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	[House Hearing, 115 Congress]
	[From the U.S. Government Publishing Office]










	AT WHAT COST? EXAMINING THE
	SOCIAL COST OF CARBON

	=======================================================================

	JOINT HEARING

	BEFORE THE

	SUBCOMMITTEE ON ENVIRONMENT &
	SUBCOMMITTEE ON OVERSIGHT

	COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
	HOUSE OF REPRESENTATIVES

	ONE HUNDRED FIFTEENTH CONGRESS

	FIRST SESSION

	__________

	FEBRUARY 28, 2017

	__________

	Serial No. 115-05

	__________

	Printed for the use of the Committee on Science, Space, and Technology


	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







	Available via the World Wide Web: http://science.house.gov

	______

	U.S. GOVERNMENT PUBLISHING OFFICE

	24-670 PDF WASHINGTON : 2017
	-----------------------------------------------------------------------
	For sale by the Superintendent of Documents, U.S. Government Publishing
	Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
	DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
	Washington, DC 20402-0001















	COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

	HON. LAMAR S. SMITH, Texas, Chair
	FRANK D. LUCAS, Oklahoma EDDIE BERNICE JOHNSON, Texas
	DANA ROHRABACHER, California ZOE LOFGREN, California
	MO BROOKS, Alabama DANIEL LIPINSKI, Illinois
	RANDY HULTGREN, Illinois SUZANNE BONAMICI, Oregon
	BILL POSEY, Florida ALAN GRAYSON, Florida
	THOMAS MASSIE, Kentucky AMI BERA, California
	JIM BRIDENSTINE, Oklahoma ELIZABETH H. ESTY, Connecticut
	RANDY K. WEBER, Texas MARC A. VEASEY, Texas
	STEPHEN KNIGHT, California DONALD S. BEYER, JR., Virginia
	BRIAN BABIN, Texas JACKY ROSEN, Nevada
	BARBARA COMSTOCK, Virginia JERRY MCNERNEY, California
	GARY PALMER, Alabama ED PERLMUTTER, Colorado
	BARRY LOUDERMILK, Georgia PAUL TONKO, New York
	RALPH LEE ABRAHAM, Louisiana BILL FOSTER, Illinois
	DRAIN LaHOOD, Illinois MARK TAKANO, California
	DANIEL WEBSTER, Florida COLLEEN HANABUSA, Hawaii
	JIM BANKS, Indiana CHARLIE CRIST, Florida
	ANDY BIGGS, Arizona
	ROGER W. MARSHALL, Kansas
	NEAL P. DUNN, Florida
	CLAY HIGGINS, Louisiana
	------

	Subcommittee on Environment

	HON. ANDY BIGGS, Arizona, Chair
	DANA ROHRABACHER, California SUZANNE BONAMICI, Oregon, Ranking
	BILL POSEY, Florida Member
	MO BROOKS, Alabama COLLEEN HANABUSA, Hawaii
	DANIEL WEBSTER, Florida CHARLIE CRIST, Florida
	BRIAN BABIN, Texas EDDIE BERNICE JOHNSON, Texas
	GARY PALMER, Alabama
	BARRY LOUDERMILK, Georgia
	JIM BANKS, Indiana
	CLAY HIGGINS, Louisiana
	LAMAR S. SMITH, Texas
	------

	Subcommittee on Oversight

	HON. DRAIN LaHOOD, Illinois, Chair
	BILL POSEY, Florida DONALD S. BEYER, Jr., Virginia,
	THOMAS MASSIE, Kentucky Ranking Member
	GARY PALMER, Alabama JERRY MCNERNEY, California
	ROGER W. MARSHALL, Kansas ED PERLMUTTER, Colorado
	CLAY HIGGINS, Louisiana EDDIE BERNICE JOHNSON, Texas
	LAMAR S. SMITH, Texas















	C O N T E N T S

	February 28, 2017

	Page
	Witness List..................................................... 2

	Hearing Charter.................................................. 3

	Opening Statements

	Statement by Representative Andy Biggs, Chairman, Subcommittee on
	Environment, Committee on Science, Space, and Technology, U.S.
	House of Representatives....................................... 4
	Written Statement............................................ 6

	Statement by Representative Suzanne Bonamic, Ranking Member,
	Subcommittee on Environment, Committee on Science, Space, and
	Technology, U.S. House of Representatives...................... 8
	Written Statement............................................ 10

	Statement by Representative Darin LaHood, Chairman, Subcommittee
	on Oversight, Committee on Science, Space, and Technology, U.S.
	House of Representatives....................................... 12
	Written Statement............................................ 14

	Statement by Representative Donald S. Beyer, Jr., Ranking Member,
	Subcommittee on Oversight, Committee on Science, Space, and
	Technology, U.S. House of Representatives...................... 16
	Written Statement............................................ 18

	Statement by Representative Lamar S. Smith, Chairman, Committee
	on Science, Space, and Technology, U.S. House of
	Representatives................................................ 20
	Written Statement............................................ 22

	Witnesses:

	Dr. Ted Gayer, PhD, Vice President and Director of Economic
	Studies and Joseph A. Pechman Senior Fellow at Brookings
	Institution
	Oral Statement............................................... 24
	Written Statement............................................ 27

	Dr. Kevin Dayaratna, PhD, Senior Statistician and Research
	Programmer, Center for Data Analysis, Institute for Economic
	Freedom and Opportunity at The Heritage Foundation
	Oral Statement............................................... 34
	Written Statement............................................ 36

