## From: Higgins, Cortney [mailto:Cortney_Higgins@omb.eop.gov] Sent: Friday, May 30, 2014 3:58 PM To: Culligan, Kevin Cc: Wayland, Robertj; Elman, Barry; Chappell, Linda Subject: Edits to Chapter 8 RIA

See attached, starting on page 8-7 – edits just in the uncertainty section.
Regards, Cortney

<< Chapter_8_ Net Benefits 053014 noon edits to uncertainty section.docx >>

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8-1 

## CHAPTER 8: COMPARISON OF BENEFITS AND COSTS

8.1 Comparison of Benefits and Costs

The illustrative benefits, costs, and net benefits of the compliance with Option s 1 and Option 2 illustrative compliance scenarios are presented in this chapter of the Regulatory Impact Analysis (RIA). As discussed in Chapter 31 , the EPA is proposing two options for state-specific
rate-based CO 2 

### goals that reflect application of cost-effective measures from all four building
blocks discussed

. For both Options 1 and 2, presented in this RIA, two illustrative compliance
scenarios , reflect ing possible compliance approaches with state-specific CO 2 

### goals , are analyzed
in this RIA . These Options scenarios are a reflection of what compliance could look like for Options 1 and 2, assuming states comply with the CO 2 

### goals on an individual state basis (referred to as state approach) or a number of states comply collectively on a regional basis (referred to as regional approach). EPA is proposing Option 1 and taking comment on Option 2. The guidelines allow flexibility of compliance, and EPA recognizes that actual compliance may differ from the illustrative approaches reflected analyzed in this RIA.

The EPA has used the social cost of carbon estimates presented in the 2013 Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2013 SCC TSD) to analyze CO 2 

### climate impacts of this rulemaking. 1 

### We refer to these estimates, which were developed by the U.S. government, as “SCC estimates.” The SCC is an estimate of the monetary value of impacts associated with a marginal change in CO 2 

### emissions in a given year). The four SCC estimates are associated with different discount rates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95 th 

### percentile at 3 percent), and each increases over time. In this comparison of benefits and costs, the EPA provides the estimate of climate benefits associated with the SCC value deemed to be

1 Docket ID EPA-HQ-OAR-2013-0495, Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 , Interagency Working Group on Social Cost of Carbon, with participation by Council of Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, De partment 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 (May 2013, Revised November 2013). Available at: http://www.whitehouse.gov/sites/default/files/omb/asse ts/inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf.

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8-2 central in the SCC TSD (the model average at 3% discount rate). As Table 8-1 shows, the EPA estimates that under the proposed Option 1
, regional approach monetized climate benefits (in 2011$) are $17 billion in 2020, assuming a 3 percent discount rate (model average). The air pollution health co-benefits in 2020 are estimated to be $16 billion to $37 billion for a 3 percent discount rate and $15 billion to $34 billion (2011$) for a 7 per cent discount rate. The annual, illustrative compliance costs estimated by IPM and inclusive of demand side energy efficiency program and participant costs and Mm onitoring
, Rr eporting
, and Rr ecordkeeping (MRR) costs, are approximately $5.5 billion (2011$) in 2020. The quantified net benefits (the difference between monetized benefits and costs) in 2020, are $28 billion to $49 billion using a 3 percent discount rate and $26 billion to $45 billion assuming a 7 percent discount rate (2011$). In comparison, net benefits for the Option 1 state compliance approach in 2020 are estimated to be $27 billion to $50 billion, using a 3 percent discount rate a nd $26 billion to $46 billion assuming a 7 percent discount rate. Option 2 regional and state compliance approach benefits, costs and
net benefits for 2020 are also shown on Table 8-1. Table 8-2 reflects estimates for the Options 1 and 2 regional and state compliance approaches for 2025. For the regional compliance approach to the proposal Option 1 in 2030, the EPA estimates this proposal approach will yield monetized climate benefits of $30 billion (2011$) (using 3 pe rcent discount rate (model average) as shown
on Table 8-3.

