extent that reductions of GHG are justified by the SCC benefits. The policy

questions regarding decisions made by the IWG, such as choices concerning discount rates or measuring domestic regulation against global benefits and the application of the SCC have never been resolved or discussed in a public forum by the federal government but rages in the scientific and legal community . The best case for cost

- benefit analy sis is that the 2010 IWG recommendations are politicall y neutral in the sense of drawing on widely shared intuitions about human well

- being. But cost

- benefit analy sis cannot cope with inherently political questions involving contested normative issues. Policy makers will have to find alternative tools when those question s predominate. The SCC reflects arbitraril y chosen damage functions or, more precisely , the average of several arbitraril y chosen damage functions. It emerges from three climate models of questionable reliability . Guesswork is not alway s fatal to cost
- bene fit anal ys is. Judgment is needed to distinguish between reasonable estimates and estimates that are excessively wide of the mark. Our judgment is that the IWG report relies on too many unwarranted assumptions and cannot be relied on. But technical problems can be repaired through further research. Computer models of climate change are improving and will eventuall y provide reasonable estimates of the SCC. The more serious problem for cost

- benefit anal ys is of climate change is that climate regulation requires a series of judgments that are political and institutional rather than technical. Commenter 10091 states the social cost of carbon as determined b y the Interagency Working Group in their May

2013 Technical Support Document (updated in November 2013) and i ncluded in the Regulatory I mpact Anal ys is of this EPA action is unsupported by the scientific literature, not in accordance with OMB guidelines, fraught with uncertainty, and thus unsuitable and inappropriate for federal rulemaking. As such, use of the SCC in cost/benefit anal ys es in this and all proposed federal regulation should be suspended. Commenter 10087 states that SCC is an arbitrary metric that should not be used for regulatory impact anal ys is, citing references. **Response 4. 4** 
**- 8**  : The comments regarding the aggregation of the SC

- CO 2 estimates and general application in a rulemaking context mirror those submitted to the Office of Management and Budget’s separate comment solicitation on the SC

- CO 2 (78 FR 70586; November 26, 2013). As a member of the interagency working group (IWG) on SC

- CO 2 , EPA has carefull y examined and evaluated comments submitted to OMB’s separate solicitation. EPA has also carefull y examined and evaluated all comments received regarding SC

- CO 2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the aggregation of SC

- CO 2 estimates and use of the estimates in this RIA. Specificall y, EPA concurs with the IWG’s response to these comments and hereby incorporates them by reference. 47 The remainder of this section elaborates on these comments in the context of this rulemaking.

47 Referred to as the "OMB Response to Comments on SC

- CO2." In particular, see pgs 25 to 28, 40

- 41 at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc

- response - to
- comments
final

- july

- 2015.pdf

.4

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EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology and estim ates to ensure that they continue to reflect the best available science and economics. Furthermore, EPA has determined that the SC

- CO 2 methodological recommendations require additional research, review, and public comment before it can appl y them to a rule making context. To help sy

nthesize the technical information and input reflected in the comments, and to add additional rigor to the next update of the SC

- CO 2 , the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC

- CO 2 estimates, including the approaches suggested b y commenters and summarized in this document. Specificall y, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (A cademies) to examine the technical merits and challenges of potential approaches to improving the SC

- CO 2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer

reviewed literature, will hel p to ensure that the SC

- CO 2 estimates used by EPA continue to reflect the best available science and methodologies. After careful evaluation of the full range of comments and associated technical issues described in section 4.5 , EPA has determined that it will continue to use the current SC

- CO 2 estimates until further updates can be made to reflect forthcoming guidance from the Academies. EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy sis. Therefore, EPA has presented the current SC

CO 2 estimates 48 in the analy sis of illustrative benefit

- cost scenarios for ne w sources in RIA Chapter 5 (see RIA Chapters 3 and 5; see Response to Comments 3.2 for detailed discussion about the conclusions of the RIA) . EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forw ard with the Academies process. The remainder of this section provides more detailed responses to the comments and recommendations. Aggregation and selection of SC

- CO 2 estimates Some comments discussed the aggregation of model results and the selection of the final range of SC

- CO 2 estimates. Both the 2010 TSD and the current TSD present information about the full distribution of SC

- CO 2 estimates within and across possible combinations of the three models and five socioeconomic

- emissions scenarios, for each of three discount rates (45 combinations in total) (see tables A2

- A4 in Appendix A of the TSDs). Additional summary statistics for the distributions of the SC

- CO 2 estimates are also provided for each of the three models (see Table A5 in Appendix A). EPA b elieves that the information presented in the TSDs is sufficiently disaggregated to reflect the variability of the SC

- CO 2 estimates across models, input assumptions, and discount rates. In addition, EPA has provided the full set of Monte Carlo modeling res ults (10,000 model runs for each combination, for a total of 450,000 observations per emissions y ear) to outside researchers upon request and will continue to do so.

