From: Robin Moran/AA/USEPA/US 

To: "Achanta, Chandana L." <Chandana_L._Achanta@omb.eop.gov> 

Cc: William Charmley/AA/USEPA/US@EPA, Ed Nam/AA/USEPA/US@EPA, Maureen 

Delaney/DC/USEPA/US@EPA, rebecca.yoon@dot.gov, james.tamm@dot.gov, Kate 

Cardamone/DC/USEPA/US@EPA, Dina Kruger/DC/USEPA/US@EPA, Paul 

Balserak/DC/USEPA/US@EPA, Elizabeth Kopits/DC/USEPA/US@EPA 

Date: 03/30/2010 04:18 PM 

Subjec

t: 

SCC Response to Comments 

Chandana, per your request, for your information, here is EPA's response to comments for Social 

Cost of Carbon. 

[attachment "SCC Response to Comments - to OMB 3-30-10.doc" deleted by Tad 

Wysor/AA/USEPA/US] 

Robin Moran 

Senior Policy Advisor 

Assessment and Standards Division 

U.S. EPA, Office of Transportation and Air Quality 

2000 Traverwood Dr. 

Ann Arbor, MI 48105 

(734) 214-4781 

(734) 214-4821 (fax)
4.5.4. Benefits of Reducing GHG Emissions (Social Cost of Carbon) 

EPA RESPONSE A 

Organizations: See table below. 

Commenter Affiliation Document ID Number 

California Air Resources Board EPA-HQ-OAR-2009-0472-7189.1 

Center for Biological Diversity EPA-HQ-OAR-2009-0472-7265.1 

Connecticut DEP EPA-HQ-OAR-2009-0472-7301.1 

Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 

Ford Motor Company EPA-HQ-OAR-2009-0472-7082.1 

Institute for Energy Research EPA-HQ-OAR-2009-0472-7225.1 

Institute for Policy Integrity at 

New York University School of 

Law 

EPA-HQ-OAR-2009-0472-7246.1 

National Association of Clean 

Air Agencies 

EPA-HQ-OAR-2009-0472-7071.1 

Natural Resources Defense 

Council 

EPA-HQ-OAR-2009-0472-7274.1 

National Rural Electric 

Cooperative Association 

EPA-HQ-OAR-2009-0472-7252.1 

New Jersey DEP EPA-HQ-OAR-2009-0472-7093.1 

Northeast States for 

Coordinated Air Use 

Management 

EPA-HQ-OAR-2009-0472-7235.1 

Pew Center EPA-HQ-OAR-2009-0472-7239.1 

Physicians for Social 

Responsibility, Los Angeles 

EPA-HQ-OAR-2009-0472-7283, pg 81 

Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 

Private Citizen (Chew, Yuli) EPA-HQ-OAR-2009-0472-7042.1 

Private Citizen (Magavern, Bill) EPA-HQ-OAR-2009-0472-7283, pg 179-186 

Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 

Private Citizen (Steiner, John) EPA-HQ-OAR-2009-0472-8705 

Sierra Club EPA-HQ-OAR-2009-0472-6185, p. 31 

Stockholm Environment 

Institute-US Center 

EPA-HQ-OAR-2009-0472-7432.1 

Union of Concerned Scientists EPA-HQ-OAR-2009-0472-7181.1 

University of California Santa 

Barbara Bren Working Group 

EPA-HQ-OAR-2009-0472-7188.1 

Comments:
Commenters presented extensive methodological input and discussed various issues, 

including discount rate, uncertainty and risk, and magnitude and uses of the social cost of 

carbon. 

Comments on Discount Rate 

These comments identified concerns about the discount rates applied to SCC estimates and 

provided different recommendations about issues such as the approach used to select discount 

rates, the magnitude of the discount rate, and ways to account for uncertainty in discount rates. 

Many commenters emphasized the ethical issues embedded in the selection (e.g., 7246.1, 7239.1, 

and 7274.1). 

In general, commenters recommended different approaches and lower rates to give more 

weight to climate damages experienced by future generations. Some commenters recommended 

that EPA develop a social discount rate on the basis of detailed consideration of the scientific, 

ethical, and economic implications of discounting (e.g., 7246.1 and 7274.1); several commented 

on using the Ramsey framework in particular to derive the discount rate (e.g., 7432.1, 7246.1, 

7274.1). Some commenters did not think it was appropriate to infer rates from observed market 

behavior when considering the long time horizons for climate damages (e.g., 7265.1, 7246.1, 

7274.1). For example, the Environmental Defense Fund and the NYU Institute for Policy 

Integrity stated in a joint letter that a “simple application of a market rate of return is not 

justified” because of the “special relationship of GHGs to the market rate of return and to a large 

range of goods and services (both market and non-market)” (7246.1, pg 15). They noted, 

however, that if EPA opted to use market rates of return, it should also analyze and consider the 

underlying complexities in greater detail, such as the relationship between GHG reductions and 

economic growth, and present a robust discussion about GHG reductions “fit into an optimal 

portfolio of investments” (7246.1, pg 15). 

 In addition, two commenters suggested that EPA should not discount the SCC (7265.1, 

7274.1). That is, they stated that EPA should use a discount rate of zero, thereby making the 

present value of damages in the future equivalent to their value in the future, effectively making 

the net present value of damages infinite. 

Many of the commenters stated that the discount rates applied to the interim SCC estimates 

were too high and therefore resulted in underestimates of SCC that fail to adequately capture the 

value of damages experienced by future generations (e.g., 7265.1, 7246.1, 7274.1, 7239.1). In 

particular, some commenters disagreed with the rationale given for use of a 5 percent discount 

rate. Dr. Rose stated that “a 5 percent discount rate is inconsistent with risk-free consumption 

trade-offs within the current generation,” further noting that the intergenerational timeline for 

GHG emissions “implies even greater uncertainty than that reflected in intragenerational interest 

rates” (7276.1, pg 4). That is, GHG mitigation represents a different kind of investment than 

intragenerational investments analyzed with higher discount rates like 5 percent. The 

Environmental Defense Fund and the NYU Institute for Policy Integrity concluded that there are 

“strong reasons for concluding that a substantial fraction of the benefits from abatement are 

uncorrelated or even negatively correlated with the returns to the economy as a whole” (7246.1, 
pg 15). Other commenters agreed with this view and concluded that it would be appropriate to 

view investment in GHG mitigation from a risk-averse perspective—i.e., investment in 

mitigation as a form of insurance against uncertain future climate damages—rather than a risky 

investment in mitigation technology (7274.1, 7432.1). 

Furthermore, some commenters disagreed with the proposed rule’s statement that 5 percent 

is consistent with the Ramsey framework, based on standard estimates of the Ramsey parameters 

(e.g., 7239.1, 7276.1, 7246.1, 7432.1). First, the Stockholm Environment Institute noted that 

controversy about appropriate estimates of Ramsey parameters has thus far prevented 

standardization of the framework values. Similarly, Environmental Defense Fund and NYU 

Institute for Policy Integrity stated that “[t]he claim that 5% is ‘near the middle of the range of 

values that are able to be derived from the Ramsey equation’ is in fact meaningless—there is no 

theoretical lower or upper bound to values that could possibly be derived from the Ramsey 

equation” (7276.1, pg 8). Second, several commenters pointed out that the Ramsey framework 

normally assumes perfect certainty about the future and needs to be adjusted to account for the 

significant uncertainty inherent in GHG emissions; this would result in a lower estimate of the 

discount rate (e.g., 7432.1, 7239.1). Third, the Stockholm Environment Institute concluded that 

the derivation of the 5 percent discount rate from Ramsey “does not appear to be based on a 

careful reading of the sources cited in supporting footnotes” (7432.1, pg 11).1

 

In addition, many commenters noted that the range of discount rates used in the proposed 

rule did not include low enough rates and recommended using lower rates in the final rule (e.g., 

7239.1, 7432.1, 7188.1). Several specifically suggested using 2 percent and lower and one 

recommended setting an upper bound that did not exceed 4 percent (7246.1, 7274.1). 

The commenters presented multiple sources to support their recommendation for lower 

rates. For example, several commenters stated that consideration of rates below 3 percent would 

fulfill OMB Circular A-4 guidance to conduct sensitivity analysis at such rates for 

intergenerational problems (e.g., 7432.1, 7274.1, and 7239.1). The Environmental Defense Fund 

and NYU Institute for Policy Integrity presented evidence of lower rates that the interagency 

group should consider, including a 2009 National Academy of Science study that reporting 

discount rates of 1.5, 3, and 4.5 percent for SCC estimates (7246.1). 

 Finally, some commenters recommended that EPA account for discount rate uncertainty 

and adjust the rates in the final rule (e.g., 7246.1, 7274.1, 7432.1). The Stockholm Environment 

Institute disagreed with the proposed rule’s statement that the literature on techniques to account 

for discount rate uncertainty, in particular time-varying discount rates, is relatively recent. This 

commenter cited several papers, including a literature review published in 2002 in AEA’s 

Journal of Economic Literature; the review discussed numerous arguments for time-varying 

discount rates dating back to a 1937 paper.2

 Likewise, the Environmental Defense Fund and the 

NYU Institute for Policy Integrity pointed out the qualitative conclusions of the work by Newell 

 

1

 The Stockholm Environment Institute determined that four of the five sources cited in the proposal as the basis for 

the Ramsey parameter estimates are inconsistent with the numerical estimates presented in proposed rulemaking. 

See OAR-2009-0472-7432.1, pg 11. 