	Dr. Michael Greenstone, PhD, Milton Friedman Professor in
	Economics, the College, and the Harris School; Director of the
	interdisciplinary Energy Policy Institute at the University of
	Chicago and the Energy & Environment Lab at the University of
	Chicago Urban Labs
	Oral Statement............................................... 50
	Written Statement............................................ 52

	Dr. Patrick Michaels, PhD, Director, Center for the Study of
	Science, Cato Institute; contributing author to United Nations
	Intergovernmental Panel on Climate Change (Nobel Peace Prize
	2007)
	Oral Statement............................................... 60
	Written Statement............................................ 62

	Discussion....................................................... 98

	Appendix I: Answers to Post-Hearing Questions

	Dr. Kevin Dayaratna, PhD, Senior Statistician and Research
	Programmer, Center for Data Analysis, Institute for Economic
	Freedom and Opportunity at The Heritage Foundation............. 124

	Dr. Michael Greenstone, PhD, Milton Friedman Professor in
	Economics, the College, and the Harris School; Director of the
	interdisciplinary Energy Policy Institute at the University of
	Chicago and the Energy & Environment Lab at the University of
	Chicago Urban Labs............................................. 127

	Appendix II: Additional Material for the Record

	Statement submitted by Representative Eddie Bernice Johnson,
	Ranking Member, Committee on Science, Space, and Technology,
	U.S. House of Representatives.................................. 134

	Document submitted by Representative Darin LaHood, Chairman,
	Subcommittee on Oversight, Committee on Science, Space, and
	Technology, U.S. House of Representatives...................... 136


	AT WHAT COST? EXAMINING THE
	SOCIAL COST OF CARBON

	----------


	TUESDAY, FEBRUARY 28, 2017

	House of Representatives,
	Subcommittee on Environment and
	Subcommittee on Oversight,
	Committee on Science, Space, and Technology,
	Washington, D.C.

	The Subcommittees met, pursuant to call, at 10:07 a.m., in
	Room 2318, Rayburn House Office Building, Hon. Andy Biggs
	[Chairman of the Subcommittee on Environment] presiding.