48 See https://www.whitehouse.gov/sites/default/files/omb/inforeg/sc c - tsd

- final

- july

- 2015.pdf

.4

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As discussed in the 2010 TSD, using the full distribution of the SC

- CO 2 estimates from the 45 scenarios would be impractical in a regulatory impact anal ys is. To produce a range of plausible estimates that still reflects the uncertaint y about the SCC estimates, the results from the various model and scenario combinations (150,000 observations pe r emissions y ear for each of the three discount rates) were pooled to produce three separate probability distributions for the SC

- CO 2 for emissions in a given year, one for each assumed discount rate (2.5, 3 and 5 percent). Three point estimates were then derived from these pooled distributions representing the mean at each discount rate. EPA considers this approach for presenting expected SC

- CO 2 values across a range of discount rates to be appropriate for representing the central tendency of the SC

- CO 2 es timates across scenarios. The fourth value, the 95th percentile of the pooled distribution using a 3 percent discount rate, is included to represent higher

- than

- expected economic impacts from climate change further out in the tail of the SC

- CO 2 distributio n - i.e., impacts that may have lower probabilit y of occurring but relativel y high damages. For purposes of representing the uncertainties involved, the TSDs emphasized the importance of considering and presenting the full range of these four estimates in regulatory impact anal ys is. EPA agrees that the modeling of uncertainty in our anal ys is, including the uncertaint y explicitly represented in the IAMs, may not capture the full range of uncertaint y of the “true” value of the SCC. This concern is common to m ost quantitative assessments of uncertainty . By definition, the modeling of uncertaint y requires a model, and therefore cannot capture the uncertaint y associated with model selection. However, EPA does not agree that pooling results across models implies that the estimates capture the full range of uncertaint y, nor is such a claim made in the TSDs or the rulemaking’s supporting documents. Rather, EPA attempted to capture a reasonable range of uncertainty using information available in the peer

- reviewed lite rature and the uncertaint y anal ys is built into the models themselves. Using three models rather than one helps address, but does not eliminate, uncertaint y associated with model choice. Along with the four selected SC

- CO 2 estimates for each emissions y ear , the IWG presented more detailed information about the full distribution of SC

- CO 2 estimates for emissions in the y ear 2020. Specificall y, the 2013 TSD reports information on the full distribution of the SCC estimates for emissions in y ear 2020 for each m odel, scenario, and discount rate combination , including the low

- end percentiles (i.e., 1st, 5th and 10th percentiles). In addition, as noted above, complete distributions for all emissions y ears are available upon request. While the IWG did not present a summary 5th percentile estimate (i.e., pooling results across the models and scenarios) for use in regulatory impact anal ys is, for reasons discussed below, the model and scenario specific statistics for 2020 provide a general sense of how the 5th percent ile relates to the mean. Furthermore, as we note above EPA has provided the full set of Monte Carlo modeling results to outside researchers upon request and will continue to do so. This information may be used to calculate a full set of 5th percentile summ ary statistics that are comparable to the 95th percentile e stimates provided in the TSDs. As the 2010 TSD discusses, the SC

- CO 2 estimates derived from the three integrated assessment models have several significant limitations that could lead to a substant ial underestimation of the SC

- CO 2 . These limitations include the incomplete treatment and monetization of non

catastrophic damages, the incomplete treatment of potential “catastrophic” damages, and uncertaint y in extrapolation of damages to high temperatur es. The IPCC Fourth Assessment Report, which was the most current IPCC assessment available at the time of the IWG’s 2009

-4

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2010 review, discussed these limitations and concluded that it was “very likely that [SCC] underestimates” climate change damages. Bas ed on the current scientific understanding of climate change and its impacts, and on the limitations of the IAMs in quantifying and monetizing the full array

of potential “catastrophic” and non

- catastrophic damages, EPA and the other members of the IWG con cluded that the distribution of SCC estimates may be biased downwards. Since then, the peer

- reviewed literature has continued to support this conclusion. For example, the IPCC Fifth Assessment report observed that SCC estimates continue to omit various imp acts that would likely increase damages. The 95th percentile estimate was included in the recommended range for regulatory impact analy sis to address these concerns. In addition, as acknowledged in the 2010 TSD, the SC

- CO 2 estimates derived from the three IAMs did not take into consideration the possibility of risk aversion. That is, individuals may have a higher willingness

- to
- pay to reduce the likelihood of low

- probability, high

- impact damages than they

do to reduce the likelihood of higher

- probabilit y, l ower - impact damages with the same expected cost. The inclusion of the 95th percentile estimate in the SC

- CO 2 values was also motivated by

this concern. In contrast, EPA is not aware of s ys tematic upward biases in the estimates comparable to the downward bi ases discussed above. For this reason, while EPA and other members of the IWG have been full y transparent regarding the entire range of uncertainty reflected in the probability distributions, EPA did not include a 5th percentile estimate in the selected range f

or regulatory

impact anal ys is. The choice of the mean or the median as a measure of central tendency depends on the context. In skewed distributions, such as for the SC

- CO 2 estimates, the median will often give a more “ty pical” outcome, while the mean will give full weight to the tails of the distribution. In some cases, the t ypical outcome is of most interest. For example, in describing household incomes the median is most often used because the focus is on understanding the income of the t ypical hou sehold, and using the mean might distort this picture b y giving undue weight to a small number of very

wealthy households. In the climate change context, however, sound decision

making requires consideration of not only the t ypi cal or most likely outcomes, but also less likely outcomes that could have very large (or small, or even negative) damages (the tails of the distribution). Use of the median to represent the SC

- CO 2 in a regulatory impact anal ys is would not necessaril y lead to the most efficient polic y choice that uses resources wisely to mitigate potential climate impacts (e.g., maximize the expected net benefits). In this case, EPA believes that the mean is the appropriate measure of central tendency

. Application to the Analyses of Illustrative Benefit

- Cost Scenarios for New Sources EPA agrees with those supportive of the application of the estimates. Most c ommenters who disagreed with use of the SC

- CO 2 specifically disagreed with the use of a domestic estimate and different discount rates. See section 4.4

- 3 for EPA’s detailed response to comments on the use of a global versus domestic SCC. See section 4.4