2

 Shane Frederick, George Loewenstein, and Ted O’Donoghue, “Time discounting and time preference: A critical 

review,” Journal of Economic Literature (2002) 40:351-401. 
and Pizer are “reinforced in a general theoretical setting by Gollier and Weitzman” (7246.1, pg 

21).3

 Likewise, the Environmental Defense Fund and NYU Institute for Policy Integrity 

supported the adjustment of discount rates for uncertainty and recommended that EPA do so to 

determine the principal SCC estimates, rather than limit it to sensitivity analysis. These 

commenters described the choice between the Weitzman and Newell-Pizer approaches, which 

define discount rate uncertainty in different ways, as a false one because each approach supports 

the same conclusion: “in the presence of uncertainty over the appropriate discount rate, future 

costs and benefits should be discounted at a rate that declines over time” (7246.1, pg 21). 

However, they noted that if forced to choose one or the other, they would advise Newell and 

Pizer because of “its careful use of historical data, its demonstration that time-varying discount 

rates are rigorously justified on strictly descriptive grounds, and its development of a rigorous 

analytical methodology that can be readily applied to the computation of SCC values in the 

current context” (7246.1, pg 20-21). 

 Another commenter identified the potential time inconsistency as an issue to consider 

when applying Newell and Pizer (2003) to SCC estimates. Specifically, Dr. Rose stated that the 

Newell and Pizer discounting framework may present values that are inconsistent with various 

alternative futures; he further noted that such inconsistencies would likely be greater if climate 

impacts affect future economic growth (7276.1). 

The Environmental Defense Fund and NYU Institute for Policy Integrity addressed the 

critique that rank ordering of present value and future value of benefits may produce different 

results when using time-differential discount rates. They maintained that the timing of the 

investment decision is not arbitrary—it is made by individuals in the present under known 

certainties. Rather, concerns about time inconsistency center on “a certain pattern of discount 

rates (“high today, low tomorrow”) that the planner nonetheless systematically fails to 

anticipate,” but that time-declining rates (e.g., Newell-Pizer) involve a “discrete investment 

decision [that] must be made today, in the absence of full information about the future discount 

rate, that will continue to yield returns far into the future” (7246.1, pg 21-22). In sum, they 

concluded that no time inconsistency arises in the latter case because “by the time we reach the 

future the decision will have already been made. Declining discount rates merely provide an aid 

to current decision-making in the face of risk” (7246.1, pg 21-22). 

Comments on Uncertainty and Risk 

Many commenters discussed the limitations of the SCC estimates, in particular the 

treatment of uncertainty, catastrophic impacts, and omitted impacts, and the implications for the 

benefits assessment. For example, several commenters noted that the reliance on modelweighted averages in the proposed rule failed to capture the uncertainty in climate impacts. The 

Environmental Defense Fund and NYU Institute for Policy Integrity recommended the final rule 

 

3

 See, for example, Martin L. Weitzman, Why the Far Distant Future Should Be Discounted at Its Lowest Possible 

Rate, 36 Journal of Environmental Economics and Management, 201 (1998); Christian Gollier & Martin L. 

Weitzman, How Should the Distant Future Be Discounted When Discount Rates Are Uncertain? (Working Paper, 

Nov. 2009), http://www.economics.harvard.edu/faculty/weitzman/files/discountinglongterm(2).pdf. 
better account for the upward skew of uncertainty by, for example, applying an upward 

adjustment to the SCC estimates. 

Commenters from various environmental organizations and state and regional government 

agencies observed that the models do not capture numerous and significant climate impacts, in 

particular potentially catastrophic events, which contributes to the underestimation of GHG 

mitigation benefits. The Union of Concerned Scientists’ conclusion that the interim SCC 

estimates fell “far short of capturing the potentially immense impacts of climate change” was 

echoed by many other commenters (e.g., 7265.1, 7235.1, and 7274.1). 

The Natural Resources Defense Council (NRDC) elaborated on the treatment of 

catastrophic impacts, stating that the “SCC estimates [used in the proposed rule] are 

systematically biased downward, in large part because they do not adequately reflect the most 

critical issue in climate change: non-zero probabilities of extremely high and potentially 

catastrophic damages” (7274.1, p. 3). NRDC observed that the set of interim SCC estimates 

misrepresented the probability distribution of climate damage estimates, which includes “a ‘fat’ 

right tail (low to medium probabilities of relatively high damages), extending toward infinity 

(very low probabilities of profound catastrophes)” (7274.1, pg 12). Specifically, NRDC noted 

that while the lower bound of the interim SCC estimates was representative of the left tail of the 

distribution of damage estimates, the upper bound was not. NRDC recommended that SCC 

estimates instead go to the right of the central estimates to better represent the right-skew of the 

distribution. NRDC further supports this recommendation by referring to Weitzman’s (2009) 

observation that “climate change presents a long chain of tenuous inferences with huge 

uncertainties in every link that undermine the capability of [integrated assessment models] to 

estimate damages” (7274.1, pg 14). 

Comments on Magnitude and Uses of Social Cost of Carbon 

Many commenters stated that the interim SCC estimates were too low (e.g., 7301.1, 7181.1, 

7093.1, 7239.1), although one commenter said SCC overstates the benefits of GHG mitigation 

(7225.1). Some commenters expressed concern that EPA is using an underestimate of the SCC 

to determine the stringency of the vehicle rule’s GHG standards (e.g., 7239.1, 7265.1, 7093.1). 

Commenters recommended that EPA consider higher values in the analysis to better represent 

the possibility of catastrophic climate damages; some recommended specific numbers to use as 

the upper bound (e.g., 7189.1) or other analyses to set a minimum lower bound (7181.1). 

Commenters discussed additional uses of SCC in rulemaking analyses as well as presentation. 

For example, the Environmental Defense Fund and NYU Institute for Policy Integrity 

recommended that the interagency group specify how agencies should use SCC in traditional 

regulatory impact analysis and agency rulemaking. The Stockholm Environment Institute also 

commented on the use and purpose of SCC, and noted that policies designed from an insurance 

perspective “would not be framed in terms of cost-benefit calculations,” but that economic 

analysis would inform selection of a least-cost strategy for meeting a risk-based standard 

(7432.1, pg 13). 

Other recommendations regarding the use and presentation of SCC included: 
• Present an even number of SCC estimates (7276.1) 

• Expand the presentation of information about the basis for the estimates, including 

discussion about omitted impacts, a broader set of descriptive statistics, and probability 

density functions (e.g., 7274.1, 7246.1) 

• Considering using CO2 mitigation cost in lieu of SCC estimates (7082.1) 

• Incorporate a broader range of SCC estimates into the benefits analysis rather than rely 

on central estimates (e.g., 7246.1). 

EPA Response A:

As discussed in preamble III.H.6, EPA and NHTSA used new SCC estimates in this final rule 

that were recently developed by an interagency process, in which both agencies participated. 

EPA and NHTSA critically evaluated the decisions of the interagency group and the new SCC 

estimates and endorsed them as reasonable for this final rule for the reasons presented in 

preamble III.H.6. The remainder of this response discusses EPA’s consideration of and response 

to the comments on discount rate, uncertainty and risk, and magnitude and uses of the social cost 

of carbon, and, as relevant, how the interagency modeling exercise addressed the methodological 

comments. 

EPA has responded to the commenters’ other SCC comments elsewhere. Specifically, refer to 

Response [B] for EPA’s response to comments regarding the interim SCC estimates and 

methodology, the use of integrated assessment models, and equity-weighting, and to Response 

[C] for EPA’s response to comments regarding global and domestic valuations of SCC. 

Discount rate. 

Many of the comments on SCC identified concerns about the discount rates applied to the 

interim SCC estimates and provided different recommendations about: (i) approach used to 

select discount rates; (ii) the magnitude of the discount rate, and; (iii) ways to account for 

uncertainty in discount rates. 

EPA’s continued assessment of the SCC literature and review of the extensive public comments 

about discount rate selection reaffirms the complexity and sensitivity of this task. Recognizing 

the lack of consensus about an appropriate discount rate to use in this context and uncertainty 

regarding how interest rates might change over time, EPA selected three rates to span a plausible 

range of certainty-equivalent constant discount rates: 2.5, 3, and 5 percent per year. Although 

EPA selected discount rates for this exercise that differed from some of those recommended by 

commenters, the agency regards its approach as defensible and transparent given its consistency 

with current benefit-cost analysis principles as well as OMB’s guidelines for such analysis as 

embodied in OMB Circular A-4. The Technical Support Document, Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866 (hereafter, "SCC TSD"), discusses in 

detail the basis for the discount rate selection.4

(i) Response to Comments on the Approach Used to Select Discount Rates. 

EPA considered the comments and recommendations regarding both prescriptive approaches for 

discount rate selection and descriptive approaches that infer discount rates from observed market 

behavior. As stated in the SCC TSD, the selection of discount rates drew on both approaches but 

relied primarily on the descriptive approach. 

In sum, average returns on longer-term investments were used to inform selection of certaintyequivalent discount rates. This approach was consistent with the comments on consumptionbased rates as well as the literature. EPA recognizes its limitations but finds this approach to be 

the most defensible and transparent given its consistency with the standard contemporary 

theoretical foundations of benefit-cost analysis and with the approach outlined in OMB’s 

existing guidance. See the SCC TSD for a detailed explanation. 

Prescriptive Approaches. EPA considered all recommendations for prescriptive approaches, 

including selection of rates at 2 percent and lower within the Ramsey framework and use of a 

zero discount rate (i.e., not discounting). As noted in the SCC TSD, Ramsey (1928) argued that 

it is “ethically indefensible” to apply a positive pure rate of time preference to discount values 

across generations. After considering the comments and relevant literature, however, EPA 

ultimately decided that within the time constraints of this rulemaking, use of observed market 

behavior was a more transparent and defensible approach consistent with the federal 

government’s current guidelines on intergenerational discounting. See the SCC TSD for the 

detailed rationale and discussion. 