In addition to CO 2 

### , implementing these proposed guidelines is expected to reduce
emissions of SO 2 

### and NO X 

### , which are precursors to formation of ambient PM 2.5 

### , as well as directly emitted fine particles. 2 

### Therefore, reducing these emissions would also reduce human exposure to ambient PM 2.5 

### and ozone precursors, thus the incidence of PM 2.5 

### - and ozone related
health effects. The se air pollution health co-benefits in 2030 are estimated to be $254 billion to $59 billion for a 3 percent discount rate and $23 billion to $54 billion (2011$) for a 7 percent
discount rate.

2 We estimate the health co-benefits associated with emission reductions of two categories of directly emitted particles: elemental carbon plus organic carbon (EC+OC) and crustal. Crustal emissions are composed of compounds associated with minerals and metals from the earth’s surface, including carbonates, silicates, iron, phosphates, copper, and zinc. Often, crustal material represen ts particles not classified as one of the other species (e.g., organic carbon, elemental carbon, nitrate, sulfate, chloride, etc.). Formatted: Highlight

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8-3 The annual illustrative compliance costs estima ted using IPM, inclusive of demand side energy efficiency program and participant costs and MRR costs, are approximately $7.3 billion (2011$) in 2030. The quantified net benefits for the Option 1 regional in 2030 are $48 billion to $82 billion, assuming a 3 percent discount ra te, and $46 to $77 billion assuming a 7 percent discount rate (2011$). In 2030, quantified net benefits are $ 49 billion to $84 billion, assuming a 3 percent discount rate, and $46 to $79 billion assumi ng a 7 percent discount rate (2011$) for the Option 1 state compliance approach. This table also reflects benefit, cost, and net benefit estimates in 2030 for Option 2 regional and state compliance approaches.

Based upon the foregoing discussion, it remains clear that th is proposal’se combined
climate benefits and human health co-benefits associated with the reduction in other air pollutants of this proposal are substantial and far outweigh the compliance costs for the all of the regulatory options and compliance approaches. The EPA could not monetize important categories of impacts. Unquantified impacts includ e those associated with changes in emissions of other pollutants that affect the climate, such as methane. In addition, the analysis does not quantify co-benefits from reducing exposure to SO 2 

### , NOx, and hazardous air pollutants (e.g., mercury and hydrogen chloride), as well as ecosystem effects and visibility impairment. Formatted: Highlight

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8-4 Table 8-1. Summary of Estimated Monetized Benefits, Compliance Costs, and Net Benefits for the Proposed Guidelines – 2020 (billions of 2011$) a Option 1 - state Option 2 – state 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $4.9 $18 $26 $52 $3.8 $14 $20 $40 Air pollution health co-benefits c $17 to $40 $15 to $36 $14 to $32 $12 to $29 Total Compliance Costs d $7.5 $5.5 Net Benefits e $27 to $50 $26 to $46 $22 to $40 $20 to $37

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 1.5 tons of Hg Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 1.2 tons of Hg Ecosystem Ee ffects Visibility impairment Option 1 – regional Option 2 – regional 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $4.7 $17 $25 $51 $3.6 $13 $19 $39 Air pollution health co-benefits c $16 to $37 $15 to $34 $13 to $31 $12 to $28 Total Compliance Costs d $5.5 $4.3 Net Benefits e $28 to $49 $26 to $45 $22 to $40 $21 to $37

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 1.3 tons of Hg Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 0.9 tons of Hg Ecosystem Ee ffects Visibility impairment

a All estimates are for 2020, and are rounded to two significant figures, so figures may not sum.

b The climate benefit estimates in this summary table reflect global impacts from CO 2 emission changes and do not account for changes in non-CO 2 GHG emissions. Different discount rates are applied to SCC than to the other estimates because CO 2 emissions are long-lived and subsequent damages occur over many years. The SCC estimates are year-specific and increase over time.