- 7, for EPA’s detailed response to comments about the selection of the discount rate. See also EPA’s detailed response to comments on the IAMs, damage functions, socioeconomic scenarios, and the time horizon in 4.4

- 1 and EPA’s response to comments regarding peer review and other process

- related issues for SCC, including the documentation discussing SC

- CO 2 methodol ogy, in 4.4

- 5. Regarding the recommendation to detail the significant and unquantified climate effects in the RIA, i.e. the impacts currently omitted from the IAMs used to estimate the SC

- CO 2 , EPA has4

- 107

updated the RIA discussion to reference several publi cations that identify and discuss some of the important, unquantified climate effects. EPA notes, however, that it is not possible at this time to provide a precise list of each model’s treatment (i.e., included, excluded) of climate impacts. Instead, th e TSDs present a robust discussion of this key analy tical issue, e.g., how each model estimates climate impacts, the known parameters and assumptions underlying those models, and the implications of incomplete treatment of impacts (catastrophic and non

cat astrophic) for the SC

- CO 2 estimates. Moreover, the discussion in the SC

- CO 2 TSD underscores the difficult y in accuratel y distilling the models’ treatment of impacts in table

- form. Most notably , the use of aggregate damage functions

— which consolidate info rmation about impacts from multiple studies

— in two of the models poses a challenge in listing included impacts. For example, within the broad agricultural impacts category , some of the sub

- grouped impacts are not explicitly modeled but are highl y correlate d to other subcategories that are explicitly modeled. EPA agrees that it is important to update the SC

- CO 2 periodically to incorporate improvements in the understanding of greenhouse gas emissions impacts and will continue to follow and evaluate the latest science on impact categories that are omitted or not fully addressed in the IAMs. As previously noted, EPA and the other IWG members will seek external expert advice on the technical merits and challenges of potential approaches to update the damage funct ions in future revisions to the SCC estimates. Finally , the RIA also continues to discuss climate change impacts, specifically an overview of the 2009 Endangerment Finding and climate science assessments released since then (see RIA, Chapter 3). Regarding comments about application of the SC

- CO 2 to marginal and non

- marginal emission impacts : The SC

- CO 2 is an estimate of the marginal benefit of a net one

- ton reduction in CO 2 emissions. The SC

- CO 2 estimates are multiplied by estimates of net CO 2 emissions ch anges in a given ye ar to calculate the value of the benefits associated with the policy action that achieves the emissions reductions. Given that the definition of marginal in this context relates to the change in CO 2 emissions relative to the global level of CO 2 emissions, the SC

- CO 2 is the appropriate metric to use in estimating the benefits of emissions changes in the illustrative anal ys es presented in the RIA. The applicabilit y of the SCC to monetizing the benefits of an emissions change is not related to rulemaking’s costs or economic impacts. These factors are independent of the SC

- CO 2 estimates and are therefore not related to the applicability of the SC

CO 2 . The estimation of the social benefits of avoiding or reducing CO 2 emissions is a separate and independent calculation from the anal ys is of compliance costs and impacts on industry competitiveness. See Response to Comments, section 3.2, for more detailed response to comments on the conclusions of the RIA, including the primary conclusion that there will be negligible costs as a result of the proposed regulation. RIA Chapter 5 presents conclusions from the illustrative analy ses. EPA disagrees with the comments that characterize the SC

- CO 2 as an illusory or otherwise unsupportable metric. EPA ackn owledges uncertainty in the SCC estimates but disagrees that the uncertaint y is so great as to undermine use of the SCC estimates in regulatory impact anal ys is. The uncertainty

in the SCC estimates is fully acknowledged and comprehensively discussed in the TSDs and supporting academic literature. While uncertainty must be acknowledged and addressed in regulatory

impact anal ys es, even an uncertain anal ys is provides useful information to decision makers and the public. For example, if an anal ys is shows that b enefits of a policy option consistently

do (or do not) justify

costs even over a broad range of estimates, this may increase confidence in the robustness of this conclusion. Conversely , if choices among parameter4

- 108

estimates within a plausible range signific antly affect the conclusions of the anal ys is, this is an important consideration in deciding how to weigh the anal yt ical results in the decision making process. The presence of uncertaint y is thus not a reason to exclude the best available estimates of quantified/monetized benefits, as long as it is appropriatel y characterized. Rather, good regulatory

practice requires that agencies use the best available scientific, technical and economic information to derive the best estimates of costs and benefits that they can, and then communicate to the public the limitations and uncertainties of the anal ys es. As discussed in the OMB Response to Comments on SC

- CO 2 , this is what EPA and all of the members of the IWG have attempted to do in developing and discussing the SC

- CO 2 estimates. As noted in the SC

CO 2 TSDs, the EPA and the other IWG members are committed to periodic updates in the estimates to reflect ongoing developments in our understanding of the science and economics of climate change, including the treatment of uncertainty . Moreover, as previously stated, EPA has determined that the current SC

- CO 2 estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO 2 emissions changes into regulatory analy ses. See also Coalition for Responsible Regulation v. EPA , 684 F. 3d at 119

- 20 (“State and Industry Petitioners assert that EPA ‘delegated’ its judgment to the I PCC, USGCRP, and NRC by rel yi ng on thes e assessments of clime

- change science. This argument is little more than a semantic trick....EPA simply

did here what it and other decision

- makers often must do to make a science

based judgment: it sought out and reviewed existing scientific evidence to det ermine whether a particular finding was warranted. It makes no difference that much of the scientific evidence in large part consisted of ‘syntheses’ of individual studies and research. Even individual studies and research papers often sy nthesize past wo rk in an area and then build upon it. This is how science works. EPA is not required to re

