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AT WHAT COST? EXAMINING THE 

SOCIAL COST OF CARBON 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON ENVIRONMENT & 

SUBCOMMITTEE ON OVERSIGHT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 28, 2017 

Serial No. 115–05 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. LAMAR S. SMITH, Texas, Chair 

FRANK D. LUCAS, Oklahoma 

DANA ROHRABACHER, California 

MO BROOKS, Alabama 

RANDY HULTGREN, Illinois 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

JIM BRIDENSTINE, Oklahoma 

RANDY K. WEBER, Texas 

STEPHEN KNIGHT, California 

BRIAN BABIN, Texas 

BARBARA COMSTOCK, Virginia 

GARY PALMER, Alabama 

BARRY LOUDERMILK, Georgia 

RALPH LEE ABRAHAM, Louisiana 

DRAIN LAHOOD, Illinois 

DANIEL WEBSTER, Florida 

JIM BANKS, Indiana 

ANDY BIGGS, Arizona 

ROGER W. MARSHALL, Kansas 

NEAL P. DUNN, Florida 

CLAY HIGGINS, Louisiana 

EDDIE BERNICE JOHNSON, Texas 

ZOE LOFGREN, California 

DANIEL LIPINSKI, Illinois 

SUZANNE BONAMICI, Oregon 

ALAN GRAYSON, Florida 

AMI BERA, California 

ELIZABETH H. ESTY, Connecticut 

MARC A. VEASEY, Texas 

DONALD S. BEYER, JR., Virginia 

JACKY ROSEN, Nevada 

JERRY MCNERNEY, California 

ED PERLMUTTER, Colorado 

PAUL TONKO, New York 

BILL FOSTER, Illinois 

MARK TAKANO, California 

COLLEEN HANABUSA, Hawaii 

CHARLIE CRIST, Florida 

SUBCOMMITTEE ON ENVIRONMENT

HON. ANDY BIGGS, Arizona, Chair 

DANA ROHRABACHER, California 

BILL POSEY, Florida 

MO BROOKS, Alabama 

DANIEL WEBSTER, Florida 

BRIAN BABIN, Texas 

GARY PALMER, Alabama 

BARRY LOUDERMILK, Georgia 

JIM BANKS, Indiana 

CLAY HIGGINS, Louisiana 

LAMAR S. SMITH, Texas 

SUZANNE BONAMICI, Oregon, Ranking 

Member 

COLLEEN HANABUSA, Hawaii 

CHARLIE CRIST, Florida 

EDDIE BERNICE JOHNSON, Texas 

SUBCOMMITTEE ON OVERSIGHT

HON. DRAIN LAHOOD, Illinois, Chair 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

GARY PALMER, Alabama 

ROGER W. MARSHALL, Kansas 

CLAY HIGGINS, Louisiana 

LAMAR S. SMITH, Texas 

DONALD S. BEYER, Jr., Virginia, Ranking 

Member 

JERRY MCNERNEY, California 

ED PERLMUTTER, Colorado 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

February 28, 2017 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Andy Biggs, Chairman, Subcommittee on Environment, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 4 

Written Statement ............................................................................................ 6 

Statement by Representative Suzanne Bonamic, Ranking Member, Subcommittee on Environment, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 8 

Written Statement ............................................................................................ 10 

Statement by Representative Darin LaHood, Chairman, Subcommittee on 

Oversight, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 12 

Written Statement ............................................................................................ 14 

Statement by Representative Donald S. Beyer, Jr., Ranking Member, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 16 

Written Statement ............................................................................................ 18 

Statement by Representative Lamar S. Smith, Chairman, Committee on 

Science, Space, and Technology, U.S. House of Representatives ..................... 20 

Written Statement ............................................................................................ 22 

Witnesses: 

Dr. Ted Gayer, PhD, Vice President and Director of Economic Studies and 

Joseph A. Pechman Senior Fellow at Brookings Institution 

Oral Statement ................................................................................................. 24 

Written Statement ............................................................................................ 27 

Dr. Kevin Dayaratna, PhD, Senior Statistician and Research Programmer, 

Center for Data Analysis, Institute for Economic Freedom and Opportunity 

at The Heritage Foundation 

Oral Statement ................................................................................................. 34 

Written Statement ............................................................................................ 36 

Dr. Michael Greenstone, PhD, Milton Friedman Professor in Economics, the 

College, and the Harris School; Director of the interdisciplinary Energy 

Policy Institute at the University of Chicago and the Energy & Environment Lab at the University of Chicago Urban Labs 

Oral Statement ................................................................................................. 50 

Written Statement ............................................................................................ 52 

Dr. Patrick Michaels, PhD, Director, Center for the Study of Science, Cato 

Institute; contributing author to United Nations Intergovernmental Panel 

on Climate Change (Nobel Peace Prize 2007) 

Oral Statement ................................................................................................. 60 

Written Statement ............................................................................................ 62 

Discussion ................................................................................................................. 98 
Page

IV 

Appendix I: Answers to Post-Hearing Questions 

Dr. Kevin Dayaratna, PhD, Senior Statistician and Research Programmer, 

Center for Data Analysis, Institute for Economic Freedom and Opportunity 

at The Heritage Foundation ................................................................................ 124 

Dr. Michael Greenstone, PhD, Milton Friedman Professor in Economics, the 

College, and the Harris School; Director of the interdisciplinary Energy 

Policy Institute at the University of Chicago and the Energy & Environment Lab at the University of Chicago Urban Labs ......................................... 127 

Appendix II: Additional Material for the Record 

Statement submitted by Representative Eddie Bernice Johnson, Ranking 

Member, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 134 

Document submitted by Representative Darin LaHood, Chairman, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 136 
(1) 

AT WHAT COST? EXAMINING THE 

SOCIAL COST OF CARBON 

TUESDAY, FEBRUARY 28, 2017 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENVIRONMENT AND

SUBCOMMITTEE ON OVERSIGHT, 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, D.C. 

The Subcommittees met, pursuant to call, at 10:07 a.m., in Room 

2318, Rayburn House Office Building, Hon. Andy Biggs [Chairman 

of the Subcommittee on Environment] presiding. 
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Chairman BIGGS. Good morning. The Subcommittees on Environment and Oversight will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Subcommittee at any time. 

Welcome to today’s hearing entitled ‘‘At What Cost? Examining 

the Social Cost of Carbon.’’ I recognize myself for five minutes for 

an opening statement. 

Welcome to today’s joint subcommittee hearing entitled ‘‘At What 

Cost? Examining the Social Cost of Carbon.’’ Today, we will examine the previous Administration’s determination of the social cost 

of carbon, or SCC, and explore why the calculated value is flawed. 

Energy is the bedrock of our society, and yet the SCC estimate 

of the previous Administration has killed jobs, limited innovation, 

and resulted in higher energy costs for American families, all in exchange for benefits that are negligible at best and nonexistent at 

worst. 

The Obama Administration’s Interagency Working Group, which 

ultimately established an enormously high SCC of $37 per ton of 

CO2 emitted into the atmosphere, relied on an outdated economic 

model and failed to take into account the White House’s own Office 

of Management and Budget, or OMB, guidelines for cost-benefit 

analysis. Quite simply, the working group used numbers that got 

them the results they wanted in order to advance some of the most 

expensive and expansive regulations ever written. In pushing forward this political agenda, the working group acted irresponsibly. 

It also allowed the previous Administration to implement stringent 

and costly regulations without a scientific basis. 

As we will learn today, the SCC working group ignored two 

major OMB recommendations for federal agency rulemaking. First, 

it failed to use a seven percent discount rate, and instead relied on 

rates of 2.5 percent, three percent, and five percent. and, second, 

it ignored the guideline to report cost-benefit analysis from a domestic perspective. If nothing else is taken away from what will be 

a very technical hearing, I hope it will be these two very basic 

flaws. 

The low long-term discount rate established by the previous Administration fundamentally disregards the notion that the American economy is resilient and can respond to potential future 

threats with technological development and innovation. As to the 

flaw of the previous Administration’s decision to focus on CO2 emissions from a global perspective, this approach leaves the United 

States footing the bill for costly regulations that are based on benefits conferred to other countries. It is simply not right for Americans to be bearing the brunt of costs when the majority of benefits 

will be conferred away from home. 

By ignoring OMB guidelines, the current SCC models leave critical components out of the discussion. If the OMB guidelines would 

have been followed, the social cost of carbon would have been significantly lower. 

The previous Administration disregarded scientific integrity by 

overestimating climate change resulting from greenhouse gas emissions. In order to push an expensive regulatory agenda, the Administration inflated the SCC to justify costly regulations in response 
5 

to the allegedly terrible damage CO2 emissions will cause in the future. 

The SCC is nothing but a one-sided manipulation of parameters 

to fit the policy-driven agendas of the previous Administration. 

These alarmist tactics need to stop. Today’s hearing is intended to 

uncover the real truth and deception behind the SCC. 

America’s strength emanates from our resilience and flexibility. 

Attempts to justify government regulations over industry innovations hinders growth and development. I look forward to working 

with the Trump Administration to renew faith in American ingenuity and technological development. 

[The prepared statement of Chairman Biggs follows:] 
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Chairman BIGGS. I now recognize the Ranking member of the 

Subcommittee on Environment, Ms. Bonamici, for an opening 

statement. 

Ms. BONAMICI. Thank you very much, Mr. Chairman, and thank 

you to our witnesses for being here today. 

The social cost of carbon is a metric used to value the damage 

caused by emitting 1 ton of carbon dioxide into the atmosphere in 

a year. It provides a consistent value for all federal agencies to use 

for their cost-benefit analysis on regulatory efforts that reduce carbon dioxide emissions. 

There are some people who criticize this metric, but the Government Accountability Office and independent peer review by the National Academy of Sciences have validated it many times. Additionally, federal courts have upheld that the methodology used to develop the social cost of carbon is based on robust science and sound 

economic analysis. It is critical that updates to the social cost of 

carbon metric are based on the best available science and updated 

economic analysis based on peer-reviewed literature. 

The Government Accountability Office has found that the methodology used to develop the social cost of carbon was based on peerreviewed academic literature and took steps to incorporate new information as it became available. This process also provided ample 

opportunity for public comment on both the social cost of carbon 

and the regulations that use the metric in their cost-benefit analysis. 

Some people suggest that regulations to reduce the emissions of 

carbon dioxide and other pollutants are unnecessary because climate change does not exist or human activity does not contribute 

to it, but simply ignoring a fact does not make it less true. The climate is warming, and we need to work now to limit the consequences for future generations. Our children and grandchildren 

should not inherit an environment that degrades their health and 

harms their future economy. 

Economic growth and reducing carbon pollution are not in conflict with one another. Clean energy development allows us to continue powering our communities in ways that avoid long-term negative consequences on future generations. It also gives us the opportunity to bring new living-wage jobs into communities. In fact, 

the American Wind Energy Association found that the wind energy 

sector accounts for 3,000 jobs throughout my home State of Oregon 

alone. In addition to boosting Oregon’s economy, wind energy generation avoided more than 1 million tons of statewide carbon dioxide emissions in 2015, and many of the wind energy jobs are in 

rural areas where jobs are needed. 

The social cost of carbon is not a product of a single President, 

a single scientific study, or a single legal action. It is rooted in 

overwhelming scientific consensus on climate change, an effort 

spanning 30 years from both the executive and judicial branches of 

the Federal Government. These factors, coupled with a transparent 

development process and strong economic analysis, form the basis 

of this metric that has been used in at least 79 federal regulations, 

including fuel economy standards for vehicles, energy efficiency 

measures for home appliances, and regulations such as the Clean 

Power Plan. This metric was not invented to serve a political agen-
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da but in fact was developed to meet a legal mandate to justify, in 

simple terms of dollars and cents, how the Federal Government’s 

actions will affect Americans today and our children and grandchildren tomorrow. 

I look forward to hearing how we may best continue to use the 

social cost of carbon in support of policies that protect our environment. 

With that, I would like to again thank the witnesses for being 

here today, and I yield back the balance of my time. 

[The prepared statement of Ms. Bonamici follows:] 
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Chairman BIGGS. Thank you, Ms. Bonamici. 

I now recognize the Chairman of the Subcommittee on Oversight, 

Mr. LaHood, for his opening statement. 

Mr. LAHOOD. Thank you, Chairman Biggs, and happy to be part 

of this hearing today with you, today’s hearing titled ‘‘At What 

Cost? Examining the Social Cost of Carbon,’’ and happy to have the 

witnesses here today as we examine the previous Administration’s 

social cost of carbon and the shortfalls in application of this flawed 

process. 

There is significant evidence that the previous Administration 

manipulated the social cost of carbon calculation to reflect significant benefits to enacting what were ultimately job-killing regulations and policies across a wide spectrum of issues. The social cost 

of carbon is a flawed tool used by the Obama Administration to justify a green agenda when, in reality, the prior Administration was 

seeking to offset its costly regulations with far-reaching implications that burden our industries and nation. 

Unsurprisingly, the previous Administration ignored specific 

guidelines set forth by the Office of Management and Budget, 

OMB, and used the social cost of carbon as a vehicle to tout the 

economic benefits of the new environmental regulations. This is 

troubling and to me is not being honest with the taxpayers. 

Critics take issue primarily with two aspects of the social cost of 

carbon methodology, specifically, the discount rate used and the domestic versus global benefits claimed. Both issues I look forward to 

discussing in more detail with our panel of esteemed witnesses 

today. 

I, too, take issue with the methodology but also the lack of transparency with the use and development of the social cost of carbon. 

Three statistical integrated assessment economic models were used 

to develop the social cost of carbon: the FUND, the DICE, and the 

PAGE. Experts have concluded these three models are flawed and 

possess too many uncertainties to be the foundation of the benefit 

analysis of environmental regulations. If one were to change the 

assumptions these models are based on, the result will drastically 

differ, demonstrating malleability in the social cost of carbon calculation. 