c The air pollution health co-benefits reflect reduced exposure to PM 2.5 and ozone associated with emission reductions of directly emitted PM 2.5 , SO 2 and NO X . The range reflects the use of concentration-response functions from different epidemiology studies. The reduc tion in premature fatalities each year accounts for over 90 percent of total monetized co-benefits from PM 2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally pot ent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type.

d Total social costs are approximated by the illu strative compliance costs estimated, in part, using the Integrated Planning Model for the proposed option and a discount rate of approximately 5%. This estimate includes monitoring, recordkeeping, and reporting costs and demand side energy efficiency program and participant costs.

e The estimates of net benefits in this summary table are calculated using the global social cost of carbon at a 3 percent discount rate (model average) . The RIA includes combined climate and health estimates based on these additional discount rates.

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8-5 Table 8-2. Summary of Estimated Monetized Benefits, Compliance Costs, and Net Benefits for the Proposed Guidelines – 2025 (billions of 2011$) a Option 1 – state Option 2 – state 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $7.6 $25 $37 $77 $5.6 $19 $28 $27 Air pollution health co-benefits c $23 to $54 $21 to $49 $18 to $41 $16 to $37 Total Compliance Costs d $5.5 $5.5 Net Benefits e $43 to $74 $41 to $69 $31 to $55 $29 to $51

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 2.0 tons of Hg Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 1.7 tons of Hg Ecosystem Ee ffects Visibility impairment Option 1 – regional Option 2 – regional 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $7.5 $25 $37 $76 $5.5 $18 $27 $56 Air pollution health co-benefits c $23 to $53 $21 to $48 $17 to $40 $16 to $36 Total Compliance Costs d $4.6 $4.5 Net Benefits e $43 to $74 $41 to $69 $31 to $54 $29 to $50

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 1.7 tons of Hg Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 1.3 tons of Hg Ecosystem Ee ffects Visibility impairment

a All estimates are 2025, and are rounded to two significant figures, so figures may not sum.

b The climate benefit estimates in this summary table reflect global impacts from CO 2 emission changes and do not account for changes in non-CO 2 GHG emissions. Different discount rates are applied to SCC than to the other estimates because CO 2 emissions are long-lived and subsequent damages occur over many years. The SCC estimates are year-specific and increase over time.

c The air pollution health co-benefits reflect reduced exposure to PM 2.5 and ozone associated with emission reductions of directly emitted PM 2.5 , SO 2 and NO X . The range reflects the use of concentration-response functions from different epidemiology studies. The reduc tion in premature fatalities each year accounts for over 90 percent of total monetized co-benefits from PM 2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type.

d Total social costs are approximated by the illustrative compliance costs estimated, in part, using the Integrated Planning Model for the proposed option and a discount rate of approximately 5%. This estimate includes monitoring, recordkeeping, and reporting costs and demand side energy efficiency program and participant costs.

e The estimates of net benefits in this summary table are calculated using the global social cost of carbon at a 3 percent discount rate (model average) . The RIA includes combined climate and health estimates based on these additional discount rates.

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8-6 Table 8-3. Summary of Estimated Monetized Benefits, Compliance Costs, and Net Benefits for the Proposed Guidelin es –2030 (billions of 2011$) a Option 1– state Option 2– state 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $9.5 $31 $44 $94 $6.4 $21 $30 $63 Air pollution health co-benefits c $27 to $62 $24 to $56 $18 to $42 $16 to $38 Total Compliance Costs d $8.8 $3.1 Net Benefits e $49 to $84 $46 to $79 $36 to $59 $34 to $56

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 2.1 tons of Hg and 590 tons of HCl Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 1.5 tons of Hg and 130 tons of HCl Ecosystem Ee ffects Visibility impairment Option 1– regional Option 2– regional 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate Climate Benefits b 5% discount rate 3% discount rate 2.5% discount rate 95 th percentile at 3% discount rate $9.3 $30 $44 $92 $6.0 $20 $28 $60 Air pollution health co-benefits c $25 to $59 $23 to $54 $17 to $40 $15 to $36 Total Compliance Costs d $7.3 $1.9 Net Benefits e $48 to $82 $46 to $77 $35 to $57 $33 to $54