- prove the existence of the atom every time it appr oaches a scientific question.”) EPA disagrees with the comment that SC

- CO 2 values are not trusted because "they have increased dramatically

in recent y ears" due in part to the many assumptions required for calculating SC

- CO 2 . Commenter also believes SC

- CO 2 values are easily manipulated. EPA and other federal agencies had receiv ed multiple public comments urging them to update the estimates. In response to these comments and consistent with the 2010 commitment to periodicall y revise the SC

- CO 2 estimates, in 2013 the IWG released an update to the SC

- CO 2 estimates that maintained the same methodology underpinning the previous estimates, but applied the most current versions of the three IAMs. The science underl yi ng the assessment and valuation of climate change impacts is constantly evolving. Since the publication of the initial SC

- CO 2 estimates in 2010, the representation of the science and economic consequences of climate change in the three IAMs has improved. The 2013 SC

- CO 2 technical update allowed the SC

- CO 2 estimates to reflect these improvements. Some of the model revisions ten ded to increase the value of SC

- CO 2 while others tended decreased it. The updated values reflected the net effect of all of those changes. None of interagency working group’s 2010 modeling decisions were revisited as a part of the 2013 update. The 2013 up date used the same approach and assumptions as the 2010 anal ys is, but with the latest version of each of the three models available. In addition, the TSDs fully discuss the sensitivities of the SC

- CO 2 and how the interagency

working group explored those sensitivities. See also 4.4

- 4 for discussion about treatment of uncertaint y.4

- 109

EPA strongl y disagrees with the comment that climate change is an artifact of modeling, Global Circulation Models have no co nnection to the real world, and SCC is therefore a model of models. See 4.4

- 1 , for detailed response to comments criticizing the IAMs and section 4.1 for response to comments climate change science

. Regarding the comments about quantification versus moneti zation of the climate benefits and the comment that the Agency has not provided a single quantifiable climate benefit of the proposed rule, EPA disagrees and notes that it has in fact provided the estimated value of climate benefits. The climate benefits estimates have been calculated using the estimated values of marginal climate impacts, known as the social cost of carbon (SC

- CO 2 ), presented in the Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analy sis un der Executive Order 12866. The SC

- CO 2 is a metric that estimates the monetary value of impacts associated with marginal changes in CO 2 emissions in a given y ear. Itincludes a wide range of anticipated climate impacts, such as net changes in agricultura l productivity and human health, property

damage from increased flood risk, and changes in energy s ys tem costs, such as reduced costs for heating and increased costs for air conditioning. Itis ty picall y used to assess the avoided damages as a result of re gulatory actions (i.e., benefits of rulemakings that have an incremental impact on cumulative global CO 2 emissions). In order to calculate the dollar value for emission reductions, the SC

- CO 2 estimate for each emissions y ear is applied to changes in CO 2 em issions for that y ear, and then discounted back to the analy sis y ear using the same discount rate used to estimate the SC

- CO 2 . While the impacts of CO 2 emissions changes, such as sea level rise, are estimated within each integrated assessment model as part of the calculation of the SC

- CO 2 , it is the resulting monetized damages that are relevant for conducting the benefit

cost anal ys is. As such, it is the SC

- CO 2 estimates that are used in the RIA to estimate the welfare effects of quantified changes in CO 2 emissions. See, e.g. RIA chapter 5. Regarding the comments on leakage, specifically that multiplying the SC

- CO 2 values by estimated CO 2 reductions within the power sector only is problematic because the SC

- CO 2 should only

be applied to estimated net chan ges in global CO 2 emissions, EPA notes that it has applied the SC

- CO 2 estimates to the best available estimate of the net emissions impact in the illustrative analy ses in the RI A (see RIA Ch 5 ). EPA recognizes that this is an important issue for anal ys ts t o consider in determining the net CO 2 reductions to be valued in an RIA but notes that it does not affect the calculation of the SC

- CO 2 itself, which is an estimate of the marginal benefit of a net one

- ton reduction in CO 2 emissions. The SC

- CO 2 estimates are multiplied by estimates of net GHG emissions changes to calculate the value of benefits associated with a policy action in a given year. It is in the estimation of net GHG emissions, and not the SC

- CO 2 , that any leakage should be accounted f or. Furthermore, as discussed in RTC Section 3.2 and in the RIA Chapter 4, EPA’s modeling, conducted using the Integrated Planning Model (I PM), as well as modeling conducted by the U.S. Energy

Information Administration (EIA) showed that new generating cap acit y built through the period of anal ys is would be in compliance with the standard even in the baseline scenario and, as a result, the rule would not lead to changes in behavior . This finding held true even under a number of alternative scenarios. As a re sult, the EPA projected there would be negligible costs, benefits, energy impacts (including changes to electricit y prices), employment impacts, or economic impacts associated with the rule in the period of analy sis. (See Chapter 4 of the RIA.) Based on th ese conclusions, we would not expect business relocation, impacts to manufacturing, or the transfer of industrial activity to other countries.4

- 110

Regarding the recommendation for USG guidance on the application of the SC

- CO 2 , specifically guidance that wo uld clarify the TSD’s recommendation to use all four SC

- CO 2 estimates in rulemaking anal ys es, EPA first notes that it has followed the current guidance to consider all four values in regulatory

impact anal ys is. EPA agrees that consistent and appropriate a pplication of the SC

- CO 2 estimates is important. EPA will inform OMB of this comment requesting additional guidance of the application of the SC