Because of these realities, last year, I was pleased to be an original cosponsor of H.R. 5668, the Transparency and Honesty in Energy Regulation Act, or THERA, introduced by my friend and colleague Evan Jenkins of West Virginia. This legislation is aimed at 

prohibiting the Department of Energy and the Environmental Protection Agency from considering the social cost of carbon as part of 

any cost-benefit analysis unless specifically authorized by law. If 

signed into law, the DOE and the EPA would no longer rely on manipulated and fabricated economic benefits to justify or support 

new job-killing environmental regulations. I look forward to working with Congressman Jenkins again on this issue this Congress. 

It appears that the social cost of carbon is nothing but a political 

tool lacking scientific integrity and transparency conceived and utilized by an Administration pushing a green agenda to the detriment of the American taxpayers. Perhaps a better measurement 

of the social cost of carbon is not the net damages that result from 

a one-metric-ton increase in carbon dioxide emissions in a given 
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year but the damage inflicted on domestic industries, including 

manufacturers in my district like Caterpillar, by the environmental 

regulations justified by this flawed calculation. 

I would like to thank our witnesses for being here today to discuss this important matter. In addition, I look forward working 

with the Trump Administration to reverse the damage caused by 

the Obama Administration as it relates to this issue. 

With that, I yield back to the Chair. 

[The prepared statement of Mr. LaHood follows:] 
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Chairman BIGGS. Thank you, Mr. LaHood. 

I now recognize the Ranking Member of the Subcommittee on 

Oversight, Mr. Beyer, for his opening statement. 

Mr. BEYER. Thank you, Mr. Chairman, and thank you, all the 

witnesses, for being here. 

You know, the social cost of carbon is a complex metric which our 

witness Dr. Greenstone has described as the most important number you’ve never heard of. Assessing and addressing the impact of 

climate change on current and future generations is critical. It 

seems already that in just the first few minutes of this hearing we 

see a dramatic difference between the short-term emphasis on job 

creation, which is important, and a long-term emphasis on protecting our planet. 

The social cost of carbon permits the government to help quantify 

the future economic damages as a result of carbon pollution that 

contributes to climate change and global warming. This metric 

didn’t materialize out of thin and dirty air. It took a federal judge 

to mandate its use during the Bush Administration based on a law 

passed when Ronald Reagan was President. 

In 2009, the Obama Administration convened an interagency effort to formalize a consistent value for it. This was not a political 

tool. This was an attempt to protect our environment. 

We’ll hear today that this development process was transparent, 

it was open to public comment, it’s been validated over the years, 

and, much like our climate, it’s not static and it changes over time 

in response to updated inputs. And although its use has been challenged in the courts recently, the courts have upheld the methodology used to obtain this estimate as proper based on real science 

and appropriate economic models. 

As a Minnesota administrative law judge determined last April, 

the preponderance of evidence supports the fact that federal social 

cost of carbon is reasonable and the best available measure to determine the environmental cost of CO2. I’m pretty certain we won’t 

hear any of that today from the majority members and their witnesses. Instead, we’ll hear the same arguments made against climate regulations that we’ve heard before. And sadly, those antiscience arguments both ignore the abundant scientific evidence 

that shows that climate change exists, that fossil fuel production 

is its main contributor, and will also admonish virtually any responsible regulatory mechanism to help protect our nation’s citizens from the environmental, economic, and public health harm 

that results from climate change’s global impacts. 

These individuals will argue already that social cost of carbon is 

outdated, inaccurate, and not a proper regulatory mechanism for 

addressing climate change. We’ve heard these arguments before. In 

fact, in 1982 the tobacco company R.J. Reynolds produced internal 

talking points about the social cost of smoking when Congressman 

Henry Waxman was holding hearings regarding the harm to the 

public’s health from cigarette smoking. At the time, Representative 

Waxman said the annual smoking-related cost in lost productivity 

was $25.8 billion and $13.6 billion in annual medical costs. R.J. 

Reynolds said, quote, that ‘‘attempts to establish a dollar value of 

so-called cost of smoking are ill-founded and unreliable,’’ end quote. 
17 

More than one decade later, in 1994, the tobacco company Philip 

Morris was producing glossy brochures to combat the growing evidence revolving around the harm of cigarette smoking. One was titled, quote, ‘‘Debunking the Social Cost of Smoking,’’ and an internal memo from Philip Morris said simply, ‘‘Philip Morris does not 

believe that smoking has been shown to pose any social cost on society.’’ 

So we’re going to hear similar arguments today on the social cost 

of carbon emissions from fossil fuels, their impact on climate 

change. These arguments resonate loudly with the new Trump Administration, but they contradict the economic analysis and scientific evidence that supports the use of social cost of carbon. 

In a much-publicized recent memo, Dr.—or Thomas Pyle, the 

head of Trump’s Department of Energy transition team, stated, 

quote, ‘‘If the social cost of carbon were subjected to the latest 

science, it would certainly be much lower than what the Obama 

Administration has been using,’’ end quote. And he suggested ending the use of it in federal rulemaking. The memo went on to describe plans to withdraw from the Paris Climate Agreement, eliminate the Clean Power Plan, increase federal oil and natural gas 

leasing, lift the moratorium on coal leasing—in other words, more 

and more and more fossil fuels at greater cost to the environment. 

Mr. Chairman, climate change is real. Scientific evidence across 

the world, we think we are the only country in the world that 

doesn’t—that has any internal disagreement about climate change. 

And as members of the Science Committee, we should be leading 

the fight to protect our nation against its impacts, and I hope my 

colleagues will be persuaded by the weight of evidence. The evidence becomes ever clearer with every passing day. And we will 

work together to promote policies that protect our future generations. 

Mr. Chair, I yield back. 

[The prepared statement of Mr. Beyer follows:] 
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Chairman BIGGS. Thank you, Mr. Beyer. 

I now recognize the Chairman of the Full Committee, Mr. Smith, 

for his opening statement. Chairman Smith. 

Chairman SMITH. Thank you, Chairman Biggs. And congratulations on becoming the Chairman of the Environment Subcommittee. I look forward to helping you restrain the EPA’s outof-control regulatory agenda. 

The EPA, along with other federal agencies, often bases their 

regulations on models and science not familiar to most Americans. 

Americans are led to believe that the EPA’s regulations are based 

on the best science available. Unfortunately, this committee has 

discovered that that is not the case. 

The EPA’s track record does not inspire trust. For example, the 

EPA routinely relies on nondisclosed scientific studies to justify its 

regulations, but how can Americans believe an agency that isn’t 

being open and honest? 

Another little-known component of environmental regulations is 

the social cost of carbon. The EPA attempts to put a price on a ton 

of carbon emitted into the atmosphere. This term is in many of the 

EPA’s regulations. However, like many of the Agency’s determinations, it is often based on a one-sided political agenda. 

Many factors contribute to the value of the social cost of carbon. 

While multiple models are used to determine a value for carbon, 

the ones frequently used in regulations assume only a worst-case 

scenario for climate change impacts. Similar to climate models, 

which predict worst-case scenarios and are repeatedly proved 

wrong, the social cost of carbon used by federal agencies is also 

flawed. 

The federal government should not include faulty calculations to 

justify costly regulations. Examples would be the Clean Power Plan 

and standards used by the Department of Energy. Instead, it 

should eliminate the use of the social cost of carbon until a credible 

value can be calculated. 

Rushing to use unreliable calculations, such as the social cost of 

carbon, to justify a regulation is irresponsible and misleading. For 

instance, the EPA’s Clean Power Plan would cost billions of dollars 

every year in return for a minimal benefit on the environment. In 

fact, the regulation would reduce global temperatures by only 0.03 

degrees Celsius and limit sea level rise by only the width of three 

sheets of paper. 

One of the many components used to justify this rule is the social 

cost of carbon. This flawed value desperately attempts to justify the 

Agency’s alarmist reasoning for support of the Clean Power Plan 

and other climate regulations. Agencies should rely on sound 

science, not flawed data. The fact that different models for the social cost of carbon exist and all have different values is a testament 

to how uncertain the science behind the value really is. For example, the social cost of carbon ranges from negative values to $37 per 

ton, which is the estimate used by government agencies under the 

Obama Administration. Before the EPA includes this value in 

rulemakings, the Agency should reassess how it is determined. 

Americans deserve credible science, not regulations based on 

data that is suspect and calculated to justify the EPA’s climate 
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agenda. Sound science and actual data should lead the way, not politically calculated social costs. 

Thank you, Mr. Chairman. I’ll yield back. 

[The prepared statement of Chairman Smith follows:] 
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Chairman BIGGS. Thank you, Chairman Smith. 

Let me introduce our witnesses. Our first witness today is Dr. 

Ted Gayer, Vice President and Director of Economic Studies and 

Joseph A. Pechman Senior Fellow at the Brookings Institute. Dr. 

Gayer received his bachelor’s degree in mathematics and economics 

from Emory, and his master’s degree and Ph.D. in economics from 

Duke University. 

Our next witness is Dr. Kevin Dayaratna, Senior Statistician and 

Research Programmer at the Heritage Foundation’s Institute for 

Economic Freedom and Opportunities Center for Data Analysis. 

Dr. Dayaratna received his bachelor’s degree in applied mathematics and mathematical physics from the University of California 

at Berkeley, his master’s degrees in mathematical statistics and 

business management from the University of Maryland, and his 

Ph.D. in mathematical statistics from the University of Maryland. 

Our third witness today is Dr. Michael Greenstone, Milton Friedman Professor in Economics, the College, and the Harris School; 

Director of the Interdisciplinary Energy Policy Institute at the University of Chicago; and Director of the Energy and Environment 

Lab at University of Chicago Urban Labs. Dr. Greenstone received 

his bachelor’s degree in economics at Swarthmore College and his 

Ph.D. in economics from Princeton. 

Our final witness today will be Dr. Patrick Michaels, Director of 

the Center for the Study of Science at the Cato Institute and contributing author to United Nations’ Intergovernmental Panel on 

Climate Change, which was awarded the Nobel Peace Prize. Dr. 

Michaels received his bachelor’s and master’s degrees in biological 

sciences and plant ecology from the University of Chicago and his 

Ph.D. in ecological climatology from the University of Wisconsin at 

Madison. 

I now recognize Dr. Gayer for five minutes to present his testimony. 

TESTIMONY OF DR. TED GAYER, PHD, 

VICE PRESIDENT AND DIRECTOR OF ECONOMIC STUDIES 

AND JOSEPH A. PECHMAN SENIOR FELLOW 

AT BROOKINGS INSTITUTION 

Dr. GAYER. Chairs Biggs, LaHood, and Smith; and Ranking 

Members Bonamici and Beyer; and members of the subcommittees, 

I appreciate the opportunity to appear here today to discuss the social cost of carbon. 

The social cost of carbon is a dollar estimate of the damages 

caused by a 1-ton increase in greenhouse gas emissions in a given 

year. It is a conceptually valid and important consideration when 

devising policies and treaties to address climate change, yet estimating the value of the social cost of carbon is an enormously complex and uncertain exercise. 

In 2009, the Obama Administration established an Interagency 

Working Group to develop a range of estimates for the social cost 

of carbon subsequently used by agencies to evaluate federal regulations. My focus is on the specific question of whether the social cost 

of carbon should account for the global or the domestic harm of a 

ton of greenhouse gas. 
25 

In a world in which the United States and all the other major 

emitters of greenhouse gases adopted a coordinated set of policies 

to address climate change, then a global measure would be appropriate since greenhouse gases contribute to damages around the 

world no matter where they occur. 

But we don’t live in such a world. Instead, in the United States 

we have opted for a suite of regulatory policies ranging from subsidizing lower carbon energy sources; mandating energy efficiency 

levels in buildings, vehicles, and household appliances; requiring 

transportation fuels to contain minimum volumes of different renewable fuels, and restricting emissions from electric utilities. 

Given the diversity of regulations directed at climate change, it 

is useful and important for the agencies to coordinate on a single 

measure of climate benefits. But the question is whether they 

should report and consider the benefits to U.S. citizens or to the 

world. The Interagency Working Group opted for a global measure. 

I believe the exclusive focus on a global measure runs counter to 

standard benefit cost practice in which only the benefits within the 

political jurisdiction bearing the cost of the policy are considers. It 

also seems at odds with the express intent of longstanding Executive orders and of authorizing statutes. For example, the main regulatory guidance document that has been in place for 20 years is 

Executive Order 12866, which makes clear that the appropriate 

reference point for analyzing federal regulatory policy—policies is 

the U.S. citizenry, not the world. 

Similarly, when enacting the Clean Air Act, Congress stated that 

its purpose was to, quote, ‘‘protect and enhance the quality of the 

nation’s air resources so as to promote the public health and welfare and productive capacity of its population,’’ end quote, which 

again suggests a focus on domestic benefits. 

The global measure is 4 to 14 times greater than the estimated 

domestic measure, which is significant. For example, for its proposed regulations for existing power plants, the EPA estimated climate benefits amounting to $30 billion in 2030. However, the estimated domestic climate benefits would have only amounted to $2 

to $7 billion, which is less than EPA’s estimated compliance cost 

for the rule. 

I believe that adopting a global measure for the benefits of a domestic policy would be justified if U.S. actions led to complete reciprocity from other countries. The question is whether efforts by the 

United States to regulate greenhouse gases might spur reciprocity 

by other countries to do so as well, generating domestic benefits 

that are 4 to 14 times as great as the direct domestic benefits to 

the U.S.-only policy. This is doubtful since the agency regulations 

taken under existing U.S. laws such as the Clean Air Act are not 

tantamount to treaty commitments that can establish a formal 

basis for other countries matching the efforts undertaken domestically. 