	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Good morning. The Subcommittees on
	Environment and Oversight will come to order.
	Without objection, the Chair is authorized to declare
	recesses of the Subcommittee at any time.
	Welcome to today's hearing entitled ``At What Cost?
	Examining the Social Cost of Carbon.'' I recognize myself for
	five minutes for an opening statement.
	Welcome to today's joint subcommittee hearing entitled ``At
	What Cost? Examining the Social Cost of Carbon.'' Today, we
	will examine the previous Administration's determination of the
	social cost of carbon, or SCC, and explore why the calculated
	value is flawed.
	Energy is the bedrock of our society, and yet the SCC
	estimate of the previous Administration has killed jobs,
	limited innovation, and resulted in higher energy costs for
	American families, all in exchange for benefits that are
	negligible at best and nonexistent at worst.
	The Obama Administration's Interagency Working Group, which
	ultimately established an enormously high SCC of $37 per ton of
	CO<INF>2</INF> emitted into the atmosphere, relied on an
	outdated economic model and failed to take into account the
	White House's own Office of Management and Budget, or OMB,
	guidelines for cost-benefit analysis. Quite simply, the working
	group used numbers that got them the results they wanted in
	order to advance some of the most expensive and expansive
	regulations ever written. In pushing forward this political
	agenda, the working group acted irresponsibly. It also allowed
	the previous Administration to implement stringent and costly
	regulations without a scientific basis.
	As we will learn today, the SCC working group ignored two
	major OMB recommendations for federal agency rulemaking. First,
	it failed to use a seven percent discount rate, and instead
	relied on rates of 2.5 percent, three percent, and five
	percent. and, second, it ignored the guideline to report cost-
	benefit analysis from a domestic perspective. If nothing else
	is taken away from what will be a very technical hearing, I
	hope it will be these two very basic flaws.
	The low long-term discount rate established by the previous
	Administration fundamentally disregards the notion that the
	American economy is resilient and can respond to potential
	future threats with technological development and innovation.
	As to the flaw of the previous Administration's decision to
	focus on CO<INF>2</INF> emissions from a global perspective,
	this approach leaves the United States footing the bill for
	costly regulations that are based on benefits conferred to
	other countries. It is simply not right for Americans to be
	bearing the brunt of costs when the majority of benefits will
	be conferred away from home.
	By ignoring OMB guidelines, the current SCC models leave
	critical components out of the discussion. If the OMB
	guidelines would have been followed, the social cost of carbon
	would have been significantly lower.
	The previous Administration disregarded scientific
	integrity by overestimating climate change resulting from
	greenhouse gas emissions. In order to push an expensive
	regulatory agenda, the Administration inflated the SCC to
	justify costly regulations in response to the allegedly
	terrible damage CO<INF>2</INF> emissions will cause in the
	future.
	The SCC is nothing but a one-sided manipulation of
	parameters to fit the policy-driven agendas of the previous
	Administration. These alarmist tactics need to stop. Today's
	hearing is intended to uncover the real truth and deception
	behind the SCC.
	America's strength emanates from our resilience and
	flexibility. Attempts to justify government regulations over
	industry innovations hinders growth and development. I look
	forward to working with the Trump Administration to renew faith
	in American ingenuity and technological development.
	[The prepared statement of Chairman Biggs follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. I now recognize the Ranking member of the
	Subcommittee on Environment, Ms. Bonamici, for an opening
	statement.
	Ms. Bonamici. Thank you very much, Mr. Chairman, and thank
	you to our witnesses for being here today.
	The social cost of carbon is a metric used to value the
	damage caused by emitting 1 ton of carbon dioxide into the
	atmosphere in a year. It provides a consistent value for all
	federal agencies to use for their cost-benefit analysis on
	regulatory efforts that reduce carbon dioxide emissions.
	There are some people who criticize this metric, but the
	Government Accountability Office and independent peer review by
	the National Academy of Sciences have validated it many times.
	Additionally, federal courts have upheld that the methodology
	used to develop the social cost of carbon is based on robust
	science and sound economic analysis. It is critical that
	updates to the social cost of carbon metric are based on the
	best available science and updated economic analysis based on
	peer-reviewed literature.
	The Government Accountability Office has found that the
	methodology used to develop the social cost of carbon was based
	on peer-reviewed academic literature and took steps to
	incorporate new information as it became available. This
	process also provided ample opportunity for public comment on
	both the social cost of carbon and the regulations that use the
	metric in their cost-benefit analysis.
	Some people suggest that regulations to reduce the
	emissions of carbon dioxide and other pollutants are
	unnecessary because climate change does not exist or human
	activity does not contribute to it, but simply ignoring a fact
	does not make it less true. The climate is warming, and we need
	to work now to limit the consequences for future generations.
	Our children and grandchildren should not inherit an
	environment that degrades their health and harms their future
	economy.
	Economic growth and reducing carbon pollution are not in
	conflict with one another. Clean energy development allows us
	to continue powering our communities in ways that avoid long-
	term negative consequences on future generations. It also gives
	us the opportunity to bring new living-wage jobs into
	communities. In fact, the American Wind Energy Association
	found that the wind energy sector accounts for 3,000 jobs
	throughout my home State of Oregon alone. In addition to
	boosting Oregon's economy, wind energy generation avoided more
	than 1 million tons of statewide carbon dioxide emissions in
	2015, and many of the wind energy jobs are in rural areas where
	jobs are needed.
	The social cost of carbon is not a product of a single
	President, a single scientific study, or a single legal action.
	It is rooted in overwhelming scientific consensus on climate
	change, an effort spanning 30 years from both the executive and
	judicial branches of the Federal Government. These factors,
	coupled with a transparent development process and strong
	economic analysis, form the basis of this metric that has been
	used in at least 79 federal regulations, including fuel economy
	standards for vehicles, energy efficiency measures for home
	appliances, and regulations such as the Clean Power Plan. This
	metric was not invented to serve a political agenda but in fact
	was developed to meet a legal mandate to justify, in simple
	terms of dollars and cents, how the Federal Government's
	actions will affect Americans today and our children and
	grandchildren tomorrow.
	I look forward to hearing how we may best continue to use
	the social cost of carbon in support of policies that protect
	our environment.
	With that, I would like to again thank the witnesses for
	being here today, and I yield back the balance of my time.
	[The prepared statement of Ms. Bonamici follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Thank you, Ms. Bonamici.
	I now recognize the Chairman of the Subcommittee on
	Oversight, Mr. LaHood, for his opening statement.
	Mr. LaHood. Thank you, Chairman Biggs, and happy to be part
	of this hearing today with you, today's hearing titled ``At
	What Cost? Examining the Social Cost of Carbon,'' and happy to
	have the witnesses here today as we examine the previous
	Administration's social cost of carbon and the shortfalls in
	application of this flawed process.
	There is significant evidence that the previous
	Administration manipulated the social cost of carbon
	calculation to reflect significant benefits to enacting what
	were ultimately job-killing regulations and policies across a
	wide spectrum of issues. The social cost of carbon is a flawed
	tool used by the Obama Administration to justify a green agenda
	when, in reality, the prior Administration was seeking to
	offset its costly regulations with far-reaching implications
	that burden our industries and nation.
	Unsurprisingly, the previous Administration ignored
	specific guidelines set forth by the Office of Management and
	Budget, OMB, and used the social cost of carbon as a vehicle to
	tout the economic benefits of the new environmental
	regulations. This is troubling and to me is not being honest
	with the taxpayers.
	Critics take issue primarily with two aspects of the social
	cost of carbon methodology, specifically, the discount rate
	used and the domestic versus global benefits claimed. Both
	issues I look forward to discussing in more detail with our
	panel of esteemed witnesses today.
	I, too, take issue with the methodology but also the lack
	of transparency with the use and development of the social cost
	of carbon. Three statistical integrated assessment economic
	models were used to develop the social cost of carbon: the
	FUND, the DICE, and the PAGE. Experts have concluded these
	three models are flawed and possess too many uncertainties to
	be the foundation of the benefit analysis of environmental
	regulations. If one were to change the assumptions these models
	are based on, the result will drastically differ, demonstrating
	malleability in the social cost of carbon calculation.
	Because of these realities, last year, I was pleased to be
	an original cosponsor of H.R. 5668, the Transparency and
	Honesty in Energy Regulation Act, or THERA, introduced by my
	friend and colleague Evan Jenkins of West Virginia. This
	legislation is aimed at prohibiting the Department of Energy
	and the Environmental Protection Agency from considering the
	social cost of carbon as part of any cost-benefit analysis
	unless specifically authorized by law. If signed into law, the
	DOE and the EPA would no longer rely on manipulated and
	fabricated economic benefits to justify or support new job-
	killing environmental regulations. I look forward to working
	with Congressman Jenkins again on this issue this Congress.
	It appears that the social cost of carbon is nothing but a
	political tool lacking scientific integrity and transparency
	conceived and utilized by an Administration pushing a green
	agenda to the detriment of the American taxpayers. Perhaps a
	better measurement of the social cost of carbon is not the net
	damages that result from a one-metric-ton increase in carbon
	dioxide emissions in a given year but the damage inflicted on
	domestic industries, including manufacturers in my district
	like Caterpillar, by the environmental regulations justified by
	this flawed calculation.
	I would like to thank our witnesses for being here today to
	discuss this important matter. In addition, I look forward
	working with the Trump Administration to reverse the damage
	caused by the Obama Administration as it relates to this issue.
	With that, I yield back to the Chair.
	[The prepared statement of Mr. LaHood follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