- CO 2 to regulatory impact anal ys is. **Value of goods and services whose production is associated with**  **CO2 emission**  **s Comment 4.**  **4**
**- 9:**  Commenter 10951 states EPA's use of the Administration's Social Cost of Carbon values is misplaced. The SCC values assume that coal usage onl y create damage and are blind that the world uses coal because it is a reliable, low the benefits of coal usage, the SCC values have no worth at all in measuring whether reducing CO 2 emissions would be a positive or a negative. The attached report The Social Costs of Carbon No, the Social Benefits of Carbon fills in the blank that the SCC values and EP A misses. The report compares the benefits of using coal with the SCC values. As the report concludes: Of primary importance, the successful development and utilization of fossil fuels, which generate CO 2 , facilitated successive industrial revolutions, created the modern world, and enabled the high quality of life currentl y taken for granted. There is a strong causal relationship between world GDP and CO 2 emissions over the past two centuries, and this rel ationship is forecast to continue for the foreseeable future. We compared these indirect CO 2 benefits to the SCC estimates. Commenter 10951 discussed the benefits of coal use and incorporated these benefits in a comparison of the CO 2 costs and benefits (on a normalized per ton basis) using the SCC estimates and assumptions found that the current benefits clearl y outweigh any h ypothesized costs by, literall y, orders of magnitude: The benefit

cost (BC) ratios range up to more than 200

- to
- 1 (Figure AB

- 1). We utilized forecast data to estimate B

- C ratios through 2040 and found that future benefits also greatly exceed hy

pothesized costs by orders of magnitude: In the range of 40

- to
- 1 to 400

- to
- 1. To place these findings in perspective, normally , B

- C ratios in the range of 2

- to
- 1 or 3

- to
- 1 are considered favorable. Thus, our main conclusion is that the benefits of CO 2 overwhelmingly outweigh estimated CO 2 costs no matter which SCC estimates or assumptions are used. In fact, the SCC estimates are relatively so small as to be in the statistical noise of the estimated CO 2 benefits. Thus, on balance, the benefits of coal usage dramatically outweigh the purported harms. EPA's view seems to be that in order to reduce CO 2 emissions, nations should restrict coal usage and m ove to more expensive, less reliable energy sources. But doing so will come at a cost, and that cost, as the report and the discussion below shows, will be a very large net negative. Commenter 3593 states estimates of the social cost of carbon that take ne gative values (i.e., because on net carbon creates more benefits than costs) document the relative value of using coal to generate electricity

and demonstrate that the benefits of coal outweigh any reasonabl y estimated harm to public health and the environment, as discussed above. Commenter 9396 states that the IWG failed to account for various direct benefits such as increased growing seasons in some regions as well as indirect benefits arising from the positive attributes of GHG producing activities. The se include the provision of services that result in direct health benefits such as a safer food suppl y, clean water, and access to health benefits associated with heating, cooling and electricity

.4

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**Response 4. 4** 
**- 9**  : Rigorous evaluation of benefits and costs i s a core tenet of the rulemaking process. EPA agrees that these are important issues that may be relevant to assessing the impacts of policies that reduce CO 2 emissions. However, these issues are not relevant to the SC

- CO 2 itself. The SC

- CO 2 is an estimate of the net economic damages resulting from CO 2 emissions, and therefore is used to estimate the benefit of reducing those emissions. A rule that affects CO 2 emissions may also affect the production or consumption of goods and services, in which case it co uld create costs and benefits for businesses and households that either produce or use those goods and services. These costs and benefits are important to include in an anal ys is of the rule’s impacts, but are not a result of changes in CO 2 emissions. The S C

CO 2 is not a measure of social welfare from the consumption of goods and services whose production results in CO 2 emissions, or other positive or negative externalities associated with the production of those goods and services. In other words, the SC

- C O 2 is just one component of a larger anal ys is that includes consideration of many other potential impacts, including labor market changes, energy

securit y, electricity reliability, and changes in emissions of other pollutants, among others.

Commenter 359 4 states while OREP appreciates the approach taken, we are **Comment 4.4**
**- 10:**  also concerned that the proposed standards are based on SCC calculations that reflect conservative understandings of the impacts of climate change, due to the rapid changes in climate science, and an approach which is incapable of considering impacts and feedbacks that are just now becoming visible, and either cannot yet be fully verified, or have not yet had a chance to be incorporated. While there is not y et a basis for full y evaluating to collec tive costs of these impacts, recent history, including the recent revision to the SCC framework, shows that the cost will almost certainly be a significant addition to the costs used here. We therefore ask that this expectation be duly considered and ackn owledged in so far as possible in the development of these standards. **Response 4.4**
**- 10:**  Please see RIA Chapter 3 for discussion about the SC

- CO 2 estimates as well as response to comments 4.4

- 1 for detailed response to comments on the SC

- CO 2 methodology

. Also, see response to comments Section 3.1 and 3.2 and RIA Chapter 4, which discusses the anal ys is of benefits and costs and EPA’s modeling, conducted using the Integrated Planning Model (IPM), as well as modeling conducted by the U.S. Ener gy

I nformation Administration (EIA), that showed that new generating capacity b uilt through the period of anal ys is would be in compliance with the standard even in the baseline scenario and, as a result, the rule would not lead to changes in behavior . This finding held true even under a number of alternative scenarios. As a result, the EPA projected there would be negligible costs, benefits, energy impacts (including changes to electricity prices), employ

ment impacts, or economic impacts associated with the rule in the period of anal ys is. (See Chapter 4 of the RIA.)