Non-Monetized Benefits Direct exposure to SO 2 and NO 2 1.7 tons of Hg and 580 tons of HCl Ecosystem Ee ffects Visibility impairment Direct exposure to SO 2 and NO 2 1.1 tons of Hg and 30 tons of HCl Ecosystem Ee ffects Visibility impairment

a All estimates are 2030, and are rounded to two significant figures, so figures may not sum.

b The climate benefit estimates in this summary table reflect global impacts from CO 2 emission changes and do not account for changes in non-CO 2 GHG emissions. Also, different discount rates are applied to SCC than to the other estimates because CO 2 emissions are long-lived and subsequent damages occur over many years. The SCC estimates are year-specific and increase over time.

c The air pollution health co-benefits reflect reduced exposure to PM 2.5 and ozone associated with emission reductions of directly emitted PM 2.5 , SO 2 and NO X . The range reflects the use of concentration-response functions from different epidemiology studies. The reduc tion in premature fatalities each year accounts for over 90 percent of total monetized co-benefits from PM 2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally pot ent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type.

d Total social costs are approximated by the illustrative compliance costs estimated , in part, using the Integrated Planning Model for the proposed option and a discount rate of approximately 5%. This estimate includes monitoring, recordkeeping, and reporting costs and demand side energy efficiency program and participant costs.

e The estimates of net benefits in this summary table ar e calculated using the global social cost of carbon at a 3 percent discount rate (model average) . The RIA includes combined climate and health estimates based on these additional discount rates.

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8-7 8.2 Uncertainty Analysis

The Office of Management and Budget’s circular Regulatory Analysis (Circular A-4) provides guidance on the preparation of regulatory analyses required under E.O. 12866, and requires an uncertainty analysis for rules with annual benefits or costs of $1 billion or more. 3 

### This proposed rulemaking surpasses that threshold for both benefits and costs. Throughout the RIA, we
considered a number of sources of uncertainty, both quantitatively and qualitatively, on benefits
and costs The three notable source of uncertainty are called out here:

 There is a significant amount of uncertainty as sociated with the simulation of the choices that states will make regarding how they will reduce CO2 (i.e., as illustrated Options 1 and 2 below). These simulations influence both the costs and the benefits (see below).

 The uncertainty associated with these illustrative scenarios is further compounded by the approach used to calculate the health co-benefits associated with the reduction in PM2.5 and ozone that would happen when CO2-re duction technologies are implemented.

 The usual uncertainties associated with the PM2.5 and ozone related health benefits
estimates hold here as well

 The climate related benefits, particularly thos e associated with the social cost of carbon introduce separate uncertainties.

. We summarize key elements of our uncertainty analysis here. Some of these elements are evaluated using probabilistic techniques, whereas for others the underlying likelihoods of certain outcomes are unknown and so we use scenario analysis to evaluate their potential effect on the benefits and costs of this rulemaking. Uncertainty Associated with Simulating Technologies Adopted: The calculation of the state goals is based on an evaluation of methods for reducing the carbon emissions intensity of electricity generation that may be achieved at reasonable cost. Our best estimates of the costs of these methods of intensity reduction are reported within the cost analysis of this rule and are included in the cost modeling in the RIA (e.g., the cost of demand-

3 Office of Management and Budget (OMB), 2003, Circular A-4
, http://www.whitehouse.gov/omb/circulars_a004_a-4 and OMB, 2011. Regulatory Impact Analysis: A Primer. http://www.whitehouse.gov/sites/default/files/omb/ inforeg /regpol/circular-a-4_regulatory-impact-analysis-aprimer.pdf Formatted: Highlight Comment [A1]: Accepted EPA insert. Track changes are suggestions for expanding this section. Block of extent were copied directly from Chapter 4 of the RIA.