By using the global social cost of carbon, the agencies are claiming that their rules provide benefits that in fact largely accrue to 

foreign citizens. Of course, many Americans are altruistic and care 

about the welfare of people beyond our borders, but foreign aid decisions should be made openly and not hidden in an obscure metric 

used in domestic rulemaking. 
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A global measure of the social cost of carbon is appropriate if the 

intent is to use it to support the development of a global system 

of reducing greenhouse gases, such as through a worldwide carbon 

tax. I favor a carbon tax for the United States that replaces regulations and relies on border tax adjustments to incentivize other 

major emitters to follow suit. But absent such an approach, for domestic agencies considering domestic regulations in which the costs 

are incurred domestically, a global measure deviates from standard 

practice and requires more scrutiny and justification than it has received to date. At the very least, agencies should report the expected domestic benefits and only separately and transparently report the expected foreign benefits of their actions informed by concrete evidence of reciprocity expected from other countries. 

Thank you. 

[The prepared statement of Dr. Gayer follows:] 
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Chairman BIGGS. Thank you, Dr. Gayer. 

I now recognize Dr. Dayaratna for five minutes to present his 

testimony. 

TESTIMONY OF DR. KEVIN DAYARATNA, PHD, 

SENIOR STATISTICIAN AND RESEARCH PROGRAMMER, 

CENTER FOR DATA ANALYSIS, 

INSTITUTE FOR ECONOMIC FREEDOM 

AND OPPORTUNITY AT THE HERITAGE FOUNDATION 

Dr. DAYARATNA. Chairman Biggs, Ranking Member Bonamici, 

and other Members of the Subcommittees, thank you for the opportunity to testify about the social cost of carbon. 

My name is Kevin Dayaratna. I’m the Senior Statistician and Research Programmer at the Heritage Foundation. The views I express in this testimony are my own and should not be construed 

as representing any official position of the Heritage Foundation. 

One of the primary metrics that the previous Administration had 

used to justify agenda regarding energy policy—justify regulatory— 

its regulatory agenda regarding energy policy is the social cost of 

carbon, which is defined as the economic damages associated with 

a metric ton of carbon dioxide emissions summed across a particular time horizon. 

There are three primary statistical models that the Obama Administration’s Interagency Working Group had used to estimate 

the SCC, the DC. model, the FUND model, and the PAGE model. 

My colleagues and I have used the DC. and FUND models, testing 

their sensitivity to a variety of important assumptions. Our work, 

published both at Heritage, as well as in the peer-reviewed literature, as repeatedly illustrated that while these models might be 

interesting for academic exercises, they can be readily manipulated 

by regulators and bureaucrats. 

In particular, as with any statistical model, they are dependent 

on various assumptions. I’d like to discuss three assumptions regularly manipulated to achieve predetermined outcomes: the choice of 

a discount rate, a time horizon, and the specification of an equilibrium climate sensitivity distribution. 

The first easily manipulated assumption is the discount rate. In 

this type of cost-benefit analysis, the discount rate should reflect 

the rate of return on generally achievable alternative investments. 

The IWG had run these models using 2.5, 3, and five percent discount rates despite the fact that OMB guidance in circular A–4 had 

specifically stipulated that a seven percent discount rate be used 

as well. 

At Heritage, we re-estimated these models using a seven percent 

discount rate and noticed drastic reductions to the SCC. In 2020, 

for example, according to our recent analysis of the DC. model published in the peer-reviewed journal Climate Change Economics, 

under a three percent discount rate, the SCC is estimated to cost 

$37.79 per ton, while under a seven percent discount rate, it is estimated to be $5.87, an 84 percent reduction. The higher estimates 

previously found by the IWG can enable policymakers to justify unnecessary regulations and taxes on the economy. 
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The second easily manipulated assumption is the specification of 

a time horizon. It is close to impossible to forecast what the economy will look like decades into the future. Foolishly, these models 

attempt to make projections not decades but rather three centuries 

into the future. In my work at Heritage, I have changed the time 

horizon to a significantly shorter but still unrealistic time horizon 

of 150 years into the future. With the DC. model, we find that 

these results plummet by 25 percent in some instances. 

The third readily manipulated variable is the model’s equilibrium climate sensitivity, or ECS, distribution, quantifying the 

Earth’s temperature response to a doubling of carbon dioxide concentration. My colleague Dr. Pat Michaels will go into this in more 

detail, but the IWG used an ECS distribution that was published 

ten years ago in the journal Science. Since then, a number of newer 

ECS distributions have been published suggesting lower probabilities of extreme global warming. 

Using the more up-to-date ECS distributions generate significantly lower estimates of the SCC. In our peer-reviewed work, we 

found that, as a result of updating the ECS distributions, the results drop by as much as 197 percent under some circumstances. 

Inflated estimates of climate sensitivity drive up the SCC, which 

can become manifested in unnecessary regulations. 

Finally, the unexplored issue here is are there any benefits associated with carbon dioxide emissions? The answer is surprisingly 

yes. The FUND model actually allows for negative SCC, meaning 

a positive outcome. In fact, under some assumptions, there are actual substantial probabilities of negative SCC, meaning increased 

CO2 fertilization, leading to increased agriculture and forestry 

yields. 

Moreover, if one were to take the IWG’s interpretation of these 

models seriously and implement the associated regulations, there 

would be significant damage to the economy. In particular, our 

analysis finds that by 2035 the country would experience an average employment shortfall of 400,000 lost jobs, a marked increase 

in electricity prices, and an aggregate $2.5 trillion loss in GDP. 

Our analysis using the model for the assessment of greenhouse 

gas-induced climate change has found that these devastating impacts would be accompanied by insignificant changes and less than 

2/10 of a degree Celsius in temperature mitigation and less than 

2 centimeters of sea level rise reduction. 

In conclusion, the SCC is a broken tool for regulatory policy and 

taking it seriously would provide significant harm and little environmental benefit. 

Thank you for your attention, and I look forward to your questions. 

[The prepared statement of Mr. Dayaratna follows:] 
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Chairman BIGGS. Thank you, Dr. Dayaratna. 

I now recognize Dr. Greenstone for five minutes to present his 

testimony. 

TESTIMONY OF DR. MICHAEL GREENSTONE, PHD, 

MILTON FRIEDMAN PROFESSOR IN ECONOMICS, 

THE COLLEGE, AND THE HARRIS SCHOOL; 

DIRECTOR OF THE INTERDISCIPLINARY 

ENERGY POLICY INSTITUTE AT THE UNIVERSITY OF CHICAGO 

AND THE ENERGY & ENVIRONMENT LAB 

AT THE UNIVERSITY OF CHICAGO URBAN LABS 

Dr. GREENSTONE. Thank you, Chairmen Biggs and LaHood, 

Ranking Members Bonamici and Beyer, and Members of the Subcommittees, for inviting me to speak today. 

My name is Michael Greenstone, and I’m the Milton Friedman 

Professor in Economics and Director of the Energy Policy Institute 

at the University of Chicago. 

The social cost of carbon is a monetized value of the damages 

from the release of an additional ton of CO2. This means that it can 

be used to determine the benefits of regulations that reduce CO2

emissions. Indeed, these benefits can then be compared to the costs 

that regulations impose to determine whether the regulation is 

beneficial or not. 

In 2009, while working in the Obama Administration, Cass 

Sunstein and I convened and co-led an Interagency Working Group 

to determine a government-wide value for the social cost of carbon. 

Ultimately, the Interagency Working Group determined a central 

estimate of $21 per metric ton. That estimate has since been revised to reflect scientific advances and is now about $36. 

The approach has been judged valid. Last August, the Federal 

Court of Appeals rejected a legal challenge to the metric. Further, 

the General Accounting Office has said that the working group’s 

processes and methods reflected key principles that ensured its 

credibility: It used consensus-based decision-making, relied largely 

on existing academic literature and models; and disclosed limitations and incorporated new information by considering public comments and revising the estimates as updated research became 

available. 

Indeed, the social cost of carbon’s credibility is underscored by 

the fact that it has been adopted by the governments of California, 

Illinois, Minnesota, Maine, New York, and Washington State, not 

to mention Canada and Mexico. 

Before concluding my testimony today, I would like to address 

two frequent critiques of the social cost of carbon. One such critique is that the real discount rates used—2.5, 3, and 5 percent— 

are too low. Why is a discount rate so important? If we choose a 

discount rate that is too low, then we’re going to pay too much for 

mitigation efforts today. If instead we choose one that’s too high, 

then we will impose higher climate damages on our children and 

grandchildren than we intend. 

Economic theory tells us that we’ll be best off if the discount rate 

is equal to the market interest rate from investments that match 

the structure of payoffs that climate mitigation provides. If we 
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thought climate damages were likely to be imposed consistently 

and predictably over time, then it would be appropriate to set a 

discount rate equal to something like the average return for the 

stock market. That’s about 5.3 percent over the last 50 years. 

But, on the other hand, if we think climate damages could be unpredictable and that tail risk points towards major losses, then 

markets, markets themselves, tell us to use a lower discount rate. 

Consider the case of gold. Its average return is only about three 

percent, yet people hold it as an investment. Why is that? The reason is that it pays off dramatically during infrequent episodes of 

economic distress. For example, during the Great Recession, gold 

outperformed the stock market by 67 percent. 

When one considers the possibility of large temperature changes 

for given increases in emissions, great sea level rise in relatively 

short periods of time, the possibility of physical tipping points or 

human responses to these changes that include mass migration, 

then the case for using a low discount rate to determine the social 

cost of carbon appears strong. 

In addition to this conceptual reason to prefer low discount rates, 

the decline in global interest rates, so another market-based reason, since the mid-1980s provides another reason. The three percent real discount rate that has been a cornerstone of regulatory 

analysis since 2003 draws its justification from the fact that it was 

roughly equal to the real rate of return on long-term government 

debt at that time. 

However, the world has changed. Rates are now much lower and 

indeed the comparable rate is now probably below two percent. Put 

another way, capital markets are trying to tell us to use discount 

rates that are lower than those currently being used to determine 

the social cost of carbon. 

A second criticism of the social cost of carbon is that it reflects 

global costs from emissions, but the United States should only be 

concerned with domestic damages. However, this criticism misses 

an important point that the goal of policy is to maximize net benefits to Americans and that recognizing foreign damages is likely to 

increase net benefits. 

Why is this the case? It’s because each ton of CO2 emitted outside the United States inflicts damages on us. Thus, we benefit 

when China, India, the European Union, and others reduce their 

emissions. It absolutely strains credibility to assume that these 

countries’ emissions cuts would be as large as if we reverted to a 

social cost of carbon based only on domestic damages. 

In many respects, the Paris Climate Agreement, where nearly 

200 countries agreed to take action on carbon emissions, is a validation of the importance of treating climate change is a global 

problem. 

To summarize, society needs to balance the cost to our economy 

of mitigating climate change with the coming climate damages. 

Wishing that we did not face this tradeoff will not make it go away. 

Ultimately, we will be better off if a social cost of carbon based on 

sound science, economics, and law, continues to serve as a lynchpin 

of regulatory policy. Thank you. 

[The prepared statement of Mr. Greenstone follows:] 
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Chairman BIGGS. Thank you, Dr. Greenstone. 

I’ll now recognize Dr. Michaels for five minutes to present his 

testimony. 

TESTIMONY OF DR. PATRICK MICHAELS, PHD, DIRECTOR, 

CENTER FOR THE STUDY OF SCIENCE, CATO INSTITUTE; 

CONTRIBUTING AUTHOR TO UNITED NATIONS 

INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE 

(NOBEL PEACE PRIZE 2007) 

Dr. MICHAELS. May we have the first image? Thank you. 

[Slide.] 

Dr. MICHAELS. Mr. Chairman, Ranking Members, Members of 

the Subcommittees, thank you for inviting my testimony on scientific problems relating to the current calculation of the social cost 

of carbon or SCC. I am Patrick J. Michaels, Director of the Center 

for the Study of Science at the Cato Institute. Prior to that, I was 

a Research Professor of Environmental Sciences at University of 

Virginia for 30 years. 

A year-and-a-half ago I testified to the Committee on Natural Resources that the Obama Administration’s calculations of the SCC 

were in contravention of a large and growing body of scientific literature—next image—— 

[Slide.] 

—demonstrating that the sensitivity of temperature to human 

emission of carbon dioxide is not nearly as large as was previously 

thought. And more important, the chance of a high-end warming 

has greatly diminished. Since then, the evidence has grown stronger. 

Climate sensitivity is the amount of net warming one gets for 

doubling atmospheric carbon dioxide. It also roughly approximates 

the forecast for surface warming for the 21st century. The Obama 

Administration used a sensitivity specification by Roe and Baker, 

which is the top line there, that had a mean sensitivity of 3.0 degrees C and a 5 to 95 percent confidence limit of 1.7 to 7.14 degrees 

C, a very large number. 

Beginning in 2011, all this work down here, a growing body of 

the scientific literature has yielded 32 new estimates of the sensitivity generated by more than 50 researchers from around the 

world with a mean sensitivity of 2 degrees C and a 5 to 95 percent 

confidence limit of 1.1 to 3.5 degrees C. 

The large distributions of warming—next image— 

[Slide.] 

—used in Roe and Baker resulted in large part because of extremely wide range of estimates of the cooling effects of sulfate 

aerosols, another human emission. These were dramatically narrowed by researchers Nick Lewis and Judith Curry of Georgia 

Tech, which greatly reduced the sensitivity, as you can see here, 

and the spread around that sensitivity. 

As my colleague Kevin Dayaratna has shown, the newer more reality-based estimates result in a dramatic lowering of the SCC. 

Next image. 