NRDC presented an interesting observation regarding the relationship between damage functions 

and growth rates, and maintained that declining economic growth requires a negative discount 

rate. However, negative growth does not automatically imply negative discount rates because 

the discount rate is a function of both rho and the product of eta and growth. Therefore, one 

could have low, but positive discounting depending on the value of rho. 

Regardless of the relationship between economic growth and discount rate, the modeling 

exercise supporting the final rule could not allow for negative discount rates because it used 

constant discount rates. Moreover, negative discount rates cannot be justified using EPA’s 

current discounting approach—reliance on observed market behavior to infer discount rate. 

Application of a negative discount rate would involve explicit consideration of ethical aspects of 

intergenerational discounting and ultimately the selection of an appropriate social discount rate. 

 

4

 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of 

Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, 

Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic 

Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and 

Technology Policy, and Department of Treasury, “Social Cost of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866,” February 2010. EPA-HQ-OAR-2009-0472 
EPA agrees with the NYU Institute for Policy Integrity and the Environmental Defense Fund 

(IPI, EDF) that use of prescriptive approaches would necessitate explicit consideration of 

philosophical and legal issues (7246.1, pg 4). While EPA has considered these comments and 

remains keenly aware of the normative dimensions of discount rate selection, the selection of 

discount rates in the recent modeling exercise focused primarily on economic considerations and 

the guidelines for intergenerational discounting specified in OMB Circular A-4 and EPA’s 

guidance. 

Using Market Rates to Inform Discount Rates. Several commenters expressed a preference for 

explicitly prescriptive approaches but also provided comments for the agency to consider if it 

used market rates to inform discount rate selection (e.g., see IPI, EDF, NRDC). EPA agrees with 

IPI and EDF’s clarification that regardless of the approach, the choice of a discount rate is not a 

“value-free ‘objective’ decision” and involves “deep ethical and moral judgments” (7246.1, pg. 

4). While using observed market behavior was the best approach feasible for this analysis, EPA 

recognizes its limitations and will continue to seek opportunities, such as convening workshops 

to explore economic and non-economic aspects of discounting, to aid our understanding of the 

relevant issues. The SCC TSD explains in greater detail the rationale for using market rates to 

inform discount rate selection. 

EPA concurs with the comments regarding the need to carefully select an appropriate market 

rate, given the numerous rates available, as well as the comments on consumption-based 

discount rates. EPA carefully reviewed the literature and considered various complexities 

involved in discounting over long time horizons. For example, IPI and EDF noted that it would 

be difficult to justify the selection of high rates on the basis that the returns from alternate 

investments would be available as compensation for those impacted by climate change because 

this is unlikely to be feasible over long time horizons. As discussed in the SCC TSD, EPA opted 

to use average returns on longer-term investments rather than short term rates. 

In addition, IPI and EDF stated that if EPA uses market rate of returns, it should also analyze and 

consider the underlying complexities in greater detail, such as the relationship between GHG 

reductions and economic growth. In particular, IPI and EDF referred to Weitzman’s 

observations about a limitation of integrated assessment models: the models’ assumption of 

perfect correlation between GHG damage and aggregate economic activity is a function of the 

model design, not “the result of any reasoned argument” (Weitzman 2007) (as quoted in 7246.1, 

pg 15). Indeed, the modeling exercise has raised questions about the relationship between 

mitigation benefits and economic growth in the models. While more analysis is required before 

EPA can reach definitive conclusions, the agency recognizes this as a key issue that should be 

explored when refining SCC or applying it to benefit analyses. 

(ii) Magnitude of Discount Rate. 

EPA determined lower rates are appropriate and used rates of 2.5 and 3 percent. Consistent with 

the rationale presented by several commenters, risk-free rates of return informed the selection of 

discount rates. However, average returns on longer-term investments rather than short-term rates 

were used. The lower rates are also consistent with the comments suggesting that mitigation 
should be viewed as a form of insurance against climate damages rather than a rate of return on 

risky assets (e.g., NRDC, Stockholm Environment Institute). 

Many commenters disagreed with the rationale for and use of a 5 percent discount rate in the 

proposed rule. In particular, several commenters stated that GHG mitigation represents a 

different kind of investment than intragenerational investments analyzed with higher discount 

rates like 5 percent. IPI and EDF concluded that there are “strong reasons for concluding that a 

substantial fraction of the benefits from abatement are uncorrelated or even negatively correlated 

with the returns to the economy as a whole.” Other commenters agreed with this view and 

concluded that it would be appropriate to view investment in GHG mitigation from a risk-averse 

perspective—i.e., investment in mitigation as a form of insurance against uncertain future 

climate damages—rather than a risky investment in mitigation technology. Consideration of 

SCC estimates based on a 5 percent discount rate could not be ruled out, however, and was 

included to represent the view that climate damages are highly correlated with market returns, 

under which the appropriate discount rate would be expected to exceed the risk-free rate. 

In addition, IPI and EDF recommended 4 percent as an appropriate upper bound. While EPA 

agrees with IPI and EDF that “the uncertainty (more properly the risk) over the temperature 

changes resulting from a ton of GHG emissions does not justify a higher discount rate,” it is not 

clear how this concern argues for setting 4 rather than 5 percent as the upper bound (7246.1, pg 

24). 

In sum, EPA applied three constant certainty-equivalent discount rates (2.5, 3, and 5 percent) to 

the SCC estimates to account for various perspectives about risk and uncertainty. The upper 

value of 5 percent accounts for the view that there may be a high correlation between climate 

damages and market returns while the rest of the SCC analysis centers on a discount rate 

consistent with concerns about risk aversion. See SCC TSD for more details about the rationale 

for using 5 percent. 

(iii) Uncertainty in discount rates. 

The comments informed the ongoing consideration of how GHG benefits analysis could account 

for discount rate uncertainty through differential discounting. The SCC TSD presents the basis 

for EPA’s decision to account for discount rate uncertainty by using certainty-equivalent 

constant discount rates, in particular inclusion of 2.5 percent to incorporate the concern that 

interest rates are highly uncertain over time. 

The SCC TSD also summarizes the consideration of the approaches discussed by commenters 

(e.g., Newell and Pizer (2003), Weitzman (2001), and the UK’s “Green Book” for regulatory 

analysis) and concludes that the proper way to model discount rate uncertainty remains an active 

area of research. 

In particular, key questions about potential time inconsistencies arising with differential 

discounting remain unresolved. For example, in its 2008 critique of the EPA Economic 

Guidelines, the EPA Science Advisory Board (SAB) found that in cases with uncertain discount 

rates, “rank ordering of policies by present values and future value may differ.” The SAB 
advised EPA to use caution when interpreting the results of time differential discounting and 

noted that more research is warranted. Similarly, Dr. Rose noted that there is an inconsistency 

between the Newell and Pizer (2003) discounting and various alternative futures. 

Several commenters considered the potential for and implications of time inconsistency issues. 

For example, the Stockholm Environment Institute stated that “there is minimal risk” of time 

inconsistency problems and that regardless, “no one...has the life span or resources to arbitrage 

against multi-century public policies” (7432.1, pg 12). IPI and EDF noted that the timing of the 

investment decision is not arbitrary—it is made by individuals in the present under known 

certainties. They maintain that concerns about time inconsistency center on “a certain pattern of 

discount rates (‘high today, low tomorrow’) that the planner nonetheless systematically fails to 

anticipate,” but that time-declining rates (e.g., Newell-Pizer) involve a “discrete investment 

decision [that] must be made today, in the absence of full information about the future discount 

rate, that will continue to yield returns far into the future” (7246.1, pg 22). IPI and EDF 

conclude that no time inconsistency arises in the latter case because “by the time we reach the 

future the decision will have already been made. Declining discount rates merely provide an aid 

to current decision-making in the face of risk” (7246.1, pg 22). Although the commenters 

presented a valid point, in light of uncertainty about how interest rates may change over time, 

EPA uses a low certainty-equivalent discount rate to incorporate the concern that interest rates 

are highly uncertain over time. 

IPI and EDF also point out that the “choice of starting point cannot be made independently of the 

underlying financial instrument used to estimate real returns over time. The simulated paths are 

extensions of a particular time series, and thus correspond to a particular financial instrument” 

(7246.1, pg 23). They state that the time-differential discounting literature, which has thus far 

relied on lower discount rates as the starting point, provides sufficient empirical evidence for 

EPA to use a similar starting point. IPI and EDF suggest that the agency would first need to 

gather empirical evidence before using alternative starting points, in light of the likely 

differences that would result from instruments with different risk levels. However, given the 

lack of agreement about the starting point and proper adjustment to use in differential 

discounting, EPA could not justify relying on this technique. 

EPA agrees with a comment from Dr. Rose that clarifies the difference between dynamic

discount rates and uncertain rates. The SCC modeling exercise supporting the benefits analysis 

in this rulemaking used certainty-equivalent constant discount rates and did not change over 

time. The SCC TSD discusses in greater detail how the discount rates accounted for uncertainty. 

Uncertainty and Treatment of Impacts in the Models. 

Many commenters discussed the limitations of the SCC estimates, in particular the treatment of 

uncertainty, catastrophic impacts, and omitted impacts, as well as the implications for the 

benefits assessment. EPA has responded to these concerns by providing a more robust 

discussion about these important issues that complements the SCC estimates and better informs 

policy makers. 
EPA considered these limitations and, as a participant in the interagency group, used best 

available information and techniques to quantify such impacts as feasible and supplement the 

SCC with qualitative assessments. Overall, presentation of the revised SCC estimates in the final 

rule responds more fully the uncertainties and risks associated with climate change (see the SCC 

TSD for discussion). 