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8-8 side energy efficiency programs and non-emi tting generation). We have also conducted cost analyses for alternative quantifications of the degree to which the building blocks of the BSER determination can reduce the carbon emissions intensity of electricity generation, and scenarios modeled and presented in this RIA illustrate the potential range of impacts of the varying specifications of building block potential between Option 1 and Option 2 scenarios. Comments received by EPA on this proposal will have the potential to shed light on some of the uncertain components associated with the cost of technol ogies or other methods of reducing emissions intensity and will inform the basis of analyses in the final rule. However, we recognize that systematic uncertainty will persist in the anal ysis even with this additional information and analysis, especially given the state-level fl exibility in meeting the guidelines. A significant source of uncertainty under this regulation is the ultimate approach states will take to comply with the guidelines, which will affect both the costs and benefits of this rule. For this reason we modeled two potential compli ance scenarios for each regulatory option: the state scenario and the regional scenario. In general, for both Option 1 and Option 2, the compliance cost of the regulation fell under the regional scenario as compared to the state scenario, while the reductions of CO 2 

### and other pollutants from fossil fuel combustion also fell (but by lesser proportions). However, from this analysis we see that the net benefits of the two scenarios, given consistent assumptions, do not differ notably.

Uncertainty associated with Benefits-Ton Approach All benefit-per-ton have inherent limitations , including that the estimates reflect the geographic distribution of the modeled sector emissions, which may not match the emission reductions anticipated by the proposed guidelines, and they may not reflect local variability in population density, meteorology, exposure, baseline health incidence rates, or other local factors for any specific location. In addition, these esti mates reflect the regional average benefit-per-ton
for each ambient PM 2.5 

### precursor emitted from EGUs, which assumes a linear atmospheric response to emission reductions. The regional be nefit-per-ton estimates, although less subject to these types of uncertainties than national estimate s, still should be interpreted with caution. Even though we assume that all fine particles have equivalent health effects, the benefit-per-ton estimates vary between precursors depending on the location and magnitude of their impact on
PM 2.5 

### levels, which drive population exposure. Formatted: Font: Bold

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8-9 Uncertainty associated with PM2.5 and Ozone Health Co-Benefits

Our estimate of the total monetized co-benefits is based on EPA’s interpretation of the best available scientific literature and methods and supported by the SAB-HES and the National Academies of Science (NRC, 2002). Below are key assumptions underlying the estimates for
PM 2.5 

### -related premature mortality, which accounts for 98 percent of the monetized PM 2.5 

### health
co-benefits.

1. We assume that all fine particles, rega rdless of their chemical composition, are equally potent in causing premature mortality. This is an important assumption, because PM 2.5 

### varies considerably in composition across sources, but the scientific evidence is not yet sufficient to allow differ entiation of effect es timates by particle type. The PM ISA concluded that “many constituents of PM 2.5 

### can be linked with multiple health effects, and the evidence is not yet sufficient to allow differentiation of those constituents or sources that are more closely related to specific outcomes” (U.S. EPA, 2009b).

2. We assume that the health impact function for fine particles is log-linear without a threshold in this analysis. Thus, the estimates include health co-benefits from reducing fine particles in areas with varied concentrations of PM 2.5 

### , including both areas that do not meet the fine particle stan dard and those areas that are in attainment, down to the lowest modeled concentrations.

3. We assume that there is a “cessation” lag between the change in PM exposures and the total realization of changes in mortality effects. Specifically, we assume that some of the incidences of premature mortality related to PM 2.5 

### exposures occur in a distributed fashion over the 20 years following exposure based on the advice of theSAB-HES (U.S. EPA-SAB, 2004c), which affects the valuation of mortality cobenefits at different discount rates.