[Slide.] 
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Let’s now have a look at how well those climate models that were 

used to calculate the previous Administration’s SCC are doing. This 

illustration is a further update of an analysis initially presented in 

the testimony of John Christy in 2015 with data that ended in 

2014. The uptick in observed warming at the end of the record is 

an apparent improvement between the models and reality. But it 

is not. Instead, it is the 2015/2016 El Nino. 

Next image. 

[Slide.] 

And that spread is likely to widen again in recent years, as you 

can see from surface temperatures here that they have dropped 

back down very close to their previous El Nino value. 

[Slide.] 

Next is a chart of predicted trends and tropical temperatures 

measured vertically. This is where the largest integrated warming 

on Earth is forecast to occur. The green line on the left is reality, 

which is—generally shows two to three times less warming than 

has been predicted. At the top of the active weather zone around 

here, the forecast is approximately seven times less than—or seven 

times more than is what is being observed. To deny this reality is 

to deny science. 

It is the vertical temperature distribution that largely determines daily weather. If this is forecast incorrectly, then any subsidiary forecast of surface weather regimes are of little to no value. 

To deny that is to deny science. 

There is another systematic error on the previous calculations of 

the SCC. We live on a planet that is becoming greener because of 

the direct—next image—— 

[Slide.] 

—physiological effects of increasing carbon dioxide on plant photosynthesis. A massive survey of the scientific literature by Dr. 

Craig Idso shows this caused a $3.2 trillion increment in agricultural output from 1961 through 2011. My colleague Mr. Dayaratna 

has shown that a more realistic sensitivity in carbon dioxide fertilization can result in a negative SCC or a net external benefit 

from the production of carbon dioxide. 

In closing, I provide you this image of the greening of our lukewarming home planet, as taken by NASA satellites. Where there 

are dots, the changes are statistically significant. Note that the 

greatest increases, the ones in pink, are in the margins of the 

world’s deserts and the tropical rainforest, places we all feared for. 

To acknowledge this is to affirm reality. 

Thank you very much for inviting my testimony. 

[The prepared statement of Mr. Michaels follows:] 
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Chairman BIGGS. Thank you. I thank each of the witnesses for 

their testimony today. The Chair recognizes himself for five minutes. 

Dr. Gayer, because the Interagency Working Group ignored Office of Management and Budget guidelines and used a global perspective in determining the SCC, agencies issue regulations with 

substantial domestic cost based on benefits to non-Americans. In 

what way does this global perspective method of calculating the 

SCC potentially mislead the public? 

Dr. GAYER. So I’ll answer in two parts. First, the—it’s—the models that are discussed here today are global models, so it’s inordinately difficult for them to come up with domestic estimates, but 

the interagency review—interagency process did kind of benchmark 

it to 4 to 14 times differential. So the domestic benefits are 1/4 to 

1/14 what the global benefits are based on the models that they 

used. 

And just to clarify, based on comment earlier, I think the approach should be taken, if it is going to use a global measure, it 

is not a zero-one, right? You could use a domestic measure, you can 

use a full global measure. Michael referred to straining credibility 

to assume that there’s no global benefits. I think it strains credibility to suggest that there’s going to be full global benefits, meaning if we act, the rest of the world will act instantaneously as well. 

So to the extent that that doesn’t happen and we’re using a domestic measure, we’re overestimating the benefits. And the example I gave with the Clean Power Plan on the climate benefit side, 

it’s enough to tip the scales that the costs outweigh the benefits. 

Chairman BIGGS. And, Dr. Gayer, just to follow up, do agencies 

have a duty to inform the American public of the domestic benefits 

in a cost-benefit analysis for federal regulations? 

Dr. GAYER. Yes. And those are the OMB guidelines. As I suggested at the end, I think I’d be less kind of worked up over it if 

they did both, but they should lead with the domestic measure. 

Chairman BIGGS. Dr. Dayaratna, what are your biggest concerns 

about using the SCC in policymaking? 

Dr. DAYARATNA. Thank you for the question, Congressman. 

So there are a variety of issues with these SCCs, with these 

IAMs associated with these SCCs. The most fundamental issue is 

that they are extremely sensitive to very, very reasonable changes 

in assumptions. As I was referring to, the time—using the time horizon to 300 years, if you shift that to 150 years, which is still unrealistic, you get a drastically different estimate of the SCC. 

The discount rate, if you use a seven percent discount rate, as 

mandated by the OMB, under the FUND model you will get a negative social cost of carbon. And the policy implication there would 

be that we shouldn’t be taxing carbon dioxide emissions but subsidizing it. 

Then lastly, with the equilibrium climate sensitivity distributions, there—the ECS distribution used has—was published ten 

years ago, and it’s not even based on empirical research. More upto-date ECS distributions also will result in a substantially lower 

and even potentially negative SCC depending on the model that 

you use. 
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So with these results all over the map, I do not understand how 

policymakers can garner any meaningful advice for regulatory policy. 

Chairman BIGGS. So just for the laymen who are here, what does 

the negative value of the SCC kind of connote? I mean, what are 

we really saying there when we say negative value? 

Dr. DAYARATNA. Basically, in a nutshell, in general when people 

think of SCC they talk about economic damages associated with 

carbon dioxide emissions. When those damages are negative, that 

implies that the SCC actually provides benefits. And the result of 

that is, you know, mostly increased photosynthesis, agriculture, 

and so forth. But that would suggest that increased CO2 is actually 

good for the planet. 

Chairman BIGGS. Thank you. Dr. Michaels, in 2015 the Interagency Working Group released a report to the public comments on 

the determination of the social cost of carbon. You were one of the 

commenters. What is the significance of having a comment period 

in the process of developing an SCC? And did the interagency 

group adopt any of these comments? 

Dr. MICHAELS. No, they did not, and many of the comments were 

well-reasoned based upon recent peer-reviewed literature reinforcing the notion that the sensitivity of temperature that was used 

in the models was too high. Nature is trying to tell us something. 

If you look at that satellite image that I showed earlier, you can 

see that the observed warming in the lower atmosphere is about 

half of what was predicted. If you look in the tropics, you can see 

that the observed warming in the vertical in the tropics is about 

half, actually maybe even a little bit less than what was predicted. 

All these things point to a consistent story. About twice as much 

warming was predicted as is going to occur. 

Now, the U.N.’s mean sensitivity is 3.2 degrees Celsius. Why 

don’t we settle this out at 1.6, and everybody can go home because 

we’re going to meet the 2 degree guideline with business as usual, 

declare victory, and let’s go on. 

Chairman BIGGS. So when the report refused to adopt any of the 

comments, what does that say to the validity of the report and its 

objectivity? 

Dr. MICHAELS. I would say that they were wedded to a point of 

view, and I understand. I live in Washington. I understand the 

pressures in this town. If anyone gave an official answer that this 

was not a problem, I hate to say we probably wouldn’t be chatting 

here so amiably because nobody would care. 

Chairman BIGGS. Thank you, Dr. Michaels. 

I recognize Ranking Member Bonamici for questions. 

Ms. BONAMICI. Thank you, Mr. Chairman. 

Dr. Greenstone, it’s been suggested that the Interagency Working 

Group operated under some sort of veil of secrecy while developing 

the social cost of carbon. The GAO, in a 2014 report, found that 

many of the social cost of carbon estimates were developed with 

input from the public. Now, you and Cass Sunstein convened and 

led this Interagency Working Group. So did the Interagency Working Group hear concerns that were raised by the other witnesses 

today, and how were those considered in the process? And can you 
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also talk about the role that public comment played in the development of the social cost of carbon? 

Dr. GREENSTONE. Yes. Thank you, Congresswoman, for letting 

me talk about that. So it’s probably worth going back in time a little bit. The process—the social cost of carbon was developed in a 

very methodical way. The—we convened and led this group that 

met many times and it drew expertise from agencies across the Administration. We then first put out—the first put-out was an interim number that was put out for public comment. Then, the final 

number of $21 was released in 2010. That has been attached to, 

I think, approximately 80 different rules. Public comment was received on that through that process. And then the Administration 

later I think in 2013 just put it out for public comment by itself. 

So there was tremendous effort to engage the public. There was 

tremendous effort to draw expertise from all corners of government, 

and it was a highly technical exercise that led to what we perceive 

to be and I believe to be describing the frontier of science. 

Now, it is possible that some of my fellow witnesses feel spurned, 

and I think that’s why we often use peer-reviewed literatures to determine what’s true and what’s not true. And I think just because 

their ideas were not judged to be on the frontier does not mean 

that the whole process was flawed. 

Ms. BONAMICI. Thank you. And, Dr. Greenstone, just because a 

comment is made and received but not included does not mean it 

was not considered, correct? 

Dr. GREENSTONE. Indeed. 

Ms. BONAMICI. So, Dr. Greenstone, Dr. Dayaratna said that if the 

social cost of carbon was implemented, the country would suffer— 

I believe it was—he said disastrous economic consequences, including a loss of jobs and income and an increase in electricity prices. 

I’d like you to address what would happen if indeed the Trump Administration has been promoting energy policies without regard to 

what the policies may do to the environment. So will you explain 

what would happen if we were to roll back regulations designed to 

reduce greenhouse gas emissions, if there’s an economic price to 

pay for undermining the science supporting the social cost of carbon and environmental regulations? And also, how would other 

countries like China or India respond if the United States retreats 

from or even appears to be retreating from its obligations to address greenhouse gas emissions? 

Dr. GREENSTONE. Yes. So I think Dr. Dayaratna is making a very 

important point, which is that regulations have costs, so we should 

all agree on that and we should—we can move on. 

On the flipside of that is that regulations to reduce carbon emissions have benefits, and there’s—it’s a tradeoff, like many things 

in economics. There’s no free lunch. And, you know, if we were to 

roll back regulations on climate emissions or carbon emissions, 

what we would—the world would face and certainly the United 

States would face higher temperatures; it would face sea level rise. 

It would face a variety of risks that would impose costs on us, our 

children, and our grandchildren. 

And let me just also return—you also asked, Congresswoman, 

about how it would be perceived globally if we reverted to a domestic social cost of carbon, and I think that’s an important question 
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because it’s not—what—a narrative here about using the domestic 

damages only I think misses that this is an international problem. 

And in particular when—as I said in my testimony, when China or 

India or the EU reduces emissions, it gives great benefits to the 

citizens of the United States. And to not account for that leverage 

puts us at risk of higher costs. 

And so I think the case for reverting to a domestic-only damage 

is essentially asking the rest of the world to ramp up their measures. 

Ms. BONAMICI. And finally, I know the recent National Academy 

of Sciences report ‘‘Valuing Climate Damages: Updating Estimation 

of the Social Cost of Carbon’’ provides some recommendations to 

the Interagency Working Group on how to improve the methodology. Do the recommendations for an updated estimation undermine the current working group values of the social cost of carbon 

or would using the Academy’s recommendation methodology invalidate existing regulations—— 

Dr. GREENSTONE. No, the—— 

Ms. BONAMICI. —that use the—— 

Dr. GREENSTONE. Thank you for that question. I think rather 

than have people cherry-pick particular features, which seems to be 

what’s happening today, that they dislike or that they know can 

change the social cost of carbon, a methodical and scientific approach would be to follow the National Academy of Sciences’ recommendations. And indeed, in the Interagency Working Group, we 

suggested that, as science advanced, the numbers should be updated periodically. And the National Academy of Sciences’ report 

gives a terrific blueprint that would allow for updating. 

And, you know, it is true things have advanced since 2009 and 

2010. Our understanding about the impacts of climate change, for 

instance, on human mortality have greatly advanced. And I expected a—following NAS’s blueprint would allow for a refresh. 

Ms. BONAMICI. Thank you. My time is expired. I yield back. 

Thank you, Mr. Chairman. 

Chairman BIGGS. Thank you. 

Dr. Michaels, you wish to respond? 

Dr. MICHAELS. Yes, I think it’s time to actually take a good, clear 

look at the effect of policies with regard to the Paris agreement. 

The EPA uses a model called the Model for the Assessment of 

Greenhouse Gas-Induced Climate Change. And if you’re following, 

the acronym for that model is MAGIC. It is the standard tool that 

is used. And you can put in emissions scenarios, climate sensitivity, 

and come out with a temperature saving as a result of any given 

policy. 

So let’s assume a sensitivity that is probably too high, 3 degrees 

Celsius, and let’s reduce United States’ emissions to zero right now 

through the year 2100. The amount of warming that would be prevented would be between 1/10 and 2/10 of a degree Celsius. 

Now, let’s talk about China and India candidly rather than merely using adjectives and adverbs. The Chinese emission commitments at the Paris agreement are nothing but business as usual. 

It has long been recognized as their economy matures that their 

emissions will stabilize around 2030, and that is precisely what 

they said they would do. 
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The Indian commitment is less than nothing. As economies mature, the amount of CO2 you emit per unit GDP declines. It’s called 

an increase—or a decrease in emissions intensity. They vowed in 

Paris to decrease their emissions intensity less, underline less, 

than the business-as-usual scenario for the country of India. 

So really what we do doesn’t mean anything to these other countries because they’re not doing anything. Thank you. 

Chairman BIGGS. I recognize the Chairman of the Oversight 

Committee, LaHood, for his five minutes of questions. 

Mr. LAHOOD. Thank you, Mr. Chairman. I want to thank all the 

witnesses for being here today and your valuable testimony. 

Dr. Gayer, I wanted to ask you, you know, as we try to better 

understand what Congress and the Trump Administration can do 

to make agency rulemaking based on more accurate cost-and-benefit information, I do have concerns—I’m not sure whether you’re 

familiar—last year, the Seventh Circuit Court of Appeals, the federal jurisdiction, ruled in a unanimous decision basically against 

the petitioners, which was an organization by the name of Zero 

Zone, which is an air-conditioning/heating unit that sued the Department of Energy based on the rulemaking process. And that 

unanimous decision, their conclusion—and I’m summarizing here— 

but the DOE conducted a cost-benefit analysis that is within the 

statutory authority and is supported by substantial evidence. Its 

methodology and conclusions were not arbitrary or capricious. 

