16 -i CHAPTER 1 6. MONETIZATION OF EMISSION S REDUCTION BENEFITS

TABLE OF CONTENTS

16.1 INTRODUCTION ......................................................................................................... 16-1
16.2 APPROACH .................................................................................................................. 16-116 -1 CHAPTER 16. MONETIZATION OF EMISSION S REDUCTION BENEFITS

16.1 INTRODUCTION

As part of its assessment of energy conservation standards, the U.S. Department of Energy ( DOE ) considers 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 standard levels considered for GSFL

- IRL . T o make this calculation similar to the calculation
of the net present value ( NPV ) of consumer benefit, DOE considers the reduced emissions expected to result over the lifetime of the equipment shipped in the forecast period for each
standard level

.

16.2 APPROACH

In order to estimate the monetary value of benefits resulting from reduced emissions of
CO 2 , DOE plans to use the most 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 agricultural productivity loss, human health effects, property damage fr om 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 quantificati on and monetization, the SCC can be used to provide
estimates of the social benefits of reductions in GHG emissions.

At this time, the most recent interagency estimates of the potential global benefits resulting from reduced CO 2 emissions in 2015, expressed in 2011$, were $6.1, $25.4, $41.0, and $77.7 per metric ton 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
wi ll 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 economic 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 potential monetary benefit of reduced NO X emissions resulting
from the standard levels it considers. For NO
x emissions, available estimates suggest a very wide16 -2 range of monetary values, ranging from $460 to $4,722 per ton in 2011$). a In accordance with OMB guidance, DOE conducts two calculations of the monetary benefits derived using each of
the economic values used for NO
x , one using a real discount rate of 3 percent and another using a real discount rate of 7 percent. b

DOE is investigating appropriate valuation of Hg emissions. Whether monetization of reduced Hg emissions will occur in this rulemaking is uncertain.

a F or additional information , refer to U.S. Office of Management and Budget , Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities , Washington, DC

. b OMB, Circular A

- 4: Regulatory Analysis ( Sept. 17, 2003).