In particular, the revised estimates more fully capture uncertainty through Monte Carlo analysis 

and are accompanied by a fuller discussion of the uncertainties and risks associated with climate 

change, as well as the limitations of SCC. In addition to the uncertain parameters in each model, 

EPA assessed three parameters—climate sensitivity, socioeconomic and emissions trajectories, 

and discount rate—and sought to model them probabilistically for purposes of formal uncertainty 

analysis in the interagency modeling exercise. A probability distribution was specified for 

climate sensitivity and used as an input in the three models. A probability distribution was not 

specified for the other two parameters because of uncertainty about how to model them 

probabilistically for purposes of formal uncertainty analysis. For example, while models can 

project potential emissions pathways, assigning probability weights to different states of the 

world in an analytically rigorous way proved challenging given the dearth of information on the 

likelihood of a full range of future socio-economic pathways. Therefore, the modeling exercise 

used multiple scenarios that span a range of socio-economic parameters and multiple values for 

the discount rate. 

Consistent with the commenter’s recommendations, EPA has provided much more information 

about the SCC estimates and the underlying parameters in the final rule. For example, the SCC 

TSD shows how SCC values for 2010 vary across model, scenario, and discount rate; it also 

presents the distribution of SCC estimates, including benefit estimates at the 95th and 99th 

percentiles. However, EPA believes that it is more appropriate to place the technical information 

in the rulemaking’s technical supporting documents, rather than in the preamble text, which is 

intended to provide a high-level discussion of the policy issues related to the economic analysis. 

Therefore, EPA has presented a summary of the SCC results in the preamble along with 

references to the other rulemaking documents that provide data and methodological details 

necessary to replicate the analysis. 

EPA also considered the emerging literature about the treatment of risk of catastrophic impacts 

and commenters’ recommendations on this issue. For example, EPA considered the findings 

from Weitzman (2009) suggesting that catastrophic damages are so large that they would 

dominate the effect of the discount rate in a present value calculation and result in an infinite 

willingness-to-pay for GHG mitigation today. However, EPA determined that this research 

requires further exploration before its generality is known and the optimal way to incorporate it 

into regulatory reviews is understood. EPA also considered ways to account for risk aversion in 

the SCC estimates, such as inclusion of a risk premium, suggested by IPI, EDF, and the Pew 

Center on Global Climate Change. The review showed that further research in this area is 

needed to develop a reasonable approach to account for catastrophic risks in regulatory analyses. 

In addition, an adder was not used given the lack of a rigorous method to select the number; 

choosing an adder value would at this point amount to an arbitrary decision. Finally, available 

information did not support rigorous inclusion of an option value, as recommended by the IPI 

and EDF. See the SCC TSD for more about the consideration of catastrophic risk. 
Instead, low probability, high impact events are incorporated into the SCC values through 

explicit consideration of their effects in two of the three models as well as the use of a 

probability density function for equilibrium climate sensitivity (see the SCC TSD). Treating 

climate sensitivity probabilistically results in more high temperature outcomes than analyzing 

climate sensitivities of specific values (e.g., 1.5 or 4.5), which in turn lead to higher projections 

of damages. EPA has also presented a detailed qualitative assessment of potential catastrophic 

damages and the implications for SCC estimates in the SCC TSD. EPA remains interested in 

research about practical and robust methods to address this important consideration. 

The SCC TSD further emphasizes the need to explore the sensitivity of the results to other 

aspects of the models, in particular how the damage functions incorporate adaptation, 

technological change, and catastrophic damages. While it is not possible at this time to provide a 

precise list of each model’s treatment (i.e., included, excluded) of climate impacts, EPA has 

presented a robust discussion of this key analytical issue and placed more detailed model 

information in the docket. 

In particular, the SCC TSD discusses in detail how each model estimates climate impacts, the 

known parameters and assumptions underlying those models, and the implications of incomplete 

treatment of impacts (catastrophic and non-catastrophic) for the SCC estimates. This discussion 

underscores the difficulty in accurately distilling the models’ treatment of impacts in table-form. 

Most notably, the use of aggregate damage functions—which consolidate information about 

impacts from multiple studies—in two of the models poses a challenge in listing included 

impacts. For example, within the broad agricultural impacts category, some of the sub-grouped 

impacts are not explicitly modeled but are highly correlated to other subcategories that are 

explicitly modeled. Therefore, it may be misleading to identify these kinds of impacts as either 

“included” or “omitted” from the model. Along those lines, impacts may be included in models 

but not directly; the Dynamic Integrated Climate and Economy (DICE) model represents 

adaptation implicitly through the choice of studies used to calibrate the aggregate damage 

function, and the Climate Framework for Uncertainty, Negotiation, and Distribution (FUND) 

model includes adaptation both implicitly and explicitly (see the SCC TSD for details). 

Accordingly, EPA recognizes the need for a thorough review of damage functions—in particular, 

how the models incorporate adaptation, technological change, and catastrophic damages. EPA 

has considered the Pew Center on Global Climate Change’s recommendation to conduct an 

expert elicitation on the value of omitted impacts, but determined that conducting a rigorous and 

complete expert elicitation was not possible within the rulemaking timeline. However, the 

Federal government is committed to exploring these models—e.g., determining which impacts 

are included and omitted—and how they can be modified to produce more accurate estimates of 

the SCC. EPA regards the SCC TSD as a starting point in the inquiry into the models’ treatment 

of impacts and to motivate new research. 

Regarding recommendations to modify model parameters that were not adjusted in this exercise, 

see Response B for EPA’s response. 

Magnitude and Uses of the Social Cost of Carbon.
EPA considered various comments about the magnitude of SCC estimates (e.g., interim SCC was 

too low). Many commenters recommended that EPA consider higher values in the analysis to 

better represent the possibility of catastrophic climate damages; some recommended specific 

numbers to use as the upper bound (e.g., CARB) or other analyses to set a minimum lower bound 

(e.g., Union of Concerned Scientists). In response, EPA has focused on developing a rigorous 

methodology to improve its characterization of SCC rather than selecting estimates from the 

published literature. Accordingly, EPA continued to review the SCC literature, participated in 

the interagency review of SCC, and conducted the modeling exercise (see the SCC TSD for 

detailed discussion about the basis for the modeling exercise, the methodology, and results). 

Consistent with recommendations to justify any weighting schemes used, the SCC TSD explains 

why each model and two of the parameters (socioeconomic emissions trajectories and discount 

rates) are weighted equally; it also presents the rationale for the probability distribution for 

climate sensitivity. 

EPA disagrees with one commenter who said that SCC overstates the benefits of mitigation and 

attributed it to emissions leakage, i.e., shifting emissions from the region subject to the GHG 

mitigation requirements to a location without such requirements. Emissions leakage could 

reduce or negate the net reduction in global emissions. However, emissions leakage would affect 

the estimate of total emissions and it is not relevant to the value of a one ton reduction in CO2

emissions (i.e., SCC) in this case. As discussed in the SCC TSD, we have assumed that this rule 

would result in small (marginal) impacts on cumulative global emissions. Even in the unlikely 

event that emissions leakage occurred under this rulemaking, it would not alter the cumulative 

global emissions trajectory underlying the SCC estimates. Regarding the potential for leakage 

under this rule, EPA finds the commenter’s suggestion that people will move to other countries 

to avoid purchasing cars with higher fuel economy standards highly implausible. See Preamble 

III.H.5 for further discussion about considerations of turnover rate for the vehicle fleet and the 

implications thereof. See also the prior sections of this response for detailed discussion about 

treatment of uncertainty in SCC estimates, in particular the treatment of omitted impacts, and the 

implications for the benefits assessment. 

On the other hand, the SCC TSD does not, as another commenter recommended, explicitly direct 

agencies to view the SCC as a minimum value for GHG reduction benefits. Instead, the SCC 

TSD presents detailed methodological information and a discussion of the SCC limitations, 

thereby enabling interpretation of the estimates as they are used in this analysis. 

EPA also considered comments about the use and presentation of SCC in rulemaking analyses. 

For example, IPI and EDF recommended that the interagency group specify how agencies should 

use SCC in traditional regulatory impact analysis and agency rulemaking. In response, the SCC 

TSD identifies the purpose of SCC and details how to use it to estimate the benefits of policies 

resulting in marginal reductions in CO2 emissions. The SCC TSD further notes that there is a 

separate question of whether the SCC is an appropriate tool for calculating the benefits of 

reduced emissions from policies that have a large (non-marginal) impact on global cumulative 

emissions. The analysis supporting this final rule does not attempt to answer that question. 
Overall, EPA recognizes the importance of traditional regulatory impact analyses and the EPA 

Regulatory Impact Analysis (RIA) presents four new SCC estimates used to estimate benefits of 

the marginal reductions in CO2 emissions under this final rule (see EPA RIA 7.5). 

In response to Ford’s recommendation to consider using CO2 mitigation cost in lieu of SCC 

estimates, EPA has determined that doing so would eliminate useful information from the 

economic analysis about the CO2 benefits of the standards. Indeed, Executive Order 12866 

states that agencies are required, to the extent permitted by law, “to assess both the costs and the 

benefits of the intended regulation and, recognizing that some costs and benefits are difficult to 

quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of 

the intended regulation justify its costs.” Other sections of the economic analysis consider the 

costs to achieve the standards in this final rule (e.g., see Preamble Section III.H.3 for discussion 

about the annual cost per ton of GHG reduction). 