And I guess do you have concerns that the court did not criticize 

this process in this court case? 

Dr. GAYER. Thank you for the question. 

I feel like I’m in a funny position in many ways. If you lock me 

and Michael Greenstone in a room, I’m not sure that we’d come up 

with a very different policy outcome. But I think the process of getting there matters, and I think the regulatory process that was 

used did involve a lot of assumptions and complexities that I would 

say lean into arbitrary considerations. 

That’s not to say I think that the social cost of carbon, this true 

number out there is negative; I don’t. And as I alluded to in my 

testimony, I do think we should act. I just don’t think we should 

act through kind of the mechanisms of existing statutes through 

regulations that take a very piecemeal approach and to my mind 

sort of put a veneer of scientific legitimacy on something that I 

think is highly, highly uncertain. So that’s a longwinded way of me 

getting at your question, so I apologize. 

Yes, I’m concerned when the courts disagree with me to some degree. I don’t know what—you know, in the kind of motivation of 

your question, we are existing in a world where all the action on 

climate is happening under existing statutes and therefore do—and 

going through the agencies. And so to the extent that there’s too 

much focus on global, not domestic, I do think it’s addressable from 

Office of Information and Regulatory Affairs and guidance given to 

the agencies about how they should conduct this. 

And I don’t want to speak for other people on the panel, but I 

think there is, you know, a lot of discretion in the choices that were 

made in how we come up with these numbers. I don’t think it was 

kind of rigged or deception or manipulated. I just think that people 

disagree. And I think with the new Administration and new OMB 
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and OIRA Director, they can come to a different determination of 

how much to weigh global versus domestic, as well as issues like 

discount rates and others, which is a highly difficult, complex, in 

many ways ethical question. 

Mr. LAHOOD. Well, thank you for that. 

And just as a follow-up, I think in your opening testimony you 

went through kind of, you described it as a suite of regulatory policies that we put in place domestically that, you know, have worked 

fairly well with reducing some of those environmental concerns 

that people talked about. 

In terms of a public policy position here in Congress on what we 

should do, beyond what you said with working in the Administration, any recommendations for us here in terms of legislation and 

what we should look at to address this problem? 

Dr. GAYER. Well, I think I—you know, I have an iconoclastic 

view perhaps on this. I first approached this problem because I 

thought a lot of these regulations—not because I didn’t think climate change was a problem but I thought these regulations were 

much too costly way to go about doing it. And in the analysis that 

they were using to justify it, I thought they were in some sense 

making decisions I disagreed with to make them look better than 

they are. 

I testified actually at the House a few years ago. A lot of these 

regulations are justified not on environmental grounds but because 

they purport to save consumers money because the underlying thesis there is that consumers are kind of irrational in their consumption decisions, so therefore, you know, the regulator has to come 

and make the decision for them, which is to my mind kind of a 

dangerous assumption and shouldn’t be used to justify rules. 

I have the kind of minority opinion on what should be done, but 

I think it should go through Congress. I, as I said before, favor 

kind of a trade for a carbon tax on one side that’s revenue-neutral, 

meaning affording a tax cut and also lighter regulations so that 

we’re not going to the regulatory approach, as we currently have 

been. 

Mr. LAHOOD. Thank you. Those are all my questions. 

Chairman BIGGS. Thank you. 

I recognize Mr. Beyer for five minutes. 

Mr. BEYER. Yes, Thank you, Mr. Chairman, very much. 

Thank you all very much for being here. It’s fun to have three 

economists and mathematicians, which we don’t often get and a 

bona fide Ph.D. climatologist. And I want to thank all of you for 

recognizing that climate change is in fact real. You may have different notions of is it as fast as it was, but this is a great leap forward for the Committee and for America. 

And I’m particularly pleased that Dr. Greenstone is the Milton 

Friedman Professor of Economics, which should make all of my Republican friends very comfortable and happy. And I thank Dr. 

Gayer for the quote that says that ‘‘The social cost of carbon is a 

conceptually valid and important consideration when devising policies and treaties to address climate change.’’ 

Dr. Greenstone, the two things that have come up again and 

again—in fact, our Chairman’s opening statement was, number 

one, this whole notion of the appropriate discount rate. And you 
104 

said—you quoted the appropriate discount rate comes down to a 

judgment about whether climate change involves a substantial risk 

of being disruptive. Now, the OMB has a circular that says we 

should use seven percent. Why the decision to ignore the seven percent. Can you tell us simply again why we would choose a number 

like three percent rather than a 7? 

Dr. GREENSTONE. Yes, thank you for your question, Mr. Congressman. 

So the discount rate is, as Dr. Gayer mentioned, it’s a very tough 

issue. With respect to climate change or with respect to any public 

investment, what one would like to do is to use a discount rate 

where—that reflects an interest rate from the market where the 

payoffs from that investment are similar to the payoffs from climate mitigation. 

And if you think—when you start to think about what climate 

change might offer, and a lot of it is unknown—as you put it, it 

could be very disruptive—that would tend to push people to lower 

discount rates and lower interest rates. And as I said in my testimony, the example of gold is really a good one in the sense that 

people are willing to hold gold. It has a very low mean rate of return of about three percent, but the reason they’re willing to hold 

it is because it pays off when times are bad. And so if we end up 

with a bad state of the world with respect to climate, I think that 

would push us to having—wish we’d used the low discount rate. 

It’s also worth noting that we’re having a somewhat artificial discussion about the 3 and seven percent. Those were set in 2003 

when global capital markets looked extraordinarily different than 

they do today. If we were to instead use what global capital markets are trying to tell us now, the three percent number would very 

likely be below two percent. That is that’s the return on a long— 

on a long-term government bond. That is a real return. The real 

return is probably less than two percent to be honest. And there— 

the seven percent number would also be much lower as well. 

So, ultimately, we chose to go with 3 and five percent to reflect 

the character of the climate problem. 

Mr. BEYER. Okay. Great. Thanks. 

The second half of that is that there are apparently—according 

to the majority memo—longstanding OMB guidance to only consider the domestic cost-benefits. And Dr. Gayer I think went on 

pretty eloquently about, you know, we’re considering what’s happening around the world, but they’re not necessarily affecting their 

policies. How would you justify the notion of using a global measure of the impacts? 

Dr. GREENSTONE. Yes. So actually—so let’s establish that I’m not 

a lawyer, and how nice it was to hear that there was—people were 

interested in having economists in the room. So that was a surprise. But my understanding of OMB circular A–4, which is what 

we’re talking about, is that it leaves open the option to look at global effects, and that was the path that we drove on. Now, I’m not 

the legal expert. 

The second thing that I want to come back to, and I thought it 

was very interesting. I saw some light or—between mine and Dr. 

Gayer’s testimony there, which is that I think to do an analysis 

where—of the benefits of carbon regulations that ignore the lever-
105 

age from emissions reductions inside the United States, and that 

leverage comes in the form of emissions reductions in other countries I think is an extraordinarily incomplete analysis. And using 

the global number is one way and I think a valid way to reflect 

that leverage. 

Mr. BEYER. Thank you. Thank you very much. 

Dr. Michaels, congratulations on your Nobel Prize. 

Dr. MICHAELS. I didn’t say that. That went to the group. 

Mr. BEYER. Okay. Well, still. 

Dr. MICHAELS. People there, certainly not to the worker bees. 

Mr. BEYER. You know, so it was the group that came up with the 

two percent target I think—— 

Dr. MICHAELS. Two degree target. 

Mr. BEYER. Two degree target, two degree target. 

Dr. MICHAELS. That was—— 

Mr. BEYER. Now you’re thinking that we’re going to be more like 

1.6. Will you be part of the IPCC going forward? And will they 

come to a 1.6—— 

Dr. MICHAELS. The—— 

Mr. BEYER. —consensus in the next couple of years? 

Dr. MICHAELS. The numbers that I have always given in my decades of testifying in both the House and the Senate are all within 

the range of the IPCC consensus so there’s nothing new here. 

Mr. BEYER. Okay. Great. Thank you very much. 

Mr. Chairman, I yield back. 

Dr. GREENSTONE. Can I just add one—— 

Chairman BIGGS. Thank you. 

Dr. GREENSTONE. I believe the IPCC—— 

Chairman BIGGS. Dr. Greenstone, please. 

Dr. GREENSTONE. —is from 1.5 to 4 or is it 1.5 to—— 

Dr. MICHAELS. Yes, I believe 1.6 is in there. 

Dr. GREENSTONE. I think you’re right at the bottom of the range, 

yes, but I think the IPCC’s consensus is actually—you’re right at 

the bottom of that range. 

Chairman BIGGS. Thank you. I recognize—— 

Dr. GREENSTONE. Just making sure we’re all on the same page. 

Chairman BIGGS. I recognize Chairman Smith. 

Chairman SMITH. Thank you, Mr. Chairman. 

Dr. Dayaratna, let me address my first question to you, and it 

is this: Do you feel that the social cost of carbon is based upon legitimate science or is it based upon arbitrary figures and subjective 

reasoning? 

Dr. DAYARATNA. That’s a very interesting question, so thank you, 

Congressman. In terms of the science, so as, you know, Pat and I 

both alluded to, the ECS—the equilibrium climate sensitivity distribution that is implemented in these models by the IWG has— 

was published ten years ago in the journal Science. That is a whole 

decade ago, and it is not even empirically estimated. It was calibrated to a priori assumptions that the IWG wanted to use regarding climate change. 

Now, if you look at the more recent distributions, you will notice 

significantly lower probabilities of extreme global warming. So 

what ended up happening was that using this outdated distribution, there was an overstated probability of extreme global warm-
106 

ing, and that gets manifested in higher estimates of the SCC. So 

basically, the SCC estimates were essentially beefed up. 

Chairman SMITH. Okay. Thank you. 

And, Dr. Michaels, are there benefits to carbon emissions? And 

if so, should they be factored into the social cost? 

Dr. MICHAELS. Well, if you’re going to factor costs, you should 

factor benefits, and the increment just from direct carbon dioxide 

fertilization for agricultural production is about $3 trillion from 

1961 through 2011. But more importantly, the satellite data shows 

a remarkable greening of the planet Earth, and the illustration 

that I showed earlier is remarkably reassuring because the massive 

greenings, the largest greenings are occurring in the margins of the 

great desert. The Sahelian region in Africa that you and I were 

taught in school this is desertifying and it will never come back. 

The tropical rainforest, the lungs of the Earth, have the largest increase in greening on the planet, all brought to you by carbon dioxide. So, yes, you should factor those things in I would think. Thank 

you. 

Chairman SMITH. Okay. Thank you, Dr. Michaels, for that. 

One other question. What are some important climate change 

factors that are not accounted for in the social cost? 

Dr. MICHAELS. Oh, God. How many hours do I have to answer 

that? 

Chairman SMITH. How about a minute-and-a-half but—— 

Dr. MICHAELS. Okay. 

Chairman SMITH. Okay. 

Dr. MICHAELS. One of the problems is that we spend tremendous 

amounts of taxpayer money on climate models— 

Chairman SMITH. Okay. 

Dr. MICHAELS. —and very, very—models for what happens when 

you increase carbon dioxide and very, very little money on what’s 

called natural climate variability. We know there are these great 

oscillations in the Atlantic and the Pacific that drive, modulate 

hurricanes, modulate storm tracks, modulate weather. Those 

things are not simulated in these climate models, and we need to 

understand that variability and subtract that out. 

I’ll close in one second here. The warming of the late 20th century, which began in 1976 and either ended in 1998 or continued— 

attenuated after 1998 depending upon what we believe—is the 

same magnitude as the warming of the early 20th century that occurred between 1910 and 20—and 1945. That warming could not 

have been caused by carbon dioxide. 

Chairman SMITH. Right. 

Dr. MICHAELS. It means that natural variability is as large as 

the largest human signal, and yet we only model the human signal. 

What’s wrong with this picture, Congressman? 

Chairman SMITH. Yes. Yes. That last point, the last couple points 

you seldom see covered in the media, but I think they’re great 

points to make. 

Final question is should we be using the social cost at all? 

Dr. MICHAELS. We should use the social cost of carbon if it’s accurately calculated, and I think there’s a lot of debate about what 

we’re supposed—what—— 

Chairman SMITH. Yes. 
107 

Dr. MICHAELS. —what it comprises—— 

Chairman SMITH. Okay. 

Dr. MICHAELS. —and what the natural variability component of 

it is and all this good stuff. We’re just not there. It’s not ready for 

prime time, Congressman. 

Chairman SMITH. Okay. Thank you, Dr. Michaels. 

I yield back, Mr. Chairman. 

Chairman BIGGS. Thank you, Mr. Chairman. 

I recognize Chairman LaHood. 

Mr. LAHOOD. Mr. Chairman, I would just like—I forgot to submit 

a document for the record from the American Road and Transportation Builders Association regarding our hearing today. I would 

ask to submit it for the record. 

Chairman BIGGS. Without objection. 

[The information appears in Appendix II] 

Chairman BIGGS. The Chair recognizes Mr. McNerney. 

Mr. MCNERNEY. Well, thank you, Mr. Chairman. Thank you for 

holding the hearing. I thank the witnesses this morning. 

Dr. Gayer, I’m very pleased to hear that you support a carbon 

tax. I think that’s the way to go. I’m going to be proposing a carbon 

tax and benefit package a little bit later, and I hope to get your 

support on that. Can we follow through with that? 

Dr. GAYER. I’d be delighted to, yes. 

Mr. MCNERNEY. Very good. 

About the domestic versus international impacts, do you believe 

that the physical impacts of climate change on other nations don’t 

have an impact on our domestic economy or security? 