	Chairman Biggs. Thank you, Mr. LaHood.
	I now recognize the Ranking Member of the Subcommittee on
	Oversight, Mr. Beyer, for his opening statement.
	Mr. Beyer. Thank you, Mr. Chairman, and thank you, all the
	witnesses, for being here.
	You know, the social cost of carbon is a complex metric
	which our witness Dr. Greenstone has described as the most
	important number you've never heard of. Assessing and
	addressing the impact of climate change on current and future
	generations is critical. It seems already that in just the
	first few minutes of this hearing we see a dramatic difference
	between the short-term emphasis on job creation, which is
	important, and a long-term emphasis on protecting our planet.
	The social cost of carbon permits the government to help
	quantify the future economic damages as a result of carbon
	pollution that contributes to climate change and global
	warming. This metric didn't materialize out of thin and dirty
	air. It took a federal judge to mandate its use during the Bush
	Administration based on a law passed when Ronald Reagan was
	President.
	In 2009, the Obama Administration convened an interagency
	effort to formalize a consistent value for it. This was not a
	political tool. This was an attempt to protect our environment.
	We'll hear today that this development process was
	transparent, it was open to public comment, it's been validated
	over the years, and, much like our climate, it's not static and
	it changes over time in response to updated inputs. And
	although its use has been challenged in the courts recently,
	the courts have upheld the methodology used to obtain this
	estimate as proper based on real science and appropriate
	economic models.
	As a Minnesota administrative law judge determined last
	April, the preponderance of evidence supports the fact that
	federal social cost of carbon is reasonable and the best
	available measure to determine the environmental cost of
	CO<INF>2</INF>. I'm pretty certain we won't hear any of that
	today from the majority members and their witnesses. Instead,
	we'll hear the same arguments made against climate regulations
	that we've heard before. And sadly, those anti-science
	arguments both ignore the abundant scientific evidence that
	shows that climate change exists, that fossil fuel production
	is its main contributor, and will also admonish virtually any
	responsible regulatory mechanism to help protect our nation's
	citizens from the environmental, economic, and public health
	harm that results from climate change's global impacts.
	These individuals will argue already that social cost of
	carbon is outdated, inaccurate, and not a proper regulatory
	mechanism for addressing climate change. We've heard these
	arguments before. In fact, in 1982 the tobacco company R.J.
	Reynolds produced internal talking points about the social cost
	of smoking when Congressman Henry Waxman was holding hearings
	regarding the harm to the public's health from cigarette
	smoking. At the time, Representative Waxman said the annual
	smoking-related cost in lost productivity was $25.8 billion and
	$13.6 billion in annual medical costs. R.J. Reynolds said,
	quote, that ``attempts to establish a dollar value of so-called
	cost of smoking are ill-founded and unreliable,'' end quote.
	More than one decade later, in 1994, the tobacco company
	Philip Morris was producing glossy brochures to combat the
	growing evidence revolving around the harm of cigarette
	smoking. One was titled, quote, ``Debunking the Social Cost of
	Smoking,'' and an internal memo from Philip Morris said simply,
	``Philip Morris does not believe that smoking has been shown to
	pose any social cost on society.''
	So we're going to hear similar arguments today on the
	social cost of carbon emissions from fossil fuels, their impact
	on climate change. These arguments resonate loudly with the new
	Trump Administration, but they contradict the economic analysis
	and scientific evidence that supports the use of social cost of
	carbon.
	In a much-publicized recent memo, Dr.--or Thomas Pyle, the
	head of Trump's Department of Energy transition team, stated,
	quote, ``If the social cost of carbon were subjected to the
	latest science, it would certainly be much lower than what the
	Obama Administration has been using,'' end quote. And he
	suggested ending the use of it in federal rulemaking. The memo
	went on to describe plans to withdraw from the Paris Climate
	Agreement, eliminate the Clean Power Plan, increase federal oil
	and natural gas leasing, lift the moratorium on coal leasing--
	in other words, more and more and more fossil fuels at greater
	cost to the environment.
	Mr. Chairman, climate change is real. Scientific evidence
	across the world, we think we are the only country in the world
	that doesn't--that has any internal disagreement about climate
	change. And as members of the Science Committee, we should be
	leading the fight to protect our nation against its impacts,
	and I hope my colleagues will be persuaded by the weight of
	evidence. The evidence becomes ever clearer with every passing
	day. And we will work together to promote policies that protect
	our future generations.
	Mr. Chair, I yield back.
	[The prepared statement of Mr. Beyer follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Thank you, Mr. Beyer.
	I now recognize the Chairman of the Full Committee, Mr.
	Smith, for his opening statement. Chairman Smith.
	Chairman Smith. Thank you, Chairman Biggs. And
	congratulations on becoming the Chairman of the Environment
	Subcommittee. I look forward to helping you restrain the EPA's
	out-of-control regulatory agenda.
	The EPA, along with other federal agencies, often bases
	their regulations on models and science not familiar to most
	Americans. Americans are led to believe that the EPA's
	regulations are based on the best science available.
	Unfortunately, this committee has discovered that that is not
	the case.
	The EPA's track record does not inspire trust. For example,
	the EPA routinely relies on nondisclosed scientific studies to
	justify its regulations, but how can Americans believe an
	agency that isn't being open and honest?
	Another little-known component of environmental regulations
	is the social cost of carbon. The EPA attempts to put a price
	on a ton of carbon emitted into the atmosphere. This term is in
	many of the EPA's regulations. However, like many of the
	Agency's determinations, it is often based on a one-sided
	political agenda.
	Many factors contribute to the value of the social cost of
	carbon. While multiple models are used to determine a value for
	carbon, the ones frequently used in regulations assume only a
	worst-case scenario for climate change impacts. Similar to
	climate models, which predict worst-case scenarios and are
	repeatedly proved wrong, the social cost of carbon used by
	federal agencies is also flawed.
	The federal government should not include faulty
	calculations to justify costly regulations. Examples would be
	the Clean Power Plan and standards used by the Department of
	Energy. Instead, it should eliminate the use of the social cost
	of carbon until a credible value can be calculated.
	Rushing to use unreliable calculations, such as the social
	cost of carbon, to justify a regulation is irresponsible and
	misleading. For instance, the EPA's Clean Power Plan would cost
	billions of dollars every year in return for a minimal benefit
	on the environment. In fact, the regulation would reduce global
	temperatures by only 0.03 degrees Celsius and limit sea level
	rise by only the width of three sheets of paper.
	One of the many components used to justify this rule is the
	social cost of carbon. This flawed value desperately attempts
	to justify the Agency's alarmist reasoning for support of the
	Clean Power Plan and other climate regulations. Agencies should
	rely on sound science, not flawed data. The fact that different
	models for the social cost of carbon exist and all have
	different values is a testament to how uncertain the science
	behind the value really is. For example, the social cost of
	carbon ranges from negative values to $37 per ton, which is the
	estimate used by government agencies under the Obama
	Administration. Before the EPA includes this value in
	rulemakings, the Agency should reassess how it is determined.
	Americans deserve credible science, not regulations based
	on data that is suspect and calculated to justify the EPA's
	climate agenda. Sound science and actual data should lead the
	way, not politically calculated social costs.
	Thank you, Mr. Chairman. I'll yield back.
	[The prepared statement of Chairman Smith follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Thank you, Chairman Smith.
	Let me introduce our witnesses. Our first witness today is
	Dr. Ted Gayer, Vice President and Director of Economic Studies
	and Joseph A. Pechman Senior Fellow at the Brookings Institute.
	Dr. Gayer received his bachelor's degree in mathematics and
	economics from Emory, and his master's degree and Ph.D. in
	economics from Duke University.
	Our next witness is Dr. Kevin Dayaratna, Senior
	Statistician and Research Programmer at the Heritage
	Foundation's Institute for Economic Freedom and Opportunities
	Center for Data Analysis. Dr. Dayaratna received his bachelor's
	degree in applied mathematics and mathematical physics from the
	University of California at Berkeley, his master's degrees in
	mathematical statistics and business management from the
	University of Maryland, and his Ph.D. in mathematical
	statistics from the University of Maryland.
	Our third witness today is Dr. Michael Greenstone, Milton
	Friedman Professor in Economics, the College, and the Harris
	School; Director of the Interdisciplinary Energy Policy
	Institute at the University of Chicago; and Director of the
	Energy and Environment Lab at University of Chicago Urban Labs.
	Dr. Greenstone received his bachelor's degree in economics at
	Swarthmore College and his Ph.D. in economics from Princeton.
	Our final witness today will be Dr. Patrick Michaels,
	Director of the Center for the Study of Science at the Cato
	Institute and contributing author to United Nations'
	Intergovernmental Panel on Climate Change, which was awarded
	the Nobel Peace Prize. Dr. Michaels received his bachelor's and
	master's degrees in biological sciences and plant ecology from
	the University of Chicago and his Ph.D. in ecological
	climatology from the University of Wisconsin at Madison.
	I now recognize Dr. Gayer for five minutes to present his
	testimony.