In addition, SEI commented that policies designed from an insurance perspective “would not be 

framed in terms of cost-benefit calculations,” but that economic analysis would inform selection 

of a least-cost strategy for meeting a risk-based standard. EPA continues to recognize that the 

estimates do not include all significant climate changes damages and are therefore 

underestimates. As a result, EPA has supplemented the quantified benefit estimates with a 

qualitative discussion about benefits. 

It is also useful to recognize the somewhat limited role that the monetary value placed on the 

SCC plays in the determination of what emissions standards should be adopted in this final rule. 

EPA used the benefit-cost analysis as one consideration among many to evaluate the overall 

reasonableness of the emissions standards chosen. See preamble section III.D of the preamble 

for a complete discussion of the various factors on which EPA determined the stringency of the 

final standard. In this case, the benefits of the standards are significantly greater than the costs, 

and this would be the case whether EPA considered the domestic value for the SCC, the global 

value for the SCC, or a range of values including higher SCC values. The specific range or 

values used in this analysis are therefore not outcome determinative as far as deciding what 

emissions standards to adopt, as the standards adopted by EPA would still be reasonable from a 

net benefits perspective under a wide range of SCC. 

EPA considered Dr. Rose’s comments about the number of SCC estimates presented and basis 

for deciding on an appropriate SCC estimate. In response, EPA has presented four SCC 

estimates and calculated benefits at each SCC value. The SCC TSD discusses in detail the 

methodological soundness of and treatment of uncertainty and risk in the four SCC estimates. In 

sum, the four SCC estimates are considered to capture many of the uncertainties involved in 

regulatory impact analysis. 

Regarding the commenters’ concerns about omitted impacts and recommendations to expand the 

presentation of information about the estimates, see above section, Uncertainty and Treatment of 

Impacts in Models, for EPA’s response. In addition, the SCC TSD presents the distribution of 

SCC estimates, including benefit estimates at the 95th and 99th percentiles. Variation in climate 

sensitivity is reflected, along with other parameters that are treated as uncertain in the models, in 
differences between SCC estimates for a given socio-economic trajectory and discount rate. EPA 

has also made the full model results available in the docket for this rule; see OAR-2009-0472. 

In addition, EPA notes IPI and EDF’s recommendation for the interagency group to “give 

explicit direction to agencies on how to account for ancillary benefits associated with GHG 

reductions” (7246.1, pg 42). As noted above, the SCC TSD reiterates the need to document 

more thoroughly omitted impacts and monitor the literature for emerging research. As the 

research evolves, the Federal government, including EPA, is committed to exploring how 

modeling can be improved so that these aspects are better reflected in the SCC. 

EPA agrees with the Center for Biological Diversity’s observation that omission of impacts from 

the SCC estimates effectively assigns such impacts a value of zero, but disagrees with the 

Center’s interpretation of the Ninth Circuit’s Court’s decision that agencies must quantify nonzero benefits. First, EPA has provided a non-zero estimate of the benefits of this rulemaking’s 

reduction in CO2 emissions. As discussed at length above and in the SCC TSD, some of the 

benefits cannot currently be quantified in a rigorous manner and were therefore presented in a 

qualitative manner. Both the qualitative and quantitative presentation of benefits incorporates 

the results of the Federal government’s extensive review of SCC and recent modeling exercise, 

which was based on best available information. Second, the Center for Biological Diversity’s 

argument applies most directly to rulemakings in which the economic analysis determines the 

stringency of the standard. See 538 F. 3d at 1201-02 (court found arbitrary determination not to 

monetize social cost of carbon when utilizing a marginal cost benefit analysis where this decision 

influenced the stringency of the standard). Moreover, that case involved a situation where the 

agency assigned no monetary value to the social cost of carbon, clearly not the case here. The 

stringency of this rulemaking’s standard, in fact, is not determined by the monetized benefits of 

GHG reductions. As discussed further below, the benefit-cost analysis used for this rule played a 

part in EPA’s overall conclusion that the rule is reasonable, but did not determine the standard’s 

stringency. See, for example, preamble section III.D, which discusses the basis for EPA’s 

determination and notes that issues of technology availability, cost (to both manufacturers and 

consumers), and available leadtime are the critical decision factors.. 

EPA RESPONSE B 

Organization: See table below. 

Commenter Affiliation Document ID Number 

California Air Resources Board EPA-HQ-OAR-2009-0472-7189.1 

Center for Biological Diversity EPA-HQ-OAR-2009-0472-7265.1 

Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 

Ford Motor Company EPA-HQ-OAR-2009-0472-7082.1 

Institute for Policy Integrity at 

New York University School of 

Law 

EPA-HQ-OAR-2009-0472-7246.1 

Natural Resources Defense 

Council 

EPA-HQ-OAR-2009-0472-7274.1 
New Jersey DEP EPA-HQ-OAR-2009-0472-7093.1 

Pew Center EPA-HQ-OAR-2009-0472-7239.1 

Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 

Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 

Stockholm Environment 

Institute-US Center 

EPA-HQ-OAR-2009-0472-7432.1 

Union of Concerned Scientists EPA-HQ-OAR-2009-0472-7181.1 

University of California Santa 

Barbara Bren Working Group 

EPA-HQ-OAR-2009-0472-7188.1 

Comments: 

EPA received extensive comments about the methodology used to derive the interim SCC 

estimates as well as comments on the use of integrated assessment models, and equity-weighting. 

Comments on the Methodology Used for Interim SCC Estimates 

While the Ford Motor Company noted that the interim methodology was acceptable given 

available data, many commenters—representing academic and environmental organizations—

expressed concerns that the filters were too narrow and stated that model-weighting averaging 

was inappropriate. In general, the latter group of commenters observed that averaging and 

model-weighting the filtered estimates further restricted the SCC dataset and obscured the 

variability among published SCC estimates. 

For example, the Stockholm Environment Institute (SEI) characterized the interim 

methodology as biased and reflective of an incomplete reading of the economic literature, and 

stated that other studies and models should have been included (7432). In particular, SEI 

identified the peer-review filter as problematic because it resulted in the exclusion of SCC 

estimates from the heavily scrutinized Stern Review, which “offered an innovative, rigorous 

analysis leading to a relatively high estimate of the SCC, $85 per ton of CO2” (7432.1, pg 3). 

Although the Stern Review authors did not release their results in a peer-reviewed journal, their 

study received a level of scrutiny “far beyond the normal peer review process for articles 

published in academic journals” (7432.1, pg 3). 

Similarly, Dr. Rose identified reliance on the most recent versions of each model as 

problematic. He stated that because there has been little change in SCC modeling since 2001, it 

was incorrect to assume that the most recent estimates are superior. The commenter concluded 

that limiting consideration to “the most recent results reduces sample size and makes results 

highly contingent on most recent applications and assumptions used” (7276.1, pg 1-2). 

Moreover, the Natural Resources Defense Council (NRDC) described the interagency 

group’s reliance on model-weighted averages, which further compounded this distortion and 

failed to capture estimates for extreme climate events, as “astonishing,” based on the current 

understanding of climate science (7274.1, pg 14). Other commenters likewise concluded that the 
filters and model-weighting procedures exacerbated what is widely understood to be a partial 

accounting of mitigation benefits (e.g., 7432.1, 7276.1). 

Several commenters expressed concerns about averaging SCC estimates from different 

discount rates; one commenter clarified that this is incorrect because the discount rates represent 

different judgments about “the value of temporal trade-offs” (7276.1, pg 3; see also 7188.1, 

7208.1). That is, estimates from each discount rate encompass inconsistent assumptions about 

the type of investments made and how their value changes over time. In addition, EPA received 

extensive comments about the selection of discount rates, which is discussed separately in 

Response to Comments [A]. 

Finally, one commenter recommended an alternative approach to monetize the benefits of 

reductions in CO2 emissions (see 5385, pg 3). Specifically, this commenter recommended 

extrapolating the results of local-scale ecosystem service valuations, such as one for Puget 

Sound, to a global estimate of SCC. 

Comments on Use of Integrated Assessment Models 

Three commenters discussed the limitations of the integrated assessment models, 

concluding that the interagency group’s selection of models and reliance on the model authors’ 

datasets contributed to the downward bias of the interim SCC estimates (7432.1, 7239.1, 

7274.1). One commenter observed that the integrated assessment models rely heavily on 

projections of GHG emissions and temperatures from the Intergovernmental Panel on Climate 

Change (IPCC) to estimate the value of economic damages and cited evidence to support the 

view that these projections are conservative.5 

Indeed, the Stockholm Environment Institute characterized all three models’ default 

datasets as “embody[ing] controversial judgments” (7432.1, pg 4). The Stockholm Environment 

Institute presented numerous examples of such judgments, including the “surprisingly low” 

estimate of climate damages in DICE. The Stockholm Environment Institute clarified that DICE 

relies on estimates of agricultural impacts developed in the 1990s that were “excessively 

optimistic about potential benefits from warming, and contained some basic analytical errors” 

(7432.1, pg 6). The Stockholm Environment Institute further noted that a UC-Berkeley 

economist has run DICE using the current data and found that climate damages in the U.S. could 

be four times greater than those derived using the DICE default dataset (7432.1, pg 6). 

Accordingly, these commenters recommended the agencies run the models with other 

datasets and also modify some of the models’ assumptions. For example, they suggested 

modifying certain model parameters in the exercise—e.g., global value of a statistical life (VSL), 

an adaptation function, and damage functions allowing cross-sectoral impacts (7274.1, 7432.1). 

 

5

 Commenter stated that “following every IPCC assessment report (four to date), many predictions have turned out 

worse than expected. Each IPCC assessment report is grimmer than the previous. There are already signs that the 

last assessment report of 2007 (the Fourth Assessment Report, FAR) had overly optimistic ‘best guesses.’” 