Commenter 10036 states the EPA RI A is somewhat contradictory on the topic **Comment 4.4**
**- 11:**  of benefits, in that it concludes that there will be no benefit from the rule and then hypothesizes circumstances in whic h there would be benefits. Commenter continues, stating that the proposed EGU New Source GHG Standards are not expected to change GHG emissions for newl y constructed EGUs and are anticipated to y ield no monetized benefits and impose negligible costs, econo mic impacts, or energy impacts on the electricity sector or society. However, the RIA's Chapter 5 addresses the concept of "Social Cost of Carbon," and references a multi

- agency4

- 112

report docketed in an earlier rulemaking 49

. Commenter 10036 adds there is no e vidence presented in the RIA or the proposed rule that the Social Cost of Carbon report or anal ys is underwent a peer review consistent with the previously cited OMB requirements. **Response 4.4**
**- 11:**  EPA disagrees that there will be no benefits from the final rulemaking. See response to comments 3.2

- 1 for EPA’s detailed response to this comment, including discussion about the anal ys is of costs and benefits in the rulemaking. Regarding the social cost of carbon, see response to comments 4.4

- 5 for detailed disc ussion regarding peer review and consistency with OMB guidance. 

### MISCELLANEOUS **4.5** Commenter 8925 states the social value of non

- CO 2 GHGs should be **Comment 4.5**
**- 1:**  considered (e.g., for methane, nitrous oxide, and fluorinated gases), adding that the 2010 USG acknowledges this issue but provides no clear guidance.

As discussed in Section I II.G of the preamble to the final rulemaking, separate **Response 4.5**
**- 1:**  emission limits for non

- CO 2 GHGs, such as methane, were not established because they represent less than 1 percent of the total estimated GHG emissions, on a CO 2 - equivalent basis, from fossil

- fuel fired electric power generating units. Therefore, EPA did not quanti fy potential changes in non

- CO 2 GHGs in the illustrative analyses.

Commenter 9514 states it is important to emphasize that section 111 does not **Comment 4.5**
**- 2:**  require a traditional cost

- benefit anal ys is, but simply requires that an agency's determination of BSER impose costs that are not exorbitant or too high for the industry to bear. Commenter 9514 adds that CO 2 impacts should be anal yz ed along with the benefits from reduced quantities of co

occurring pollutants.

The commenter correctl y quotes the caselaw regarding co nsideration of costs **Response 4.5**
**- 2:**  under section 111 (a). In addition, EPA’s analysis in RI A chapter 5 is consistent with the commenter’s suggestions.

Commenter 9685 states the terminology "social cost of carbon" is wrong and **Comment 4.5**
**- 3:**  misleading. As EPA knows, greenhouse gases, including carbon dioxide, are not "Carbon". There are more greenhouse gases than carbon dioxide. Methane (natural gas) is an important greenhouse gas. The IP CC2013 Summary for Policy

Makers has acknowledged that the global warming potential (GWP) of methan e has been underestimated. EPA has to address the problem in all of its analy ses, including the planned regulation of new and/or existing natural gas plants. This major error also needs to be addressed in the IAMs. Humans exhale carbon dioxide ( CO 2 ), not c arbon. EPA disagrees with the commenter, who has incorrectly assumed that the **Response 4.5**
**- 3:**  common shorthand of “carbon” means that the social cost of carbon dioxide (SC

- CO 2 ) estimates have not been adjusted to account for the mass of carbon in carbon dioxide emissions. One of

49 http://www.epa.gov/oms/climate/regulations/scc

- tsd.pdf

.4

- 113

the steps in the estimation of the SC

- CO 2 used in this rulemaking is to translate the molecular weight of carbon to the molecular weight of carbon dioxi de. Furthermore, the RI A for the proposed rulemaking clearly defined the shorthand of “SCC” or “social cost of carbon” as accounting for the carbon in carbon dioxide emissions: “The social cost of carbon (SCC) is a metric that estimates the monetary value of impacts associated with marginal changes in CO 2 emissions in a given ye ar” (RIA at proposal, section 5.7.1). The RI A for this rulemaking and the supporting documentation, including the social cost of carbon technical support documents, all clearl y show that the units are denominated in dollars per ton CO 2 emissions. EPA is well aware that carbon dioxide is not the only greenhouse gas and that methane is an important greenhouse gas. See section III.G of the preamble to the final rulemaking for discussio n about why this action regulates onl y emissions of CO 2 . See Response to Comments section 4.5, comments 4.4

- 1 and 4.4

- 2 , for EPA’s response to comments on the IAMs used to estimate the SC

- CO 2 and the climate science components of these models , respectivel y .

Commenter 8925 states regulatory anal ys is applications should be sure to **Comment 4.5**
**- 4:**  estimate changes in net global emissions associated with a proposed rule, or justify wh y it is unnecessary

because a proposed rule may have emissions implications bey ond the bounda ries of what is regulated (i.e., "leakage"), and those effects should be accounted for to properl y estimate CO 2 reduction benefits. Commenter 9396 Emissions Exports: The I WG fails to account for economic migration of emissions; as one country's efforts to reduce GHG emissions makes manufacturing more expensive, the economic activity shifts to other countries that are more climate intensive resulting in a net increase in emissions. Commenter 9401 states history provides an important lesson on how increased e nergy costs have both a direct and indirect impact on reduced employ ment and GHG leakage. Figure 2 details the relationship between rising natural gas prices and falling employm ent in the manufacturing sector. According to EIA, electricity prices rose 210 percent from 1999 to 2008. During the time period of 2000 to 2008, the manufacturing sector shut down an estimated 54,905 facilities, decimating the economy of thousands of communities across the country. During that same time period, net manufactured good s imports grew b y 4 6 percent, a clear indication of loss of US manufacturing competitiveness. A key point that needs to be emphasized is that if electricit y prices rise because of the EPA GHG rule, manufacturing employment and GHG leakage would have the same effect as higher natural gas prices. Commenter 9401 states EPA has not performed an analys is of carbon leakage which will occur as a result of the rule, thus overstating the benefits. Because manufacturing uses 25 percent of all U.S. electricity, we ar e significantly impacted by