	TESTIMONY OF DR. TED GAYER, PHD,

	VICE PRESIDENT AND DIRECTOR OF ECONOMIC STUDIES

	AND JOSEPH A. PECHMAN SENIOR FELLOW

	AT BROOKINGS INSTITUTION

	Dr. Gayer. Chairs Biggs, LaHood, and Smith; and Ranking
	Members Bonamici and Beyer; and members of the subcommittees, I
	appreciate the opportunity to appear here today to discuss the
	social cost of carbon.
	The social cost of carbon is a dollar estimate of the
	damages caused by a 1-ton increase in greenhouse gas emissions
	in a given year. It is a conceptually valid and important
	consideration when devising policies and treaties to address
	climate change, yet estimating the value of the social cost of
	carbon is an enormously complex and uncertain exercise.
	In 2009, the Obama Administration established an
	Interagency Working Group to develop a range of estimates for
	the social cost of carbon subsequently used by agencies to
	evaluate federal regulations. My focus is on the specific
	question of whether the social cost of carbon should account
	for the global or the domestic harm of a ton of greenhouse gas.
	In a world in which the United States and all the other
	major emitters of greenhouse gases adopted a coordinated set of
	policies to address climate change, then a global measure would
	be appropriate since greenhouse gases contribute to damages
	around the world no matter where they occur.
	But we don't live in such a world. Instead, in the United
	States we have opted for a suite of regulatory policies ranging
	from subsidizing lower carbon energy sources; mandating energy
	efficiency levels in buildings, vehicles, and household
	appliances; requiring transportation fuels to contain minimum
	volumes of different renewable fuels, and restricting emissions
	from electric utilities.
	Given the diversity of regulations directed at climate
	change, it is useful and important for the agencies to
	coordinate on a single measure of climate benefits. But the
	question is whether they should report and consider the
	benefits to U.S. citizens or to the world. The Interagency
	Working Group opted for a global measure.
	I believe the exclusive focus on a global measure runs
	counter to standard benefit cost practice in which only the
	benefits within the political jurisdiction bearing the cost of
	the policy are considers. It also seems at odds with the
	express intent of longstanding Executive orders and of
	authorizing statutes. For example, the main regulatory guidance
	document that has been in place for 20 years is Executive Order
	12866, which makes clear that the appropriate reference point
	for analyzing federal regulatory policy--policies is the U.S.
	citizenry, not the world.
	Similarly, when enacting the Clean Air Act, Congress stated
	that its purpose was to, quote, ``protect and enhance the
	quality of the nation's air resources so as to promote the
	public health and welfare and productive capacity of its
	population,'' end quote, which again suggests a focus on
	domestic benefits.
	The global measure is 4 to 14 times greater than the
	estimated domestic measure, which is significant. For example,
	for its proposed regulations for existing power plants, the EPA
	estimated climate benefits amounting to $30 billion in 2030.
	However, the estimated domestic climate benefits would have
	only amounted to $2 to $7 billion, which is less than EPA's
	estimated compliance cost for the rule.
	I believe that adopting a global measure for the benefits
	of a domestic policy would be justified if U.S. actions led to
	complete reciprocity from other countries. The question is
	whether efforts by the United States to regulate greenhouse
	gases might spur reciprocity by other countries to do so as
	well, generating domestic benefits that are 4 to 14 times as
	great as the direct domestic benefits to the U.S.-only policy.
	This is doubtful since the agency regulations taken under
	existing U.S. laws such as the Clean Air Act are not tantamount
	to treaty commitments that can establish a formal basis for
	other countries matching the efforts undertaken domestically.
	By using the global social cost of carbon, the agencies are
	claiming that their rules provide benefits that in fact largely
	accrue to foreign citizens. Of course, many Americans are
	altruistic and care about the welfare of people beyond our
	borders, but foreign aid decisions should be made openly and
	not hidden in an obscure metric used in domestic rulemaking.
	A global measure of the social cost of carbon is
	appropriate if the intent is to use it to support the
	development of a global system of reducing greenhouse gases,
	such as through a worldwide carbon tax. I favor a carbon tax
	for the United States that replaces regulations and relies on
	border tax adjustments to incentivize other major emitters to
	follow suit. But absent such an approach, for domestic agencies
	considering domestic regulations in which the costs are
	incurred domestically, a global measure deviates from standard
	practice and requires more scrutiny and justification than it
	has received to date. At the very least, agencies should report
	the expected domestic benefits and only separately and
	transparently report the expected foreign benefits of their
	actions informed by concrete evidence of reciprocity expected
	from other countries.
	Thank you.
	[The prepared statement of Dr. Gayer follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Thank you, Dr. Gayer.
	I now recognize Dr. Dayaratna for five minutes to present
	his testimony.

	TESTIMONY OF DR. KEVIN DAYARATNA, PHD,

	SENIOR STATISTICIAN AND RESEARCH PROGRAMMER,