Commenter cited findings published after release of the FAR, including evidence that summer sea ice could 

disappear by 2030, much sooner than the IPCC’s projection of disappearance by the end of the century. See Science 

Magazine 326(5955): 926-928. (OAR-2009-0472-7274.1, pg 10). 
Comments on Equity Weighting 

EDF and IPI discussed an inconsistency between the discounting approach used in the 

proposed rule, which applies differential equity weights on a timescale, and “the decision not to 

apply differential equity weights to the impacts on different income groups within a single 

generation” (7276.1, pg 8). They clarified the point “is not necessarily to recommend that equity 

weights be applied for intratemporal transfers: although there would appear to be strong ethical 

grounds for such an approach, the determination of those equity weights would be an enormous 

challenge in itself” (7276.1, pg 8). 

NRDC likewise noted an inconsistency and stated that “failing to weigh damages by 

income levels is inconsistent with economic theory” (7274.1, page 5). NRDC further noted it is 

“difficult to justify [not using equity weights] on ethical grounds: most of the world’s poor 

neither emitted the CO2 emissions responsible for current atmospheric concentration levels, nor 

economically benefited from them—resulting in the poor having the least ability to absorb 

climate damages” (7274.1, page 6). NRDC recommended that EPA apply equity-weights to the 

SCC estimates by taking into account the relative reductions in wealth in different regions of the 

world and use a number for the VSL that is equal between all countries and populations. See 

EPA-HQ-OAR-2009-0472-7274.1 for further discussion. 

EPA Response B:

The commenters’ input informed the development of the new SCC estimates. This response 

addresses the following issues identified by the commenters: the methodology used to derive the 

interim estimates, the use of integrated assessment models, and equity-weighting (see letters 

from California Air Resources Board, Center for Biological Diversity, Ford, NJ DEP, Natural 

Resources Defense Council, Pew Center on Climate, Dr. Rose, Stockholm Environment Institute, 

University of California Santa Barbara Bren Working Group, and Union of Concerned 

Scientists). EPA has responded elsewhere to the commenters’ other comments related to SCC. 

Specifically, refer to Response [A] for EPA’s response to comments regarding discount rate, 

uncertainty and risk, and magnitude and uses of the social cost of carbon, and to Response [C] 

for EPA’s response to comments regarding global and domestic valuations of SCC. 

Methodology Used to Derive Interim Estimates.

EPA received and considered extensive comments about the methodology used to derive the 

interim SCC estimates. EPA recognized the limitations of the interim approach—a metaanalysis that relied on published SCC estimates—but judged it as the best option given the 

limited time available to coordinate among federal agencies and develop SCC estimates for the 

proposed rule. However, EPA did not continue with its interim approach and instead developed 

new SCC estimates for this rule. Specifically, the interagency SCC group, in which EPA 

participated, reconvened on a regular basis to generate improved SCC estimates that respond to 

the concerns raised by commenters. As noted in Preamble III.H.6, EPA has critically evaluated 
the decisions of the group and the new SCC estimates and endorses them as reasonable for this 

final rule. 

The revised SCC methodology responds to comments in several key ways. First, we agree with 

the commenters’ concerns about the use of model-weighted means (e.g., see NRDC, SEI, Dr. 

Rose). The new results are weighted equally by model because the exercise produced an equal 

number of estimates for each model. Second, we agree that it is inappropriate to combine SCC 

estimates across discount rates. None of the revised SCC estimates has been averaged across 

discount rates. (See Response to Comment A for consideration of comments about the rationale 

for discount rates, approach used to select rates, the magnitude of rates, and treatment of 

uncertainty.) The Technical Support Document, Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866 (hereafter, "SCC TSD"), also responds to these 

comments by presenting the rationale for discount rate selection.6

 Third, as discussed further in 

Response to Comment A, the modeling exercise resulted in a fuller distribution of SCC estimates 

and better accounted for uncertainty through a Monte Carlo analysis. See the SCC TSD for 

detailed explanation about probabilistic treatment of climate sensitivity in the modeling exercise. 

The commenters also had concerns about the filters used to narrow down the pool of existing 

SCC estimates for consideration in the proposed rule, noting that they were overly restrictive, or 

that the sample otherwise excluded key studies (e.g., Dr. Rose, SEI, UC-Santa Barbara Bren 

Working Group). In response, EPA notes that the approach used in this final rule—conducting 

new model runs—has avoided this particular challenge. As noted in the SCC TSD, the modeling 

exercise produced a vast amount of data for consideration. 

In addition, EPA considered comments about the selection of a growth rate applied to climate 

damages for the interim SCC estimates (CARB, Center for Biological Diversity). Rather than 

assuming a constant annual growth rate, we estimated the growth rate of the SCC directly using 

the Dynamic Integrated Climate and Economy (DICE), Policy Analysis of the Greenhouse Effect 

(PAGE), and Climate Framework for Uncertainty, Negotiation, and Distribution (FUND) 

models. This approach helped to ensure that the estimates are internally consistent with other 

modeling assumptions. See the SCC TSD for a table that illustrates how the growth rate for 

these four SCC estimates varies over time; the SCC TSD also presents the full set of annual SCC 

estimates between 2010 and 2050. 

The California Air Resources Board presented a valid critique about the non-trivial variation in 

climate scenarios underlying the interim SCC estimates; Dr. Rose also described the selection of 

socioeconomic emissions scenarios for the interim estimates as limited. For the new SCC 

estimates, we used socio-economic and emission trajectories that span a range of plausible 

scenarios. Five trajectories were selected from the recent Stanford Energy Modeling Forum 

exercise, EMF-22; each trajectory was used consistently in the three models. Four trajectories 

 

6

 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of 

Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, 

Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic 

Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and 

Technology Policy, and Department of Treasury, “Social Cost of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866,” February 2010. EPA-HQ-OAR-2009-0472 
represent potential business-as-usual (BAU) growth in population, wealth, and emissions and are 

associated with CO2 (only) concentrations ranging from 612 to 889 ppm in 2100. The fifth 

trajectory represents an emissions pathway that achieves stabilization at 550 ppm CO2e (i.e., 

CO2-only concentrations of 425 – 484 ppm or a radiative forcing of 3.7 W/m2

) in 2100, a lowerthan-BAU trajectory. 

We note Dr. Rose’s comment that “it would be arbitrary to use SCC estimates off of aspirational 

pathways for policies that generate small net changes in global emissions. Instead, estimates off 

of baseline projections are more consistent with current policy decisions with marginal global 

GHG emissions implications, as well as a risk management approach designed to internalize 

risks that the USG wishes to avoid or hedge against” (7276.1, pg 2). However, as explained in 

the SCC TSD, the modeling exercised relied primarily on BAU trajectories but also included a 

lower-than-BAU trajectory that would be consistent with widespread action by countries to 

mitigate GHG emissions. The lower-than-BAU trajectory was chosen because it represents the 

most stringent case analyzed by the EMF-22 where all the models converge: a 550 ppm, not to 

exceed, full participation scenario. See the SCC TSD for complete discussion. 

Regarding Dr. Rose’s question about why the Hope (2006) estimates were labeled as 5 percent: 

One common equation used to calculate the discount rate is the Ramsey equation: r = ρ + g*η, 

where ρ is the pure rate of time preference, g is the growth rate, and η is the elasticity of the 

marginal utility of consumption. The pure rate of time preference cited in the Hope (2006) article 

is 3% per year. While the actual discount rate varies over time, it is relatively common to refer to 

the discount rate as the pure rate of time preference plus 2%, where the 2% is roughly the growth 

rate times the elasticity of the marginal utility of consumption. A more accurate categorization 

would be “approximately 5%” or “a pure rate of time preference of 3%.” As noted in Response 

A, EPA used a different approach to discount SCC estimates in the final rule. 

Dr. Rose also requested more information to understand the application of Newell and Pizer 

discounting to the interim SCC estimates. The undiscounted stream of benefits was not available 

for each of the studies included in this analysis. The way that the Newell and Pizer (2003) 

findings were adapted for the interim values was to apply the adjustment factors implied by 

either their preferred random walk model or mean-reverting model. According to the random 

walk model, SCC estimates based on a 3% or 5% discount rate are increased by 70.733% and 

89.8%, respectively. The mean-reverting model implies increases of 10.733% and 16.8% for 

estimates based on a 3% or 5% discount rate. 

Note Newell and Pizer based adjustment factors were not applied to estimates from Guo et al. 

(2006) that use a different approach to account for discount rate uncertainty. 

EPA notes Dr. Rose’s recommendation to ensure consistency in presenting the SCC analysis in 

each agency’s section of the joint rule. Tables in the proposed rule, for example, used different 

dollar years to report the same SCC estimates (e.g, 2007$ in EPA’s preamble section and 2006$ 

in NHTSA’s preamble section). The agencies agree with the commenter’s recommendation and 

have ensured to the extent possible that the sections in this rule are consistent. Moreover, the 

same detailed analysis of SCC presented in the SCC TSD supports the entire rulemaking. 
In response to Dr. Rose’s request for information about base years and Newell and Pizer 

discounting, please see the table below. 

Model Study Base year (Best available info) Year Dollars (Best available info)

FUND Anthoff et al. 2009 2000 2000 

FUND Link and Tol 2004 1995 1995 

FUND Guo et al. 2006 1995 1995 

PAGE Wahba & Hope 2006 2000 2000 

PAGE Hope 2006 2000 2000 

DICE Nordhaus 2008 2005 2005 

Additionally, the commenter requested a complete list of references. The references are as 

follows: 

• Anthoff, D., C. Hepburn, and R. Tol. 2009. Equity weighting and the marginal damage 

costs of climate change. Ecological Economics 68: 836:849. 

