14

- i CHAPTER 1 4

. MONETIZATION OF EMISSION REDUCTION S BENEFITS

TABLE OF CONTENTS

14.1 Introduction

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- 1

14.2 Approach

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- 1 CHAPTER 14. MONETIZATION OF EMIS SION REDUCTIONS BENEFITS

14.1 INTRODUCTION

As part of its assessment of energy conservation standards, the U.S. Department of Energy ( DOE ) consider s the estimated monetary benefits likely to result from the reduced emissions of carbon dioxide (CO 2 ) and nitrogen oxides (NO X ) that are expected to res ult from

the energy efficiency standard s levels considered for commercial packaged boilers

. T o make this

calculation

, similar to the calculation of the net present value ( NPV ) of consumer benefit, DOE

consider s the reduced emissions expected to result over the lifetime of the equipment shipped in

the projection period for each standard level

.

14.2 APPROACH

T o estimate the monetary value of benefits resulting from reduced emissions of CO 2 , DOE plans to use the mos t current Social Cost of Carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net

agr icultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide

estimates of the social benefits of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report in 2013. 1 The most recent estimates of the SCC in 2015, expressed in 2013$

, are $12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group

determined that a range of values from 7

- percent to 23

- percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions. To calculate a present value of the stream of monetary values, DOE will discount the values in each of the four cases using the discount rates

that had been used to obtain the SCC values in each case.

DOE recognizes that scientific and econo mic knowledge continues to evolve rapidly as to

the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the poten tial monetary benefit of reduced NO X emissions resulting

from the standard levels it considers. E stimates of monetary value for reducing NO X from stationary sources range from $476 to $4,893 per ton in 2013$

. 2 DOE calcula te s monetary benefits using a medium value for NO X emissions of $2,684 per short ton (in 2013$ ), and real

discount rates of 3

- percent and 7

- percent.14

- 2 REFERENCES

1. Interagency Working Group on Social Cost of Carbon, Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866 , May 2013.

United States Government.

< http://www .whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_r ia_2013_update.pdf >

2. Office of Management and Budget Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Un funded
Mandates on State, Local, and Tribal Entities , 2006. Washington, DC.

< http://www.whitehouse.gov/omb/inforeg/2006_cb/2006_cb_final_report.pdf >