	CENTER FOR DATA ANALYSIS,

	INSTITUTE FOR ECONOMIC FREEDOM

	AND OPPORTUNITY AT THE HERITAGE FOUNDATION

	Dr. Dayaratna. Chairman Biggs, Ranking Member Bonamici, and
	other Members of the Subcommittees, thank you for the
	opportunity to testify about the social cost of carbon.
	My name is Kevin Dayaratna. I'm the Senior Statistician and
	Research Programmer at the Heritage Foundation. The views I
	express in this testimony are my own and should not be
	construed as representing any official position of the Heritage
	Foundation.
	One of the primary metrics that the previous Administration
	had used to justify agenda regarding energy policy--justify
	regulatory--its regulatory agenda regarding energy policy is
	the social cost of carbon, which is defined as the economic
	damages associated with a metric ton of carbon dioxide
	emissions summed across a particular time horizon.
	There are three primary statistical models that the Obama
	Administration's Interagency Working Group had used to estimate
	the SCC, the DC. model, the FUND model, and the PAGE model. My
	colleagues and I have used the DC. and FUND models, testing
	their sensitivity to a variety of important assumptions. Our
	work, published both at Heritage, as well as in the peer-
	reviewed literature, as repeatedly illustrated that while these
	models might be interesting for academic exercises, they can be
	readily manipulated by regulators and bureaucrats.
	In particular, as with any statistical model, they are
	dependent on various assumptions. I'd like to discuss three
	assumptions regularly manipulated to achieve predetermined
	outcomes: the choice of a discount rate, a time horizon, and
	the specification of an equilibrium climate sensitivity
	distribution.
	The first easily manipulated assumption is the discount
	rate. In this type of cost-benefit analysis, the discount rate
	should reflect the rate of return on generally achievable
	alternative investments. The IWG had run these models using
	2.5, 3, and five percent discount rates despite the fact that
	OMB guidance in circular A-4 had specifically stipulated that a
	seven percent discount rate be used as well.
	At Heritage, we re-estimated these models using a seven
	percent discount rate and noticed drastic reductions to the
	SCC. In 2020, for example, according to our recent analysis of
	the DC. model published in the peer-reviewed journal Climate
	Change Economics, under a three percent discount rate, the SCC
	is estimated to cost $37.79 per ton, while under a seven
	percent discount rate, it is estimated to be $5.87, an 84
	percent reduction. The higher estimates previously found by the
	IWG can enable policymakers to justify unnecessary regulations
	and taxes on the economy.
	The second easily manipulated assumption is the
	specification of a time horizon. It is close to impossible to
	forecast what the economy will look like decades into the
	future. Foolishly, these models attempt to make projections not
	decades but rather three centuries into the future. In my work
	at Heritage, I have changed the time horizon to a significantly
	shorter but still unrealistic time horizon of 150 years into
	the future. With the DC. model, we find that these results
	plummet by 25 percent in some instances.
	The third readily manipulated variable is the model's
	equilibrium climate sensitivity, or ECS, distribution,
	quantifying the Earth's temperature response to a doubling of
	carbon dioxide concentration. My colleague Dr. Pat Michaels
	will go into this in more detail, but the IWG used an ECS
	distribution that was published ten years ago in the journal
	Science. Since then, a number of newer ECS distributions have
	been published suggesting lower probabilities of extreme global
	warming.
	Using the more up-to-date ECS distributions generate
	significantly lower estimates of the SCC. In our peer-reviewed
	work, we found that, as a result of updating the ECS
	distributions, the results drop by as much as 197 percent under
	some circumstances. Inflated estimates of climate sensitivity
	drive up the SCC, which can become manifested in unnecessary
	regulations.
	Finally, the unexplored issue here is are there any
	benefits associated with carbon dioxide emissions? The answer
	is surprisingly yes. The FUND model actually allows for
	negative SCC, meaning a positive outcome. In fact, under some
	assumptions, there are actual substantial probabilities of
	negative SCC, meaning increased CO<INF>2</INF> fertilization,
	leading to increased agriculture and forestry yields.
	Moreover, if one were to take the IWG's interpretation of
	these models seriously and implement the associated
	regulations, there would be significant damage to the economy.
	In particular, our analysis finds that by 2035 the country
	would experience an average employment shortfall of 400,000
	lost jobs, a marked increase in electricity prices, and an
	aggregate $2.5 trillion loss in GDP.
	Our analysis using the model for the assessment of
	greenhouse gas-induced climate change has found that these
	devastating impacts would be accompanied by insignificant
	changes and less than 2/10 of a degree Celsius in temperature
	mitigation and less than 2 centimeters of sea level rise
	reduction.
	In conclusion, the SCC is a broken tool for regulatory
	policy and taking it seriously would provide significant harm
	and little environmental benefit.
	Thank you for your attention, and I look forward to your
	questions.
	[The prepared statement of Mr. Dayaratna follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