• Guo, J., C.J. Hepburn, R. Tol, and D. Antoff. 2006. Discounting and the social cost of 

carbon: a closer look at uncertainty. Environmental Science and Policy 9: 205-216. 

• Hope, Chris. 2008. Optimal carbon emissions and the social cost of carbon over time 

under uncertainty. The Integrated Assessment Journal 8(1): 107-122. 

• Hope, Chris. 2006. The Marginal Impact of CO2 from PAGE2002: An Integrated 

Assessment Model Incorporating the IPCC’s Five Reasons for Concern. The Integrated 

Assessment Journal 6(1): 19-56. 

• Link, P.M., and R. Tol. 2004. Possible economic impacts of a shutdown of the 

thermohaline circulation: an application of FUND. Portuguese Economic Journal 3: 99-

114. 

• Newell, R., and W. Pizer. 2003. Discounting the distant future: how much do uncertain 

rates increase valuations? Journal of Environmental Economics and Management 46: 52-

71. 

• Nordhaus, William. 2008. A Question of Balance: Weighing the Options on Global 

Warming Policies. New Haven, CT: Yale University Press. 

• Tol, R. 2008. The Social Cost of Carbon: Trends, Outliers and Catastrophes. 

Economics: The Open-Access, Open-Assessment E-Journal 2(25): 1-24. 
• Wahba, Mohammed, and Chris Hope. 2006. The marginal impact of carbon emissions 

under two scenarios of future emissions. Energy Policy 34: 3305-3316. 

Other Methodology Comments. Consistent with Dr. Rose’s recommendation to “strive for an 

enduring and transparent methodology that can be readily and transparently updated,” the SCC 

TSD presents a detailed discussion of the development of the interagency modeling exercise and 

the resulting SCC estimates. As noted in the SCC TSD, the main objective of this process was to 

develop a range of SCC values using a defensible set of input assumptions grounded in the 

existing scientific and economic literatures. In this way, key uncertainties and model differences 

transparently and consistently inform the range of SCC estimates used in this rulemaking 

process. 

Furthermore, the Federal government has committed to updating the new SCC estimates as the 

science and economic understanding of climate change and its impacts on society improves over 

time. The interagency group set a preliminary goal of revisiting the SCC values within two years 

or at such time as substantially updated models become available, and to continue to support 

research in this area. 

EPA notes with interest the valuation of Puget Sound ecosystem services identified by 

commenter 5385, but regards the commenter’s suggestion to extrapolate these results to a 

national or global SCC as problematic. In particular, the commenter’s recommendation does not 

incorporate findings from the existing scientific and economic literature about climate change 

impacts on other sectors. Furthermore, while the estimated value of ecosystem services in Puget 

Sound could inform assessments of the monetized value of climate change impacts in that 

region, it does not assign a dollar value to the impacts associated with a marginal unit of CO2

emissions. In short, it lacks a defensible approach that accounts for the various complexities 

involved in projecting CO2 emissions and associated climate impacts on global scale. 

In contrast, the integrated assessment models used to estimate the new SCCs combine climate 

processes, economic growth, and feedbacks between the climate and the global economy into a 

single modeling framework. As discussed in the SCC TSD, these models translate emissions 

into changes in atmospheric greenhouse concentrations, atmospheric concentrations into changes 

in temperature, and changes in temperature into economic damages. The emissions projections 

used in the models are based on specified socio-economic (GDP and population) pathways. 

These emissions are translated into concentrations using the carbon cycle built into each model, 

and concentrations are translated into warming based on each model’s simplified representation 

of the climate and a key parameter, climate sensitivity. 

Use of Integrated Assessment Models

Several commenters discussed the use of the integrated assessment models, concluding that the 

interagency group’s selection of models and reliance on the model authors’ datasets contributed 

to the downward bias of the interim SCC estimates. 

Model choice. EPA agrees with SEI that DICE, FUND, and PAGE are not the only relevant 

climate economics models and has clarified its characterization of these models as well as its 
rationale for continuing to use them in the final rule. Overall, we find DICE, FUND, and PAGE 

useful because they combine climate processes, economic growth, and feedbacks between the 

climate and the global economy into a single modeling framework, but we recognize that this 

advantage comes at the expense of a more detailed representation of the underlying climatic and 

economic systems. However, as noted by SEI, these models have “been widely used by other 

investigators, precisely because of their simplicity and transparency” (7432.1, pg 4). Moreover, 

other integrated assessment models have not linked physical impacts to economic damages. The 

limited amount of research linking climate impacts to economic damages makes this exercise 

even more difficult (see the SCC TSD for more information). 

Others commented on the version of the models used to derive the interim SCC estimates. Pew 

noted that few studies have been published using the most recent version, but identified several 

expected to be released by the time of the final rule and encouraged EPA to account for those. 

 As discussed in the SCC TSD, EPA used SCC estimates from new model runs rather than 

selecting from those in the literature; EPA has continued to review developments in the SCC 

literature. 

We note that Pew’s comments about the values resulting from the most recent version of FUND 

are incorrect. According to EPA’s March 2010 communication with Dr. Anthoff, all of the 

deterministic SCC estimates were positive for the discount rates investigated in a paper that he 

prepared for Pew using FUND 3.5; this does not mean that FUND 3.5 produces positive SCCs 

for any discount rate. Also, FUND uses a Major.Minor numbering system rather than calendar 

year to label the versions. EPA used the latest version of this model, FUND 3.5, that was 

available at the time of the modeling exercise. 

Datasets used in models. NRDC observed that the integrated assessment models rely heavily on 

projections of GHG emissions and temperatures from the Intergovernmental Panel on Climate 

Change (IPCC) to estimate the value of economic damages and cited evidence to support the 

view that these projections are conservative. Also, SEI characterized all three models’ default 

datasets as “embody[ing] controversial judgments” (7432.1, pg 5). SEI presented numerous 

examples of such judgments, including the “surprisingly low” estimate of climate damages in 

DICE, and clarified that DICE relies on estimates of agricultural impacts developed in the 1990s 

that were “excessively optimistic about potential benefits from warming, and contained some 

basic analytical errors” (7432.1, pg 6). SEI further noted that a UC-Berkeley economist has run 

DICE using the current data and found that climate damages in the U.S. could be four times 

greater than those derived using the DICE default dataset (7432.1, pg 6). 

EPA regards with interest the commenters’ specific recommendations to modify model 

parameters that were not adjusted in the exercise—e.g., global value of a statistical life (VSL), an 

adaptation function, and damage functions allowing cross-sectoral impacts (e.g., NRDC and 

SEI). Research gaps and practical constraints required us to limit modification of the models to 

socioeconomic and emissions scenarios, climate sensitivity, and discount rate. Therefore, the 

modeling exercise relied on the default values in the latest available version of each model for 

the remaining parameters. Moreover, continuing to use the models’ default values for some 

parameters allowed the exercise to account for different approaches to quantifying damages. 

While EPA recognizes that the models’ translations of physical impacts to economic values are 
incomplete, approximate, and highly uncertain, it regards them as the best available 

representations. 

As noted in Response A, the SCC TSD further emphasizes the need to explore the sensitivity of 

the results to other aspects of the models, in particular how the damage functions incorporate 

adaptation, technological change, and catastrophic damages. The Federal government is 

committed to supporting new research and exploring how to value the benefits of reduced GHG 

emissions. As the research evolves, the Federal government is also committed to exploring how 

modeling can be improved so that these aspects are better reflected in the SCC. The interagency 

group plans to revisit the SCC estimates within two years. 

Equity weighting and value of statistical life.

NRDC recommended that EPA apply equity-weights to the SCC estimates by taking into 

account the relative reductions in wealth in different regions of the world and use a number for 

the VSL that is equal between all countries and populations. As noted in the SCC TSD, we 

recognize the inconsistency between accounting for wealth differences over time through the 

discount rate and declining to do so on a geographical scale. However, after considering the 

literature on equity-weighting, we decided not to use equity-weights because putting it into 

practice and defending it for domestic regulatory analysis would raise complex conceptual, 

empirical, and normative problems (see the SCC TSD). 

As discussed in Response A, the modeling exercise relied on the default values for VSL because 

it was not one of the parameters chosen to be held constant across all three models. 

EPA RESPONSE C 

Organization: See Table below. 

Commenter Affiliation Document ID Number 

Environmental Defense Fund EPA-HQ-OAR-2009-0472-7246.1 

Georgia-Pacific EPA-HQ-OAR-2009-0472-7122.1 

National Automobile Dealers 

Association (NADA) 

EPA-HQ-OAR-2009-0472-7182.1 

National Petrochemical & 

Refiners Association 

EPA-HQ-OAR-2009-0472-7234.1 

Natural Resources Defense 

Council 

EPA-HQ-OAR-2009-0472-7274.1 

NYU Institute for Policy 

Integrity 

EPA-HQ-OAR-2009-0472-7246.1 

Pew Center EPA-HQ-OAR-2009-0472-7239.1 

Private Citizen (Adcock, James) EPA-HQ-OAR-2009-0472-5385 

Private Citizen (Rose, Stephen) EPA-HQ-OAR-2009-0472-7276.1 

Texas Chemical Council EPA-HQ-OAR-2009-0472-7290 

University of California Santa 

Barbara Bren Working Group 

EPA-HQ-OAR-2009-0472-7188.1 
Comment Summary:

Seven commenters, representing academia and environmental organizations, supported 

the proposed rule’s preference for global SCC estimates while several industry groups stated that 

under the Clean Air Act, EPA is prohibited from using global estimates. The commenters 

supporting a global SCC described it as the most appropriate way to account for the public good 

aspects of GHG emissions and climate protection. 

