**Memorandum**

**Subject:** November 2013 Adjustment to the Social Cost of Car bon

**Date:** November 13, 2013

**From:** Amanda Curry Brown Office of Air Quality Planning and Standards

**To:** Docket EPA-HQ-OAR-2013-0495

On November 1, 2013, the federal government release d a minor adjustment to the May 2013 social cost of carbon (SCC) estimates reflecting tw o technical corrections. The first addressed a misspecification in the FUND model’s computer code, as covered in an erratum to Anthoff and Tol (2013) published in the same journal ( Climatic Change ) in October 2013. The second addressed an inadvertent misspecification of the eq uilibrium climate sensitivity distribution in the FUND model. The Office of Management and Budget (OMB) announced the update via a blog posting 1 and published the revised estimates in the SCC Tec hnical Support Document (TSD). 2 The OMB blog posting also stated that in response to public and stakeholder interest in SCC, OMB will provide an opportunity for public com ment on the updated estimates. The comment request will be in addition to the public c omment opportunities already available through particular rulemakings.

Chapter 5 of the regulatory impact analysis (RIA) s upporting the 2013 proposed Standards of

Performance for Greenhouse Gas Emissions for New St ationary Sources: Electric Utility Generating Units (EGU New Source GHG Standards) inc ludes sensitivity analyses that use the May 2013 SCC estimates. Two of the SCC estimates us ed in the sensitivity analysis (average SCC

at a 2.5% discount rate and 95 th percentile SCC at a 3% discount rate for CO 2 emissions in the year 2020) each decreased by one dollar in the Nove mber 2013 revision. The remaining two SCC estimates (average SCC at a 5% discount rate an d average SCC at a 3% discount rate for CO 2 emissions in 2020) were unchanged. Table 1 summariz es the SCC estimates used in the analysis

and the revised estimates.

**Table 1. Social Cost of Carbon in 2020 ($/metric to n CO**  **2 , 2011 dollars)** 

**May 2013 November 2013** 5% average $13 $13 3% average $46 $46 2.5% average $69 $68

3% 95 th percentile $138 $137

1 http://www.whitehouse.gov/blog/2013/11/01/refining- estimates-social-cost-carbon

2 http://www.whitehouse.gov/sites/default/files/omb/a ssets/inforeg/technical-update-social-cost-of-carbo n-forregulator-impact-analysis.pdfThe revised estimates do not impact the RIA’s prima ry conclusion that the EGU New Source

GHG Standards will have negligible costs and no qua ntified benefits. Additionally, the EPA reviewed the sensitivity analyses conducted for the RIA and found that the impact of the SCC adjustments is minor. In these sensitivity analyses , we compare the per-Megawatt hour (MWh) cost to the per-MWh climate and health benefits of generation using different fuel types. As a result of the SCC revision, the total per-MWh benef its reported decreased by one dollar for certain values reported. However, these adjustment s do not change the conclusions of these analyses.

We strive to assess the costs and benefits of regul ations based on the best information available. Accordingly, we currently plan to use th e revised SCC values in the RIA for the final EGU New Source GHG Standards. We request comment on the revised estimates and on the approach used to develop the estimates, which has n ot changed since the interagency group first published estimates in 2010. 3

References

Anthoff, D. and Tol, R.S.J. 2013a. The uncertainty about the social cost of carbon: a decomposition analysis using FUND. Climatic Change 117: 515–530.

3 The February 2010 SCC TSD provides a complete disc ussion of the approach used to develop the interage ncy SCC

estimates. This TSD is available at: http://www.whitehouse.gov/sites/default/files/omb/i nforeg/foragencies/Social-Cost-of-Carbon-for-RIA.pdf