	Chairman Biggs. Thank you, Dr. Dayaratna.
	I now recognize Dr. Greenstone for five minutes to present
	his testimony.

	TESTIMONY OF DR. MICHAEL GREENSTONE, PHD,

	MILTON FRIEDMAN PROFESSOR IN ECONOMICS,

	THE COLLEGE, AND THE HARRIS SCHOOL;

	DIRECTOR OF THE INTERDISCIPLINARY

	ENERGY POLICY INSTITUTE AT THE UNIVERSITY OF CHICAGO

	AND THE ENERGY & ENVIRONMENT LAB

	AT THE UNIVERSITY OF CHICAGO URBAN LABS

	Dr. Greenstone. Thank you, Chairmen Biggs and LaHood,
	Ranking Members Bonamici and Beyer, and Members of the
	Subcommittees, for inviting me to speak today.
	My name is Michael Greenstone, and I'm the Milton Friedman
	Professor in Economics and Director of the Energy Policy
	Institute at the University of Chicago.
	The social cost of carbon is a monetized value of the
	damages from the release of an additional ton of
	CO<INF>2</INF>. This means that it can be used to determine the
	benefits of regulations that reduce CO<INF>2</INF> emissions.
	Indeed, these benefits can then be compared to the costs that
	regulations impose to determine whether the regulation is
	beneficial or not.
	In 2009, while working in the Obama Administration, Cass
	Sunstein and I convened and co-led an Interagency Working Group
	to determine a government-wide value for the social cost of
	carbon. Ultimately, the Interagency Working Group determined a
	central estimate of $21 per metric ton. That estimate has since
	been revised to reflect scientific advances and is now about
	$36.
	The approach has been judged valid. Last August, the
	Federal Court of Appeals rejected a legal challenge to the
	metric. Further, the General Accounting Office has said that
	the working group's processes and methods reflected key
	principles that ensured its credibility: It used consensus-
	based decision-making, relied largely on existing academic
	literature and models; and disclosed limitations and
	incorporated new information by considering public comments and
	revising the estimates as updated research became available.
	Indeed, the social cost of carbon's credibility is
	underscored by the fact that it has been adopted by the
	governments of California, Illinois, Minnesota, Maine, New
	York, and Washington State, not to mention Canada and Mexico.
	Before concluding my testimony today, I would like to
	address two frequent critiques of the social cost of carbon.
	One such critique is that the real discount rates used--2.5, 3,
	and 5 percent--are too low. Why is a discount rate so
	important? If we choose a discount rate that is too low, then
	we're going to pay too much for mitigation efforts today. If
	instead we choose one that's too high, then we will impose
	higher climate damages on our children and grandchildren than
	we intend.
	Economic theory tells us that we'll be best off if the
	discount rate is equal to the market interest rate from
	investments that match the structure of payoffs that climate
	mitigation provides. If we thought climate damages were likely
	to be imposed consistently and predictably over time, then it
	would be appropriate to set a discount rate equal to something
	like the average return for the stock market. That's about 5.3
	percent over the last 50 years.
	But, on the other hand, if we think climate damages could
	be unpredictable and that tail risk points towards major
	losses, then markets, markets themselves, tell us to use a
	lower discount rate. Consider the case of gold. Its average
	return is only about three percent, yet people hold it as an
	investment. Why is that? The reason is that it pays off
	dramatically during infrequent episodes of economic distress.
	For example, during the Great Recession, gold outperformed the
	stock market by 67 percent.
	When one considers the possibility of large temperature
	changes for given increases in emissions, great sea level rise
	in relatively short periods of time, the possibility of
	physical tipping points or human responses to these changes
	that include mass migration, then the case for using a low
	discount rate to determine the social cost of carbon appears
	strong.
	In addition to this conceptual reason to prefer low
	discount rates, the decline in global interest rates, so
	another market-based reason, since the mid-1980s provides
	another reason. The three percent real discount rate that has
	been a cornerstone of regulatory analysis since 2003 draws its
	justification from the fact that it was roughly equal to the
	real rate of return on long-term government debt at that time.
	However, the world has changed. Rates are now much lower
	and indeed the comparable rate is now probably below two
	percent. Put another way, capital markets are trying to tell us
	to use discount rates that are lower than those currently being
	used to determine the social cost of carbon.
	A second criticism of the social cost of carbon is that it
	reflects global costs from emissions, but the United States
	should only be concerned with domestic damages. However, this
	criticism misses an important point that the goal of policy is
	to maximize net benefits to Americans and that recognizing
	foreign damages is likely to increase net benefits.
	Why is this the case? It's because each ton of CO<INF>2</INF>
	emitted outside the United States inflicts damages on us. Thus,
	we benefit when China, India, the European Union, and others
	reduce their emissions. It absolutely strains credibility to
	assume that these countries' emissions cuts would be as large
	as if we reverted to a social cost of carbon based only on
	domestic damages.
	In many respects, the Paris Climate Agreement, where nearly
	200 countries agreed to take action on carbon emissions, is a
	validation of the importance of treating climate change is a
	global problem.
	To summarize, society needs to balance the cost to our
	economy of mitigating climate change with the coming climate
	damages. Wishing that we did not face this tradeoff will not
	make it go away. Ultimately, we will be better off if a social
	cost of carbon based on sound science, economics, and law,
	continues to serve as a lynchpin of regulatory policy. Thank
	you.
	[The prepared statement of Mr. Greenstone follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