electricity

prices. Figure 1 illustrates that coal consistently

provides the lowest cost energy to generate electricity. The rule would stop the use of coal for use in new power generating units and deprive manufacturing from th e lowest cost power generation, thereby impacting competitiveness. I t is important to note, that having coal as a major component of electricity fuel diversit y provides for increased reliability . Higher electricit y costs and reduced reliability will shift EITE industries to other countries along with their jobs and GHG emissions, and accomplish nothing. The EPA must perform an analysis of carbon leakage that will occur as a result of the rule. Not having done so, the EPA has overstated the projected benefit s of emission reductions and not accounted for the associated loss of4

- 114

economic activity

and jobs moving outside the U.S. Without including the GHG leakage, an y benefits are arbitrary

and capricious. And, since most countries have higher power generation GH G rates, it would result in a net increase in global GHG emissions. Commenter 9401 stat e s history provides an important lesson on how increased energy costs have both a direct and indirect impact on reduced employ ment and GHG leakage. Figure 2 details the relationship between rising natural gas prices and falling employm ent in the manufacturing sector. According to EIA, electricity prices rose 210 percent from 1999 to 2008. During the time period of 2000 to 2008, the manufacturing sector shut down an estima ted 54,905 facilities, decimating the economy of thousands of communities across the country. During that same time period, net manufactured goods imports grew b y 4 6 percent, a clear indication of loss of US manufacturing competitiveness. A key point that needs to be emphasized is that if electricit y prices rise because of the EPA GHG rule, manufacturing employment and GHG leakage would have the same effect as higher natural gas prices.

EPA notes that it has applied the SC

- CO 2 estimates to the best availabl e **Response 4.5**
**- 4:**  estimate of the net emissions impact in the illustrative analys es in the RIA (see RIA Ch 5). EPA recognizes that this is an important issue for analysts to consider in determining the net CO 2 reductions to be valued in an RIA but notes that it does not a ffect the calculation of the SC

- CO 2 itself, which is an estimate of the marginal benefit of a net one

- ton reduction in CO 2 emissions. The SC

- CO 2 estimates are multiplied by estimates of net GHG emissions changes to calculate the value of benefits associate d with a policy action in a given ye ar. It is in the estimation of net GHG emissions, and not the SC

- CO 2 , that any leakage should be accounted for. Furthermore, as discussed in RTC Section 3.2 and in the RI A Chapter 4, EPA’s modeling, conducted using the Integrated Planning Model (IPM), as well as modeling conducted by the U.S. Energy

Information Administration (EI A) showed that new generating capacity built through the period of analysis would be in compliance with the standard even in the baseline scenario and, as a result, the rule would not lead to changes in behavior. This finding held true even under a number of alternative scenarios. As a result, the EPA projected there would be negligible costs, benefits, energy impacts (including changes to electr icit y p rices), emplo ym ent impacts, or economic impacts associated with the rule in the period of analysis. (See Chapter 4 of the RIA.) Based on these conclusions, we would not expect business relocation, impacts to manufacturing, or the transfer of industr ial activity to other countries. Commenter 9687 states EPA has continued to knowingl y use incorrect PM2.5 **Comment 4.5**
**- 5:**  health effects data (factor of 40 too high) that needs to be corrected in both the Endangerment Finding and the Social Cost of Carbon used to justify this rule. Commenter includes excerpt of other document to back up point.

The PM 2.5 health data is not used to calculate of the social cost of carbon **Response 4.5**
**- 5:**  dioxide. The health impacts of particulate matter are treated separately. See Chapter 3 of the final RIA for a discussion about health co

- benefits and section s 4.1 and 4.2 of this response to comments for discussion about the 2009 Endangerment Finding.

Commenter 9687 states serious questions have been raised b y Congress about **Comment 4.5**
**- 6:**  the current standards for PM2.5 and Ozone regulations which are used to justi fy the4

- 115

Endangerment Finding, the Social Cost of Carbon, and the proposed rule for new electric power plants

. The standards for PM2.5 and ozone are not used to justify the Endangerment **Response 4.5**
**- 6:**  Finding nor are they

used to justify

the social cost of carbon. The atta chments provided by the commenter do not support the commenter’s assertion. Rather, the commenter has provided a letter written b y a member of Congress to an EPA employee with questions about the 1997 NAAQS for ozone and particular matter, which are not r elevant to this rulemaking action, and EPA personnel matters that are likewise not relevant.

Comment er 9600 calls for withdrawal of this proposal, if for no other reason **Comment 4.5**
**- 7:**  based on its own conclusion that it would have no benefit including failing to accom plishing any reductions in CO 2 emissions from coal

- fired EGUs over the base case modeling period. Further, Commenter 9600

- 5985 stat e s the natural gas pipeline system will have to undergo considerable modifications and upgrades to provide natural gas on a " firm" basis to a baseload EGUs. Natural gas pipelines are simpl y not sized adequately nor are they

located where baseload EGU's would be built. Regarding comment that the proposal should be withdrawn and that it has no **Response 4.5**
**- 7:**  benefit, EPA disagrees. See Response to Comments, Section 3.1.