Dr. GAYER. No, I don’t believe that, but what I believe is that the 

actions that we’ve taken thus far won’t lead to reductions matched 

throughout the entire world. And there are many policies that we 

have outside of environmental or climate that we—that if other 

countries did the same thing—and you can think about foreign aid 

or any number of policies, the world would be a better place and 

we’d benefit perhaps from it, but we don’t take those benefits into 

account. The regulations where—— 

Mr. MCNERNEY. So if we drop out of the Clean Power Plan and 

the Paris agreements, then that’s not going to have an impact on 

China or India or the other countries that are big emitters? 

Dr. GAYER. I don’t think the Clean Power Plan—well, I don’t 

know that the Clean Power Plan would have an effect. If there’s 

an international agreement and a treaty that is binding, then certainly we should consider the global benefits. Absent that, an EPA 

regulation I don’t think will actually lead to realize the effects 

throughout the world and certainly not 100 percent throughout the 

world. 

Mr. MCNERNEY. So you think—you do think that climate change 

is a problem? 

Dr. GAYER. Sure. Yes. Yes. 

Mr. MCNERNEY. And that the United States should have a leadership role in this issue? 

Dr. GAYER. Yes. 

Mr. MCNERNEY. Thank you. 

Dr. Greenstone, what impact will eliminating the SCC have on 

current and future environmental protections designed to reduce 
108 

greenhouse gas emissions? How is that going to affect us if we 

eliminate that measure? 

Dr. GREENSTONE. Thank you for the question. I think it will increase emissions. Of course it would naturally increase emissions 

in the United States, and that would increase the rate of climate 

change and global warming. What I think—the point I’ve been trying to make that I just want to underscore is I think it would also 

increase emissions in other countries, and so there would be a multiplier effect. And I think it’s a mistake to conclude that the Paris 

agreement did not reflect U.S. leadership and did not reflect that 

the United States had adopted a robust climate policy. So—you 

know, let me also add there’s I think again surprising agreement 

on this panel, at least among two of us, that there is climate 

change. Climate change is real. And there seems to be a little disagreement on the tactics. 

You know, our other two witnesses here I think are much more 

focused on cherry-picking particular features of it, and I think I 

couldn’t agree with them more that updating the assumptions that 

underlie the social cost of carbon based on the advances in science 

in the last 7 or eight years is an important thing to do. And indeed, 

thankfully, the National Academy of Sciences has put out a very 

clear report on how to go about doing that. 

Mr. MCNERNEY. Thank you. Now, some of the critics have implied that the SCC is created by the Obama Administration and 

pushed by environmentalists, but it’s my understanding that the 

Reagan Administration first demanded the Federal Government to 

do a cost-benefit analysis, and the federal courts required the 

George W. Bush Administration to monetize these benefits. Is there 

any other way to do that than using the social cost of carbon? 

Dr. GREENSTONE. No. The—really what the courts were requiring 

that a social cost of carbon be developed. And I think when one 

thinks back to 2009, what was striking is that even though a ton 

of CO2, wherever it’s emitted in the U.S. economy has the same impact, you had a complete discordant approach. The department— 

some departments were treating it as if there were zero costs associated with it, which is, just to be clear, effectively implying that 

climate change has no negative impacts. 

Mr. MCNERNEY. Right. 

Dr. GREENSTONE. And others were effectively treating it as if it 

were infinity costs. And so I think landing at the approach and the 

number that we ended—tried to instill some discipline and coherence across—policy across the government. 

Mr. MCNERNEY. And so what’s the context of how this came 

about, how this measure came about? 

Dr. GREENSTONE. Yes. No, it was—sorry. The Court had required 

it, and the President had ordered that a number be developed and 

that—as I mentioned earlier, that used expertise from all branches 

of government. 

Mr. MCNERNEY. And this was done in a transparent fashion? 

Dr. GREENSTONE. It was done in a transparent fashion. There’s 

been endless opportunities for public comments. It’s been at least 

80 rules. In addition, it was put out for public comment on its own. 

Mr. MCNERNEY. Is there some kind of consensus on what parameters to use for this model? 
109 

Dr. GREENSTONE. Yes. There was great debate about it, and 

what—actually what—a rule that I tried to impose when we were 

leading the process was that we should not be making science—we 

are, after all, faceless bureaucrats sitting in a room—but instead 

that our job was to summarize the frontier of science. And I feel 

that we were quite faithful to that goal. 

Mr. MCNERNEY. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Chairman BIGGS. Thank you. Dr. Michaels, you looked like you 

might want to respond to the assertion of cherry-picking. 

Dr. MICHAELS. I would like to—oh, sorry. I would like to respond 

to the assertion that without the social cost of carbon that our 

emissions would go up. That’s what I call maybe herd reasoning, 

and I’d like to show you how well herd reasoning works with regard to emissions. 

This, which I just happen to be carrying in my backpack, is a 

shale oil rock. Ten years ago if I said that there were hundreds of 

years of oil—shale gas rather, which produces half the emissions 

of carbon dioxide when combusted for power production under our 

feet, polite company—and we would get it by exploding rocks, polite 

company would have laughed me out of every Washington cocktail 

hour. But that’s the way people work. 

Regulation is not required to create efficiency. Markets are required to create efficiency. This is cheaper than its competitors, 

and emissions will continue to go down as long as our economy is 

free for the simple reason that the future belongs to the efficient. 

Mr. MCNERNEY. Industry can be relied on to clean itself up. 

That’s basically what you’re saying. 

Dr. MICHAELS. No, the market can be relied upon to clean up industry. 

Mr. MCNERNEY. Mr. Greenstone—— 

Chairman BIGGS. I’m sorry. The gentleman’s time is expired. 

Mr. MCNERNEY. I’m sorry. 

Chairman BIGGS. The Chair recognizes Mr. Posey. 

Mr. POSEY. Thank you, Mr. Chairman. 

As policymakers, I think it’s important that we all know what we 

don’t know, and therefore, our attempts to predict the future impact of regulations are always speculative and subject to error. 

And that being said, it’s also true that some predictions are more 

speculative and uncertain than others. The time between the implementation of a regulation and the onset of any potential benefits 

is a great example of a factor that makes some forecasts more reliable and others less so. Clearly, the longer the period of time is between the implementation of a rule and the realization of its benefits, the less reliable the analysis of the predicted benefits can be 

due to the increased likelihood of intervention from unforeseen 

sources. 

My first question is for Dr. Dayaratna. With what I’ve said in 

mind, can you give me an idea of the time horizon used in calculating the social cost of carbon? How far into the future are we 

looking at when we talk about this cost? 

Dr. DAYARATNA. The time horizon for computing the social cost 

of carbon by the IWG is 300 years into the future. And it’s interesting that you ask that question, Congressman. Firstly, it’s dif-
110 

ficult to forecast what the economy will look like, you know, even 

a couple decades into the future, let alone centuries. 

Now, Dr. Michaels had a slide about the temperature projections 

that John Christy talked about juxtaposing the IPCC’s forecast 

versus satellite and weather balloon data. And I just find it astounding that people would want to use these models to try to 

make forecasts 300 years into the future when they can’t even predict 20. 

Mr. POSEY. Yes, we have trouble getting the weather predicted 

a day ahead of time—— 

Dr. DAYARATNA. Oh, absolutely. 

Mr. POSEY. —oftentimes. So, wow, you’re telling me we’re basing 

our regulatory decisions on assumptions about what the world will 

be like in 300 years. In some ways that’s kind of like our Founding 

Fathers trying to predict and regulate the internet. 

Dr. DAYARATNA. Yes. I gave a talk, you know, a couple weeks ago 

on this topic. You know, John Adams once said America will one 

day become the greatest empire in the world, and he was right, but 

yet he’d have no idea what people are doing today using microphones, smartphones, tablets, and so forth. Similarly, we have no 

idea what things are going to look like that far into the future. And 

I quite frankly find it’s—these models are quite foolish in actually 

trying to make those types of forecasts. 

Mr. POSEY. Okay. Can you describe for us how the social cost of 

carbon estimates change when you use a more reasonable horizon? 

Dr. DAYARATNA. So as I was referring to in my testimony, they 

change as—by—a reasonable figure is around 25 percent. That figure varies but on average around I think around 25 percent or so, 

perhaps more. 

Mr. POSEY. And given what you just said, do you think it’s advisable to continue using the current social cost of carbon estimates 

in rulemaking proceedings? 

Dr. DAYARATNA. Absolutely not. I think these models—you know, 

they’re interesting for academic exercises but they need to be revised to be suitable for regulatory policy. 

Mr. POSEY. Do you think in the future the agencies can and 

should be more forthcoming about the highly speculative nature 

and variable quality of social cost of carbon estimates? 

Dr. DAYARATNA. I tend to think so, yes. To be quite honest, like 

the sheer fact that they are using an ECS distribution that was— 

that is ten years old and not even based on empirical research is 

one thing that is, you know, just not in detail talked about in the 

IWG’s analysis. They did respond to this in the public comments; 

I will say that. But, yes, there are so many other things out there 

that they should be more forthcoming about. 

And, you know, there was a question that came up earlier about 

the use of a seven percent discount rate and why it was not used. 

Quite frankly, here’s the reason why I think it wasn’t used. Even 

using the outdated Roe Baker distribution, you still get a negative 

estimate of the SCC under a seven percent discount rate. That’s 

why it wasn’t used. 

Mr. POSEY. Okay. There’s been a lot of discussion about climate 

change. Can anyone on the panel give me a date certain, even a 
111 

year certain that there was absolutely no climate change on this 

planet since the forming of it? 

Dr. DAYARATNA. I believe that the climate has been changing 

since the planet was first formed. 

Mr. POSEY. Any others? 

Dr. GREENSTONE. Mr. Congressman, are you talking about—just 

so we’re on the same page, are you talking about climate changing 

or climate changing due to the release of CO2? Because I can’t 

quite tell from your question. 

Mr. POSEY. I thought I was fairly clear. 

Dr. GREENSTONE. Okay. Well, then—— 

Mr. POSEY. Can you give me any date certain—— 

Dr. GREENSTONE. The climate has certainly—— 

Mr. POSEY. —in the history of the Earth that the climate has not 

changed? 

Dr. GREENSTONE. Since the release of CO2, it has been changing 

more rapidly. 

Dr. MICHAELS. That’s not true. 

Mr. POSEY. You know, that’s speculative, and I didn’t ask you to 

describe a clock. I asked you if you knew what time it was. 

Yes, sir, at the end. 

Dr. MICHAELS. I think the climate was quite stable about one 

year before the Big Bang. 

Mr. POSEY. Okay. Dr. Dayaratna. 

Dr. DAYARATNA. Yes, there was actually a paper published in the 

Journal of the American Statistical Association last year that 

looked at tree ring analysis in Tornetrask, Sweden, and they found 

interestingly using their Bayesian modeling that in 1750 the temperatures there it may have been just as warm if not warmer than 

they were today in 1750 before, you know, all the things that we— 

people tend to complain about today. 

Chairman BIGGS. Thank you. 

Mr. POSEY. Do you have any idea what—— 

Chairman BIGGS. The gentleman’s time is expired. 

Mr. POSEY. Any idea what the temperature was pre the last Ice 

Age when the dinosaurs were roaming the Earth? 

Dr. DAYARATNA. Pat actually might have an answer to that. 

Dr. MICHAELS. The answer—that’s a very good question and I’m 

glad you asked that. I don’t think we have to go pre the last Ice 

Age. Let’s go not to the most recent interglacial but to the penultimate one, the one between what some people call the Illinois glaciation and the Wisconsin glaciation. At the end of the current Ice 

Age, temperatures got quite a bit warmer than they are now, the 

beginning of the current interglacial. The beginning of the penultimate one, they were much warmer than they were in our interglacial. 

In Greenland, temperatures in summer averaged around 6 degrees Celsius higher than now for 6,000 years. And guess what? 

The vast majority of the ice on Greenland survived, a heat load 

that human beings could not put on Greenland if they tried. And 

then somebody found a skeleton of a bear from 5,000 years before 

that, and it turns out the DNA sequence was that of a polar bear. 

Chairman BIGGS. Thank you. The gentleman’s time is expired. 

Dr. MICHAELS. Thank you very much. 
112 

Mr. POSEY. Thank you. 

Chairman BIGGS. The Chair recognizes my friend from Florida, 

Mr. Crist. 

Mr. CRIST. Thank you very much. Good morning. 

I was wondering—Dr. Michaels, good morning. How are you? 

Dr. MICHAELS. I’m good. 

Mr. CRIST. Do you believe that climate change is real? 

Dr. MICHAELS. Of course. 

Mr. CRIST. Fabulous. 

Dr. MICHAELS. I also believe the sun will rise tomorrow. 

Mr. CRIST. That’s breathtaking. 

Dr. MICHAELS. I know. It’s mindboggling. 

Mr. CRIST. Do you—what would you estimate is the cause of the 

climate change you believe in? 

Dr. MICHAELS. There are natural causes and there is a human 

component. You have to understand, the warming of the second— 

the second warming in the 20th century is accompanied by a cooling of the lower stratosphere. Now, if you change the greenhouse 

effect, because you change the upwelling flux of infrared radiation, 

you will warm the lower layers of the atmosphere but you will cool 

the stratosphere. That’s what Karl Popper would call a difficult 

test of a theory. And indeed, the lower stratosphere cools concurrent with the warming of the troposphere, our neck of the woods. 

That’s a greenhouse signature. 

But here’s the cool part, Congressman Crist. In 1997, 1998, everybody knows that something happened to warming unless you 

really jimmy the records and it either slowed down or stopped. 

Mr. CRIST. Attenuated you said. 

Dr. MICHAELS. Attenuated is a good word because you can attenuate—— 

Mr. CRIST. Sure. 