The Environmental Defense Fund and NYU Institute for Policy Integrity described 

climate stability as a special public good case because it is a global one, meaning that no single 

actor can provide climate stability. Maintaining or achieving the public good—climate 

stability—must involve coordination of many sovereign countries, all of which have an incentive 

to do nothing and enjoy global benefits when other countries incur the costs of GHG mitigation 

(7246.1, pg 37). 

Moreover, the Environmental Defense Fund and NYU Institute for Policy Integrity 

maintained that consideration of domestic SCC does not solve the global public good problem. 

These commenters stated that if all countries based GHG reductions on domestic SCC values, it 

would “result in sub-optimal protection of climate stability [because] the global SCC is not a 

population-weighted average of domestic SCCs, but instead the aggregate of all of the harms 

associated with climate change” (7246.1, pg 37). For more details regarding comments that 

support use of a global SCC, see EPA-HQ-OAR-2009-0472-7246.1, -7274.1, -7239.1, -7276.1, -

7188.1, and -5385. 

One commenter who supported use of global SCC estimates stated that it was unclear 

how the agencies planned to use domestic estimates, thereby making it difficult to comment on 

domestic SCC estimates (7276.1). NRDC also noted a lack of clarity regarding the agencies’ 

intentions for domestic SCC estimates but concluded that it would be inappropriate to use 

domestic estimates in any situation (7274.1). 

NRDC based its support for use of a global SCC on the global, public goods aspect of 

GHG emissions as well as ethical considerations. Specifically, NRDC stated that from an ethical 

standpoint, it cannot support a U.S. SCC estimate, which would effectively assign a value of zero 

to the damages imposed on other countries by U.S. emissions. NRDC found this particularly 

troubling because “many countries, especially poor ones, did not contribute to the current CO2

levels in the atmosphere, yet will suffer the worst consequences. Perversely, developed countries 

obtained their income status by emitting greenhouse gases, and as a result have more resources to 

absorb climate damages, while the opposite is true of the poor countries” (7274.1, pg 24). 

The commenters that disagreed with use of a global SCC argued that EPA cannot 

permissibly consider a global value because it lacks authority to consider the international effects 

of domestic emissions in crafting emission standards under section 202 (a). These commenters 

further argued that Congress was explicit when it wanted such effects to be considered, referring 

to section 115 of the Act, which authorizes regulation of domestic pollutant emissions due to 

their international effect under specified circumstances. The commenters also referred to the 
general presumption that Federal statutes are presumed not to have extra-territorial effect. For 

more details, see EPA-HQ-OAR-2009-0472-7234.1, -7290, -7182.1, and -7122.1. 

EPA Response C:

This response presents EPA’s consideration of and response to comments from regarding the use 

of global and domestic valuations of SCC (see comments from Dr. Rose, National Automobile 

Dealers Association, NYU Institute for Policy Integrity and Environmental Defense Fund, 

University of California Santa Barbara Bren Working Group, Pew Center on Climate, Natural 

Resources Defense Council, and Texas Chemical Council). 

In sum, the final rule continues to focus on global SCC values because of the global, public good 

aspects of greenhouse gas emissions. EPA prefers a global measure of GHG mitigation benefits 

because of the unusual aspects of the climate change problem—i.e., GHG emissions cause the 

same damage regardless of the location of their emission; climate change occurs over very long 

time horizons, and it represents a problem that the United States cannot solve independently (see 

the Technical Support Document, Social Cost of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866 (hereafter, "SCC TSD")).7

Several commenters argued that EPA cannot permissibly consider a global value because it lacks 

authority to consider the international effects of domestic emissions in crafting emission 

standards under section 202 (a). These commenters further argued that Congress was explicit 

when it wanted such effects to be considered, referring to section 115 of the Act, which 

authorizes regulation of domestic pollutant emissions due to their international effect under 

specified circumstances. The commenters also referred to the general presumption that Federal 

statutes are presumed not to have extra-territorial effect. 

The commenters have misapprehended the analysis of global and domestic SCC. First, EPA’s 

regulation does not exercise extraterritorial effect. The regulation sets standards for new motor 

vehicles produced or imported into the United States; hence, the activity it regulates is domestic 

activity. The issue here is not the extraterritorial exercise of regulatory authority over conduct 

occurring overseas, but how to place a monetary value on a reduction in domestic emissions, 

with the commenter arguing that EPA may not consider effects occurring outside the borders of 

the US when valuing the benefits of reductions achieved under section 202(a). In this case, the 

emissions reductions will marginally reduce the overall global contribution of GHG emissions to 

the atmosphere, affecting the global atmospheric concentrations of GHGs. This will then have a 

marginal effect on global climate change, with resulting impacts both inside the US and around 

the world. There is no issue that the impacts from global climate change that occur in the US are 

appropriate to consider in valuing the benefits of these domestic GHG reductions. 

 

7

 Interagency Working Group on Social Cost of Carbon, U.S. Government, with participation by Council of 

Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, 

Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic 

Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and 

Technology Policy, and Department of Treasury, “Social Cost of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866,” February 2010. EPA-HQ-OAR-2009-0472 
However, there is also a value to the US from domestic emissions reductions that reduce the 

harm occurring globally. First, impacts from climate change occurring overseas can create 

economic, trade, humanitarian and national security issues for the US. For example, climate 

change may exacerbate problems (e.g., food security or water supply) in relatively poor and 

politically volatile countries that raise humanitarian issues and national security issues for the 

United States.8 Second, the US will gain the greatest benefit from reducing domestic emissions 

of GHGs if there is a global response to the global problem of climate change. Given the nature 

of the public good at issue, a global response would maximize the benefits the US receives from 

reducing GHGs. Using a global SCC in valuing the domestic reductions from this final rule is 

most consistent with this outcome, while using a domestic SCC is not. For both of these reasons, 

considering the global SCC is an appropriate way to value the benefits to the US from domestic 

GHG reductions under section 202(a). 

Second, this situation is not analogous to section 115 of the Act, which calls for control of 

domestic emissions if certain conditions are met concerning emissions in the U.S. causing or 

contributing to air pollution that is reasonably anticipated to endanger public health or welfare in 

a foreign country. Mandating control of domestic emissions in certain circumstances based on 

the impact of those emissions on a foreign country does not indicate any intention by Congress 

on the very different issue involved here. Use of the global SCC in the benefits analysis for this 

rule is not an issue of the authority or the obligation to regulate domestic emissions of GHGs 

from new motor vehicles. Our authority to adopt standards stems from the endangerment and 

contribution findings that have been made under section 202(a). The issue here is how to value 

those domestic emissions reductions in considering the benefits of the reductions. That is not the 

issue Congress addressed in section 115, when it authorized regulatory controls if certain 

conditions were met. Congress’ decisions on that issue in section 115 do not limit or take away 

any of EPA’s discretion on how to value the benefits of GHG reductions from the emissions 

standards adopted under section 202(a).9

 

Finally, it is useful to recognize the somewhat limited role that the monetary value placed on the 

SCC plays in the determination of what emissions standards should be adopted. As noted above, 

the value of the SCC is not relevant to whether EPA has the authority or the obligation to adopt 

emissions standards, as that stems from the endangerment and contribution findings. In addition, 

the levels of the standards adopted by EPA have been determined based on the effectiveness of 

the technology that will be available, their cost, and the appropriate leadtime for incorporation of 

that technology in the light-duty vehicle fleet. See the detailed explanation in section III.F for 

further discussion of this. The cost-benefits analysis is used to help evaluate the overall 

 

8

 See US EPA, Technical Support Document, Endangerment and Cause or Contribute Findings for Greenhouse 

Gases under Section 202(a) of the Clean Air Act, December 8, 2009, for a complete discussion about the 

implications of international climate impacts for the US, in docket EPA-HQ-OAR-2009-0171. 

9

 The commenters are also incorrect in maintaining that because Congress addressed in section 115 the issue of an 

obligation to adopt emissions controls based on the effect domestic emissions have outside the US, it necessarily 

precluded consideration of those effects under section 202(a). See Catawba County v. EPA, 571 F. 3d 20, 34 (D.C. 

Cir. 2009) (a congressional mandate in one section and silence in another often “suggests not a prohibition but 

simply a decision not to mandate any solution in the second context, i.e., to leave the question to agency discretion.’ 

(internal citation omitted, emphasis original)). In any case, as explained above, section 115 addresses the different 

issue of authority to regulate, and does not address how to value a reduction of domestic emissions for purposes of 

evaluating the costs and benefits of an otherwise authorized regulation. 
reasonableness of the emissions standards chosen by EPA. In this case, the benefits of the 

standards are significantly greater than the costs, and this would be the case whether EPA 

considered the domestic value for the SCC, the global value for the SCC, or a range of values 

including higher SCC values. The specific range or values used in this analysis are therefore not 

outcome determinative as far as deciding what emissions standards to adopt, as the standards 

adopted by EPA would still be reasonable from a net benefits perspective under a wide range of 

SCC. 

Nonetheless, EPA considered the available estimates of domestic SCC values to determine how 

global SCC values could be adjusted to national or regional levels. As explained further in the 

SCC TSD, EPA regards this approach as highly speculative and recognizes that there is no a 

priori reason why domestic benefits should be a constant fraction of net global benefit estimate. 

 While there is compelling evidence suggesting that the US represents a non-constant fraction of 

global values, a rigorous manner to quantify that fraction in has not emerged. Indeed, current 

models do not quantify many of the spillover effects identified by commenters IPI, EDF, and 

NRDC, such as the U.S. military position in the world. Accordingly, the final rule presents only 

global SCC values; the SCC TSD presents a range of values that should be used to adjust the 

global SCC to calculate domestic effects.