EPA also evaluated significant sources of uncertainty in the estimate of climate benefits of the emission reductions forecast by the compliance cost modeling. 4 

### The modeling underlying

4 As discussed in Chapter 4, EPA estimated the global social benefits of CO 2 emission reductions expected from the proposed guidelines using the SCC estimates presented in the 2013 Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2013 SCC TSD). The estimates were first developed by the U.S. government and published in the 2010 Technical Support Document: Social Cost of Carbon for Regulatory Im pact Analysis Under Executive Order 12866, Interagency Formatted: Font: Bold

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8-10 the development of the SCC estimates addressed uncertainty in several ways. Three integrated assessment models (IAMs) were used to generate the SCC estimates. Each IAM relied on Monte Carlo simulations specifying different possible outcomes for climate sensitivity (represented by a Roe and Baker Distribution), used five different emissions growth scenarios and three discount rates. The distribution of results were depicted by four point estimates. The use of this range of point estimates in this rulemaking helps to refl ect the uncertainty in the SCC estimation exercise. See both the 2010 SCC TSD and 2013 SCC TSD for a full description. In addition, EPA quantitatively assessed uncertain ty in the air pollution health cobenefits, including probabilistic approaches. For example, EPA provides the 95 th 

### percentile confidence interval for avoided PM-related pr emature deaths and the associated economic valuation using two key epidemiology studies. Further, EPA provides the PM-related results using alternate concentration-response relationship provided by an expert elicitation and alternate ozone-related results using concentration-response relationships provided by alternate epidemiology studies. Additional quantitative analys es include sensitivity analyses for alternate income growth adjustments and cessation lags, assessments of the distribution of population exposure in the modeling underly ing the benefit-per-on estimates, and a quantitative evaluation of the benefit-per-ton estimates relative to recent analyses. A qualitative description of uncertainties associated with certain assumptions for PM, such as the linear model and equal potency across constituents, is also provided. For further discussion and characterization of those uncertainties influencing the benefi t assessment, see Chapter 4. Uncertainty Associated with Estimating the Social Cost of Carbon
The 2010 SCC TSD noted a number of limitations to the SCC analysis, including theincomplete way in which the integrated assessment models capture catastrophic and noncatastrophic impacts, their incomplete treatme nt of adaptation and technological change, uncertainty in the extrapolation of damages to high temperatures, and assumptions regarding risk aversion. Current integrated assessment models do not assign value to all of the important physical, ecological, and economic impacts of clim ate change recognized in the climate change literature due to a lack of precise information on the nature of damages and because the science incorporated into these models understandably lags behind the most recent research. The limited

Working Group on Social Cost of Carbon (2010 SCC TSD) and updated in the 2013 SCC TSD. We refer to these estimates as “SCC estimates.” Formatted: Font: Bold

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8-11 amount of research linking climate impacts to economic damages makes the modeling exercise
even more difficult. These individual limitations do not all work in the same direction in terms of their influence on the SCC estimates, though taken together they suggest that the SCC estimates are likely conservative. In particular, the IPCC Fourth Assessment Report (2007) concluded that “It is very likely that [SCC estimates] underestimate the damage costs because they cannot include many non-quantifiable impacts.”

EPA characterized also evaluated significant sources of uncertainty in the estimate of climate benefits of the emission reductions forecast by the compliance cost modeling. 5 

### The modeling underlying the development of the S CC estimates addressed uncertainty in several ways. Three integrated assessment models (IA Ms) were used to generate the SCC estimates. Each IAM relied on Monte Carlo simulations sp ecifying different possible outcomes for climate sensitivity (represented by a Roe and Baker Distri bution), used five different emissions growth
scenarios and three discount rates. The distri bution of results were depicted by four point estimates. The use of this range of point esti mates in this rulemaking helps to reflect the uncertainty in the SCC estimation exercise. See both the 2010 SCC TSD and 2013 SCC TSD for a full description.

5 As discussed in Chapter 4, EPA estimated the global social benefits of CO 2 emission reductions expected from the proposed guidelines using the SCC estimates presented in the 2013 Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2013 SCC TSD). The estimates were first developed by the U.S. government and published in the 2010 Technical Support Document: Social Cost of Carbon for Regulatory Im pact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon (2010 SCC TSD) and updated in the 2013 SCC TSD. We refer to these estimates as “SCC estimates.”