Dr. MICHAELS. —a lot or you can attenuate a little. But the stratospheric cooling also stopped. Now, if you want me to explain that, 

I’m going to tell you the three most important words in life. 

Mr. CRIST. My question is simple. What causes climate change 

in your estimation? 

Dr. MICHAELS. Lots of things. 

Mr. CRIST. What’s the primary cause? 

Dr. MICHAELS. The fact that we live on a fluid discontinuous 

earth with long-period oscillations. I mean, the biggest climate 

change that you and I know of is an ice age oscillation, and I don’t 

think CO2 is going to be capable of doing that, and those occurred, 

you know, without human influence. Again, I say the warming of 

the late 20th century has a greenhouse component because of the 

stratospheric cooling. By did the stratosphere stop cooling when the 

surface warming either stopped or attenuated? You know what the 

answer why that happened is? 

Mr. CRIST. May I ask another member a question? 

Dr. MICHAELS. No one knows is the answer. 

Mr. CRIST. Dr. Greenstone, what do you think causes climate 

change, please? 

Dr. GREENSTONE. I think what we’re here to talk about today is 

the climate change is caused from the release of CO2—— 

Mr. CRIST. Yes, sir. 
113 

Dr. GREENSTONE. —of which I think that’s a settled issue scientifically. And I can’t help but note the contrast here between the 

concerns of the development of the SCC was an opaque process, 

which is the claims here. Let me just say the character of the conversation that occurred in those many, many meetings was really 

quite sober. It was rigorous. It was very scientifically based. And 

we—at no point did anyone talk about a skeleton of a polar bear 

as a way to make an argument. 

And my own view is that there’s a great path forward, and I 

think there’s agreement in the room that there should be a development that the social cost of carbon should be refreshed to reflect 

the scientific advances that have occurred since 2009 and 2010. 

And literally, the National Academy of Sciences has outlined a terrific way forward that would also be rigorous, scientifically based, 

and sober, and I think there’s a great opportunity for the Trump 

Administration to do that. 

Mr. CRIST. Thank you. I’m from the Sunshine State, and I’m very 

proud of that. But having said that, we use less solar energy than 

New Jersey. And New Jersey’s a great place, but it’s the Garden 

State and we’re the Sunshine State. And so the point I’m trying to 

make is if we’re going to address climate change and probably the 

primary cause, which is CO2, carbon, then wouldn’t it be better for 

us to try to get more of our energy from solar, from sun or wind 

in order to mitigate the cause? 

Dr. GREENSTONE. I think there’s a great case for energy markets 

being in a very unlevel playing field. In particular, the fossil fuels, 

which involve the release of CO2, when we go to the gas pump and 

when we pay our electricity bill, we don’t pay for the climate damages that are associated with using them. And if we were to level 

the playing field so that all sources of energy could compete on 

equal grounds, it would naturally be the case that there would be 

a greater reliance on, as you suggested, renewables, probably on 

nuclear as well, and other low-carbon energy sources. 

Mr. CRIST. Thank you, Doctor. 

Thank you, Mr. Chairman. 

Chairman BIGGS. Thank you. 

The Chair recognizes Mr. Rohrabacher from California. 

Mr. ROHRABACHER. Thank you very much. And let me just note 

that I—one of my colleagues suggested that there is a consensus 

among scientists that global warming is being caused by CO2 emissions, and let me just note that a consensus may mean 75 percent, 

it may mean 60 percent, it may mean ten percent and the others 

don’t know for sure. But a consensus is not how you determine 

whether or not something is scientifically viable. You have to really 

look to see whether or not it makes sense what people are saying 

and whether or not, for example, attempts to receive government 

contracts for research were in some way influencing someone to 

target their outcome of their research because what I have heard 

in the last few years is that droughts are caused by global warming 

and the CO2 level and then now it’s floods are caused by CO2 level 

and more tornados. I mean, how many times have we heard that 

the tornados and the hurricanes are more frequent, but they’re not. 

You know, come to find out they are not more frequent. And all of 
114 

this coming back to CO2 and whether or not it is something that 

we should be concerned about at the level of CO2. You know, I drove across the country last year and I saw all 

these hothouses, and covered-up places, and they were growing all 

sorts of vegetables. And I went and stopped at several of them and 

guess what they were pumping into the hothouses? CO2. Now, 

why? Because it makes the plants grow better and that means 

there’s more food. 

Now, let me ask you this. If we have less CO2 in the air, does 

that mean that the plants, and I think we saw something there, 

that the plants will not grow as robustly if we have less CO2 in the 

air? Whoever wants to go into that. 

Dr. DAYARATNA. That is actually one of the aspects about the 

FUND model compared to the other models that is actually incorporated, the feedback from CO2 into plants and agriculture from 

CO2 fertilization. So the other models, the DC. and PAGE model 

the IWG used, do not account for this type of feedback. 

Mr. ROHRABACHER. So that’s a great benefit if we have trees that 

are growing stronger and more trees, more edible plants growing 

stronger, but that benefit was not calculated into the cost-benefit 

of other studies? 

Dr. DAYARATNA. That benefit was incorporated in the FUND 

model analysis. Out of the three models used by the IWG, the 

FUND model actually incorporated that benefit. And, you know, 

Pat can talk more about this, but there are other benefits in there 

that could potentially be modeled that, you know, the FUND model 

doesn’t take into account such as, say, aquatic life—— 

Mr. ROHRABACHER. Okay. 

Dr. DAYARATNA. —you know, detailed aspects about vegetation, 

detailed aspects about agriculture, and so forth that the economy 

could benefit from. 

Mr. ROHRABACHER. Well, let me just put it this way. It’s clearer 

that in the past there were higher levels of CO2 and great plant 

life throughout the planet, and we know that and that’s very easily 

discovered in any research. But now, our CO2 level is looked at as 

if it’s going to be harmful, and let me just say that I don’t think 

that there is a consensus at a high level of percentage, and I think 

we need to make sure that before we jump into international agreements that it’s not just whether it’s global benefit or whether it’s 

local benefit. We just have to see whether there’s any validity to 

this concept in the first place so—— 

Dr. MICHAELS. Congressman, can I offer an observation? 

Mr. ROHRABACHER. Please do. 

Dr. MICHAELS. I understand that it is thought to be socially responsible to pay for the costs of emission of carbon dioxide, and I 

also would argue that the fossil fuel-driven societies since 1900 in 

the developed world have increased their lifespan by 100 percent 

and their per capita wealth 11-fold. Are we to not also take into 

account that massive benefit? We should all be dead given our ages 

in this room if this were 1900, but it is that society that allows us 

to live. 

Chairman BIGGS. Thank you. 

Mr. ROHRABACHER. That’s a very good point and I’m glad I’m not 

dead. There you go. 
115 

Chairman BIGGS. The gentleman’s time is expired. Thank you. 

The Chair recognizes Mr. Marshall from Kansas. 

Mr. MARSHALL. Thank you, Mr. Chairman. I wish my colleague 

from Florida was still here. I was going to share with him that we 

have more sunny days in Kansas than there. Oh, you are still here, 

Governor. So we have more sunny days in Kansas than Florida, so 

we look forward to continuing the diversity of energy from Kansas. 

So thanks for sharing that. I want to acknowledge a good friend of 

mine, John Francis, who’s in the audience, flew all the way in from 

Great Bend, America, to hear our President speak. 

Dr. Gayer, the first question’s for you. You mentioned that you 

would be in favor of a carbon tax being implemented. If we implemented a carbon tax, do you think we could also do away with 

some of the regulations governing all these carbon producers and 

just let us pay a tax and be done with it if we can measure it in 

some way? 

Dr. GAYER. Yes. So certainly in many ways that’s kind of the 

thrust of my critique of what’s going on in the regulatory sphere. 

The—and I’m a—Michael Greenstone mentioned leveling the playing field. And so for me the carbon tax is a way to level the playing 

field, and the regulatory interventions that we’ve had are a very, 

very flawed approach to trying to do that. And in my view, the 

modeling and the global versus domestic are sort of justifications 

for what I think is a flawed approach. 

So, you know, the ultimate trade is a carbon tax in exchange for 

a tax reduction for more harmful taxes and less regulation and just 

stick to the pricing. 

Mr. MARSHALL. Anybody else want to weigh in on that? Dr. 

Greenstone, please. 

Dr. GREENSTONE. Yes, I think there’s a great opportunity for applying a carbon tax at an appropriate level and using—the revenues could be used in a variety of ways. It could be refunded. They 

could be used to reduce other taxes. And I think they would provide a great opportunity as well for—as a—they could be an excellent substitute for a lot of the regulations that are in place. So 

there’s agreement here. 

Dr. MICHAELS. And with regard to the revenue neutrality, I 

would offer my comment in the form of a question. Do you really 

expect $3 trillion to walk down K Street unmolested? 

Mr. MARSHALL. Okay. I don’t know what to say to that. I hope 

the question wasn’t for me. 

This social carbon tax is a perfect example of government making 

the simple complicated. I don’t think we’ll ever agree. It’s a social 

number; it’s a political number. That’s what it seems to me and I’m 

very new to this game. 

I guess what I’m more concerned about is, as I watched the 

Olympics in China and so on and so forth, it would seem to me that 

whatever measure you use that some of our biggest competitors are 

producing more of this carbon. And I’m just curious in the big 

scheme of things in today’s world how much carbon is America producing in relationship to China or India, regardless of the social 

cost we can argue? But what percentage are we now responsible 

for? 
116 

Dr. GREENSTONE. I think this is a rough number. I think historically—I think right now China is producing about 50 percent more 

per year than we are. I think we are the second-largest emitter, 

larger than the EU, larger than India. I think starting from the Industrial Revolution—someone else might know here—but I’m going 

to guess that I think we’re responsible for about maybe a quarter 

of all emissions. 

Mr. MARSHALL. Okay. 

Dr. MICHAELS. Yes, but we are becoming more efficient. Our 

emissions intensity, which is the amount of CO2 produced per unit 

GDP has dropped more rapidly than pretty much everywhere, and 

that didn’t happen because of regulations. It happened because of 

markets. So if you want efficiency, you would prefer economic—— 

Mr. MARSHALL. And I want to move on. So I grew up in a small 

town between two refineries, oil refineries. So proud that our air 

in Kansas is cleaner today than it was when I was growing up and 

the waters are cleaner. I want to keep moving in that direction. 

Back to my point: manufacturing. I’m trying to figure out why 

manufacturing jobs have left Kansas, and one of them is the cost 

of energy. Does anybody have any solutions? How do we encourage 

China, India, other countries to take leads in this responsibility? 

Does anybody have any solutions? Do we tax them or—I don’t want 

to—does anybody have any solutions on how we encourage them to 

get into this game? 

Dr. GREENSTONE. I think Dr. Gayer outlined one effective tool, 

which would be to have a carbon tax and then have some border 

tariff—border tax adjustment so that if people tried to import—so 

let’s say steel that had carbon embedded in it or carbon was used 

to produce it, they would face the same carbon tax that domestic 

producers would face. 

Mr. MARSHALL. But you would adjust that per country or how 

would you figure out—so Europe’s doing good, Germany’s doing 

good, but China’s not. 

Dr. GREENSTONE. Yes, so you’d have to—there would be some 

complexity, I think, but it’s imminently doable. 

Chairman BIGGS. Thank you. The Chair recognizes Mr. Higgins 

from Louisiana. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

We’re here to discuss the real cost of carbon as it’s imposed upon 

the American people. And it’s interesting to note that in discussing 

the social cost of carbon I’ve heard terms like ‘‘overwhelming consensus of scientific opinion’’ and ‘‘real science’’ and yet the measurement standards use a 300-year window to determine actual taxation and cost placed upon the American people. And it’s interesting to consider that we’re very fortunate that we’re not bound 

by the science of 300 years ago when we would be discussing egocentricity, alchemy, spontaneous generation of life, and the hollow 

Earth. And yet scientists tend to speak as if their scientific calculations are absolute and unchallengable. To me, the real overwhelming consensus is that the social cost of carbon is a cost measured not by 300-year windows of manipulated science but the contemporary and very real cost of American jobs and American treasure. 
117 

So I ask Dr. Dayaratna, you mentioned there are updated equilibrium climate sensitivity distributions. These ECS distributions 

quantify the Earth’s projected temperature response to a doubling 

of carbon dioxide concentrations. As you note, these recent ECS 

distributions appear to reflect a lower chance of extreme global 

warming in response to increased carbon dioxide concentrations. 

Can you explain or can you give us some insight or are you aware 

of why the previous Administration, through their Interagency 

Working Group failed to update the SCC or any other social cost 

of greenhouse gas estimates to reflect these more up-to-date ECS 

distributions? If it was not a political decision, then please explain, 

what was it? 

Dr. DAYARATNA. So the Roe Baker distribution that was published in 2007 is calibrated to a priori assumptions that the IWG 

wanted to make regarding global warming based on, you know, a 

compiled research discussed by the IPCC. The thing is that—again, 

that distribution is calibrated. It is not an empirical distribution. 

The percentiles were fitted based to assumptions that the working 

group wanted to make. Subsequent ECS distributions are actually 

empirically estimated, so they are much more worth considering. 

Now, the question regarding why were these new distributions 

not included, I think, quite frankly, the reason is that they lower 

the estimate of the SCC substantially even if you don’t use a seven 

percent discount rate, even if you use the assumptions that the 

IWG wanted to make regarding 2.5, 3, and five percent. You can 

still get a negative SCC using more up-to-date distributions because the fat tail of the Roe Baker distribution has essentially gone 

on a diet with the newer more up-to-date ECS distributions, signifying the lower probability of global warming. 

Mr. HIGGINS. Dr. Michaels, do you have something to add? 