Comment er 10961 states the EPA's "endangerment finding" on carbon dioxide **Comment 4.5**
**- 8:**  incorporates an enormous body of scientific information demonstrating that greenhouse gas emissions must be reduced immediately in order to avoid catastroph ic climate impacts. The Clean Air Act requires binding limits on any pollutant that threatens human health and welfare, and carbon dioxide threatens human welfare as no other pollutant has, to the point of existential hazard. The EPA's program for quantify ing health hazards and translating them into missions limits is robust, well

- developed, and equally applicable to the damage that excess carbon dioxide will cause. The Clean Air Act has brought extraordinary material benefits to America from reducing pollu tants that erode our health and economy, and the same challenge now exists from carbon dioxide. Far from being unsuited to the Clean Air Act as some political opponents suggest, global warming's lethal threat to human survival decidedly qualifies as the th reat to human health and welfare the Clean Air Act was meant to avert.

EPA thanks the commenter for this comment and agrees that the Clean Air Act **Response 4.5**
**- 8:**  has resulted in notable social benefits.

Comment er 9685 state s that EPA's claim

- based on the anal ys is presented in **Comment 4.5**
**- 9:**  Chapter 5 of the RIA, the EPA projects that this proposed rule will result in negligible CO 2 emission changes, quantified benefits, and costs by 2022

- is not valid and any use of the SCC to justify th e proposed rule is not valid as discussed below.

See EPA’s response to comments, section s 3.1 and 3.2 , for EPA’s response to **Response 4.5**
**- 9:**  comments regarding the emission and economic impacts of this rulemaking action. See 4.5

- 8 for EPA’s response to comments regarding the application of SC

- CO 2 to the RIA.

Comment er 9685 states EPA's MAGI CC is used to "calibrate" the IAMs. The **Comment 4.5**
**- 10:**  IAM models are "calibrated to match the carbon cycle in the Model for the Assessment of4

- 116

Greenhouse Gas I nduced Climate Change (MAGICC)". There is no documentation on the input variables used for the MAGICC run(s) nor is there data available to confirm the "calibration", much less the data used to validate the current version 5.3 of MAGI CC. MAGI CC uses AR4 IP CC models for its own "calibration". EPA is fully aware of this major fatal flaw and has had access to the information since the publication of the AR4 in 2007. Many agency members of the IW G had employees involved in the IPCC reports and were equall y awar e of the serious flaws in the IPCC models, including the US taxpay er funded models. Model prediction errors were acknowledged in the comments on the USGCRP assessment in 2006 and on the EPA Endangerment Finding in 2008. Therefore, there is no excuse other than intentional omission for the IWG to have failed to acknowledge the epic failure of the models.

EPA strongl y disagrees with the claim that the Agency has not provided **Response 4.5**
**- 10:**  information necessary

to understand the SC

- CO 2 estimates. T he TSDs provide a complete record of the methodology

and assumptions used to develop the SCC estimates, including references to the academic literature. I ndependent anal ys ts have sought and received information from EPA allowing them to implement the I WG’s SC

- CO 2 approach and modif y it further if they choose. In fact , one requestor noted publically that the EPA “modelers have been very open, collegial, and helpful.” 50 Additional documentation is available in the academic literature on the models themselves. See also response to comme nts, section 4.4

- 5 for discussion about transparency and opportunities for public comment on the SC

- CO 2 .

Comment e r 9685 states apparentl y errors were found that required a "revised" **Comment 4.5**
**- 11:**  Technical Support Document (issued in November 2013). There was no detaile d explanation of what the errors were that required a revision after only six months, who identified the errors, who made the changes to the models to reflect these changes and how the models were validated. EPA should promptly

provide this information to the public by posting on regulations.gov for this rule. The Technical Support Documents (TSDs) summarize the derivation of the SCC estimates using the three Integrated Assessment Models and provides updated values of the SCC that reflect "technical correct ions" to the estimates released in May 2013. Unfortunatel y the Interagency

Working Group (in which EPA was an active participant) convened in 2009 has operated in secret and the TSDs were developed in secret. There is no record of an y comments provided b y EPA or an y other agency participants. There is no identification of the EPA participants. Commenter posits that EPA disregarded the transparency requirements expected of any taxpay er funded government agency and as directed b y President Obama. Providing co mprehensive comments on the rule is impossible without full disclosure by EPA on regulations.gov. The commenter has incorrectl y stated that there was no detailed explanation **Response 4.5**
**- 11:**  about the corrections. OMB publicly announced the correction 51 and provided a publ ic link to the corrected TSD. Appendix B of that TSD identified the errors with complete detail, explained how those errors were corrected, and described the effect of the correction; the TSD also

50 http://dailysignal.com/2013/11/06/w hite

- house

- reopens - the

- scc/. 51 https:// www.whitehouse.gov/blog/2013/11/01/refining

- estimates

- social

- cost
- carbon4

- 117

presented the corrected estimates. 52 Furthermore, EPA submi tted a memo to the docket for this rulemaking, EPA

- HQ

- OAR

- 2013

- 0495, that identified the SC

- CO 2 errors with complete detail, explained how those errors were corrected, and described the effect of the correction, both with respect to the SC

- CO 2 estimates and with respect to the anal ys is in the RIA. 53

52 See https://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical

- update

- social

- cost
- of

- carbon

- for

regulator

- im

pact
- analysis.pdf

. 53 See EPA

- HQ

- OAR

- 2013

- 0495

- 0037 in www.regulations.gov

.