Dr. MICHAELS. I think Kevin is right. 

Dr. DAYARATNA. Your mike’s not on. 

Chairman BIGGS. Please press your mike. Thank you. 

Dr. MICHAELS. It was not a lower probability of global warming. 

It’s a lower probability of high-end global warming—— 

Dr. DAYARATNA. High-end global—yes. 

Dr. MICHAELS. —which is—and that is correct. 

Mr. HIGGINS. And with the increase of carbon emissions measured globally, would it not be a reasonable consideration that 

greenhouse gas effect would in fact assist the economies of the 

earth regarding agricultural production? 

Dr. MICHAELS. Well, the effect of carbon dioxide—the direct effect 

on plants is well-documented, and the image that I showed at the 

end of my presentation, which is a very recent image, documents 

the actual greening of much of the Earth, not just the agricultural 

component of the Earth. And it’s very reassuring to see that the 

largest greenings—and they are very, very large—tends to take 

place in the margins of the deserts south of the Sahara and in the 

northern parts of the tropical rainforest where we were very concerned. 

Mr. HIGGINS. Dr. Greenstone, I believe—— 

Dr. GREENSTONE. Yes. 

Mr. HIGGINS. —Mr. Chairman, he has something to add although 

I’m out of time. 
118 

Chairman BIGGS. Your time is expired. Sorry. 

The Chair recognizes Mr. Babin. 

Mr. BABIN. Yes, sir. Thank you, Mr. Chairman. 

Fascinating testimony. I want to thank everyone for being here, 

these witnesses. 

I represent the 36th District in Texas, which contains the highest 

concentration of chemical plants and oil refineries of any one district in the entire country. So when the federal government issues 

carbon regulations based on questionable data and methods, this is 

of great concern to me because they have a direct and significant 

impact on my constituents. 

And, Dr. Dayaratna, putting things in a perspective from the Industrial Revolution, what association do you see between carbon dioxide emissions and the health of our economy? And along with 

what some of you folks have already said, obviously it’s going to be 

a drag but I’d like to hear you elaborate a little bit more on that. 

Dr. DAYARATNA. Okay. Well, no, that’s a very good question, Congressman. So here’s the thing. And a lot of people take for granted 

that energy is a fundamental building block of civilization. So 

whether it’s, you know, powering this room, lighting up our homes, 

powering our cars and so forth, we all depend on energy. 

So when we think about, you know, this whole concept of SCC, 

the whole goal is to reduce carbon dioxide emissions, and what we 

end up doing is moving away from the least expensive and most 

efficient forms of electricity to more expensive and less efficient 

forms. 

So—and the bottom line is economically what we’ll notice is that 

when we go to these so-called lower carbon-emitting, you know, 

forms of energy, what we would notice is a dramatic change to the 

economy in the long run. You—you know, a carbon tax, as I was 

talking about in my testimony, would—in conjunction with the 

SCC would result in around 400,000 lost jobs on average by 2035, 

13 to 20 percent increase in electricity prices, a $2.5 trillion loss 

in GDP. 

Now, on the other hand—and I’ve also researched this question— 

if we were to take advantage of the vast shale oil and gas we have 

in this country, we’d actually see the exact opposite, in fact, even 

more so in the other direction. We would see a $3.7 trillion increase 

in GDP, personal income would skyrocket—— 

Mr. BABIN. Absolutely. 

Dr. DAYARATNA. —and, yes, all sorts of things that would benefit 

the economy. 

Mr. BABIN. Absolutely. Thank you so very much for that testimony. And, Dr. Michaels, it’s interesting to hear you put a historic 

and prehistoric context into all this. 

Dr. MICHAELS. I’ve lived that long. 

Mr. BABIN. Well, as a student of history, I’ve read some of the 

Norse settlements coming from Norway over to Iceland and onto 

Greenland, and they had settlements there I think from the year 

1000 and had trade and routine ships calling on them from Europe 

for a couple of 300 years. And they were in the process of raising 

livestock, had hay crops, and then strangely, it had been over 150 

years when a ship called on them in the 1500s and none of that 

community was left. And by that time the climate had cooled off 
119 

considerably. The hay crops were no longer there. The folks had 

disappeared. 

So I don’t think there was a huge amount of industrialism, carbon dioxide being released into the earth from humans during 

those centuries, so if you can kind of address that as well, along 

with some of the other—— 

Dr. MICHAELS. Well, the nature of climate is to change. 

Mr. BABIN. Right. 

Dr. MICHAELS. It is because we are not a uniform earth. We do 

not have a circular orbit. The sun varies and the infrared absorption of the atmosphere varies, sometimes with human activities. 

It’s—what do they say? It’s complicated, Congressman. And the 

problem is in the illustration that I showed, comparing the satellite 

and weather balloon observations to the average of the United Nations’ 107 computer models shows that it’s so complicated that we 

haven’t gotten close to getting it right and why would you base a 

policy upon something that is so blatantly wrong? 

Mr. BABIN. Thank you so very much. And the American people 

deserve to know the truth here and have sound scientific data, and 

that’s what this hearing’s all about. I want to thank everybody 

again for being here, and I’ll yield back, Mr. Chairman. Thank you. 

Chairman BIGGS. Thank you. The Chair recognizes Mr. Weber 

from Texas. 

Mr. WEBER. Thank you, Mr. Chairman. I have a question for 

each of you all. There seemed to be some discussion about whether 

climate change was real and what that meant and the definition, 

so here’s my question for each of you individually, and we’ll start 

with you, Dr. Gayer. Would you agree that climate change is 

caused by temperature fluctuation? 

Dr. GAYER. Yes. 

Mr. WEBER. Dr. Dayaratna? 

Dr. DAYARATNA. Dayaratna. 

Mr. WEBER. Thank you. 

Dr. DAYARATNA. The question is would I agree that climate 

change is caused by—— 

Mr. WEBER. Is caused by temperature fluctuation? 

Dr. DAYARATNA. Yes. 

Mr. WEBER. How about you, Dr. Greenstone? 

Dr. GREENSTONE. It’s a function of temperature variation. It’s 

also a function of CO2 emissions. 

Mr. WEBER. Temperature variation is a good one, too. I didn’t 

mention CO2. I’ll come back to you. Dr. Michaels, would you agree 

climate change is caused by temperature fluctuation? 

Dr. MICHAELS. It is the contrast—oh, sorry. It is the contrast in 

temperature between the surface and the upper atmosphere that 

derives—drives most of the precipitation mechanisms on Earth, so 

the answer would be if that changes, yes. 

Mr. WEBER. Okay. I’ll take that as a yes. 

Dr. Gayer, would you agree that temperatures fluctuate when 

seasons change? 

Dr. GAYER. Yes. 

Mr. WEBER. Doctor? 

Dr. DAYARATNA. Yes. 

Mr. WEBER. Dr. Greenstone? 
120 

Dr. GREENSTONE. Yes. I also think they fluctuate—— 

Mr. WEBER. Dr. Michaels? 

Dr. GREENSTONE. —from CO2 emissions. 

Dr. MICHAELS. Me four. 

Mr. WEBER. Okay. Dr. Gayer, back to you. Would you believe— 

would you agree that temperatures fluctuate in historical, global, 

cyclical fashion? In other words, we have historical evidence that 

temperatures changed up or down historically. 

Dr. GAYER. Yes, I don’t know cyclical necessarily but yes—— 

Mr. WEBER. Well, okay. 

Dr. GAYER. —it’s gone up, it’s gone down. 

Mr. WEBER. I’ll give you that. How about— 

Dr. DAYARATNA. Yes. 

Mr. WEBER. —you, Doctor? 

Dr. DAYARATNA. Yes. 

Mr. WEBER. Dr. Greenstone, would you agree with that? 

Dr. GREENSTONE. Yes. I also think that it varies—— 

Mr. WEBER. It’s just a yes or no. 

Dr. GREENSTONE. —because of CO2 emissions—— 

Mr. WEBER. Dr. Michaels? 

Dr. MICHAELS. I will use the weasel word quasi-cyclical. 

Mr. WEBER. Got you. Okay. Now, would you agree also, Doctors, 

that the temperatures actually fluctuate more when seasons 

change? Obviously, they go up drastically in Texas to 100, 110 in 

the desert area sometimes or they go way down below, so when it 

changes from fall to winter, for example, temperatures fluctuate 

wildly. Would you agree with that, Dr. Gayer? 

Dr. GAYER. I’m confused by the question because I thought that 

was the previous question. 

Mr. WEBER. Would you agree that temperatures fluctuate more 

when seasons change than they just do from week to week, for example? 

Dr. GAYER. Yes. 

Mr. WEBER. Okay. Dr. Dayaratna? 

Dr. DAYARATNA. Yes. 

Mr. WEBER. Okay. Dr. Greenstone, minus the COT component— 

CO2? 

Dr. GREENSTONE. I think CO2’s important in terms of temperature. I also think seasons are important in terms of temperature. 

Mr. WEBER. Dr. Michaels, would you agree they fluctuate more 

wildly when seasons change? 

Dr. MICHAELS. Yes, sir. 

Mr. WEBER. Great. So we know that the temperatures fluctuate 

when seasons change. Now, we’re talking about a carbon tax. And 

so if you go back to where we’re going to charge carbon tax for people on industry or countries, let’s say, that have industry, are we 

going to take into account when their seasons change because now 

they’re using more electricity when it’s hot or more electricity when 

it’s cold? Do you take that into account at all in the proposed carbon tax? 

Dr. GAYER. I’m not—— 

Mr. WEBER. Do they get a credit when—— 

Dr. GAYER. No, the—— 

Mr. WEBER. —they have a mild season. 
121 

Dr. GAYER. The goal of the carbon tax is to include a price into 

the energy decision. So certainly when they use more energy, the 

tax will go higher and the—— 

Mr. WEBER. Okay. So they could put—— 

Dr. GAYER. If you’re tying it to like tax reduction somewhere 

else, the revenue would go higher then. 

Mr. WEBER. They do get a credit when it’s mild. I got you. Okay. 

Now, what happens when those countries have a tremendous catastrophe, whether it’s a huge hurricane or a huge cyclone, tsunami, 

or you name it, and they are really hard hit and they have to have 

more energy production to rebuild their country, do they then get 

a tax credit to be able to go back and rebuild their country or do 

we punish them more because now they’re using more energy to rebuild? 

Dr. GREENSTONE. Can I ask a clarifying—— 

Mr. WEBER. No, I’m asking him first, Dr. Gayer. 

Dr. GAYER. I don’t—I didn’t—I don’t understand the tax——they 

level—you level—the tax increases the price of energy, yes. 

Mr. WEBER. So no matter what happens in a country, if they 

have a huge catastrophe and they have to use a lot of energy to 

rebuild their country, they don’t get a break? They’re just going to 

pay more carbon tax at that point? 

Dr. GAYER. Yes, that’s the nature of a tax. 

Mr. WEBER. Doctor, do you agree with that? 

Dr. DAYARATNA. That—I’ve never put together a carbon tax proposal myself—— 

Mr. WEBER. I’m just—— 

Dr. DAYARATNA. —but in principle, the—yes, that seems to be 

what—— 

Mr. WEBER. That’s what’s going to happen. 

Dr. DAYARATNA. —we would want to do, yes. 

Mr. WEBER. Dr. Greenstone, do you agree that’s going to happen, 

they use more energy, more carbon to rebuild their country and 

they’re going to get taxed on it? 

Dr. GREENSTONE. I just want to clarify if we’re talking about a 

hurricane disaster that’s due to CO2 accumulation in the atmosphere or just one that has—— 

Mr. WEBER. I’m talking about the tax once they have a disaster. 

Do you know where I’m going, Dr. Michaels? Can you see what I’m 

asking here? 

Dr. MICHAELS. Yes. I believe that you are drawing the analogy 

to what happened to this House when it passed cap-and-trade in 

2009. 

Mr. WEBER. Well, that was a catastrophe all right but—— 

Dr. MICHAELS. Correct. 

Mr. WEBER. So here’s the point I’m making. Now, suppose an industry comes along and they develop a process of capturing CO2

and putting it underground. Do we revoke the carbon tax? 

Dr. GAYER. No, you credit it. That’s the—that—— 

Mr. WEBER. Credit it? 

Dr. GAYER. That’s—and that’s one of the nice incentives of having a tax because it incentivizes those kind of technological improvements. 

Mr. WEBER. Okay. 
122 

Dr. GREENSTONE. In fact, it would be terrific. It would provide 

a market incentive—— 

Mr. WEBER. Okay. 

Dr. GREENSTONE. —to engage for people to find ways to reduce—— 

Mr. WEBER. Okay. 

Dr. GREENSTONE. —CO2 in the atmosphere. 

Mr. WEBER. Okay. Well, let me just—— 

Dr. GAYER. And be more resilient going forward. 

Mr. WEBER. —add for the record, Mr. Chairman, and I’m done 

that in my district we have the largest carbon capture storage unit, 

Air Products in—over in Jefferson County in the country. So just 

interesting food for thought where we’re headed with this idea. 

Mr. Chairman, I yield back. 

Chairman BIGGS. Thanks. I thank the witnesses for their valuable testimony and the members for their questions. The record 

will remain open for two weeks for additional comments and written questions from members. This hearing is adjourned. 

[Whereupon, at 12:03 p.m., the Subcommittees were adjourned.] 
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Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
124 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Kevin Dayaratna, PhD 
125 
126 
127 

Responses by Dr. Michael Greenstone, PhD 
128 
129 
130 
131 

(133) 

Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
134 

STATEMENT SUBMITTED BY FULL COMMITTEE

RANKING MEMBER EDDIE BERNICE JOHNSON
135 
136 

DOCUMENT SUBMITTED BY SUBCOMMITTEE ON OVERSIGHT

CHAIRMAN DARIN LAHOOD
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