	Chairman Biggs. Thank you, Dr. Greenstone.
	I'll now recognize Dr. Michaels for five minutes to present
	his testimony.

	TESTIMONY OF DR. PATRICK MICHAELS, PHD, DIRECTOR,

	CENTER FOR THE STUDY OF SCIENCE, CATO INSTITUTE;

	CONTRIBUTING AUTHOR TO UNITED NATIONS

	INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE

	(NOBEL PEACE PRIZE 2007)



	Dr. Michaels. May we have the first image? Thank you.
	[Slide.]
	Dr. Michaels. Mr. Chairman, Ranking Members, Members of the
	Subcommittees, thank you for inviting my testimony on
	scientific problems relating to the current calculation of the
	social cost of carbon or SCC. I am Patrick J. Michaels,
	Director of the Center for the Study of Science at the Cato
	Institute. Prior to that, I was a Research Professor of
	Environmental Sciences at University of Virginia for 30 years.
	A year-and-a-half ago I testified to the Committee on
	Natural Resources that the Obama Administration's calculations
	of the SCC were in contravention of a large and growing body of
	scientific literature--next image----
	[Slide.]
	--demonstrating that the sensitivity of temperature to
	human emission of carbon dioxide is not nearly as large as was
	previously thought. And more important, the chance of a high-
	end warming has greatly diminished. Since then, the evidence
	has grown stronger.
	Climate sensitivity is the amount of net warming one gets
	for doubling atmospheric carbon dioxide. It also roughly
	approximates the forecast for surface warming for the 21st
	century. The Obama Administration used a sensitivity
	specification by Roe and Baker, which is the top line there,
	that had a mean sensitivity of 3.0 degrees C and a 5 to 95
	percent confidence limit of 1.7 to 7.14 degrees C, a very large
	number.
	Beginning in 2011, all this work down here, a growing body
	of the scientific literature has yielded 32 new estimates of
	the sensitivity generated by more than 50 researchers from
	around the world with a mean sensitivity of 2 degrees C and a 5
	to 95 percent confidence limit of 1.1 to 3.5 degrees C.
	The large distributions of warming--next image--
	[Slide.]
	--used in Roe and Baker resulted in large part because of
	extremely wide range of estimates of the cooling effects of
	sulfate aerosols, another human emission. These were
	dramatically narrowed by researchers Nick Lewis and Judith
	Curry of Georgia Tech, which greatly reduced the sensitivity,
	as you can see here, and the spread around that sensitivity.
	As my colleague Kevin Dayaratna has shown, the newer more
	reality-based estimates result in a dramatic lowering of the
	SCC. Next image.
	[Slide.]
	Let's now have a look at how well those climate models that
	were used to calculate the previous Administration's SCC are
	doing. This illustration is a further update of an analysis
	initially presented in the testimony of John Christy in 2015
	with data that ended in 2014. The uptick in observed warming at
	the end of the record is an apparent improvement between the
	models and reality. But it is not. Instead, it is the 2015/2016
	El Nino.
	Next image.
	[Slide.]
	And that spread is likely to widen again in recent years,
	as you can see from surface temperatures here that they have
	dropped back down very close to their previous El Nino value.
	[Slide.]
	Next is a chart of predicted trends and tropical
	temperatures measured vertically. This is where the largest
	integrated warming on Earth is forecast to occur. The green
	line on the left is reality, which is--generally shows two to
	three times less warming than has been predicted. At the top of
	the active weather zone around here, the forecast is
	approximately seven times less than--or seven times more than
	is what is being observed. To deny this reality is to deny
	science.
	It is the vertical temperature distribution that largely
	determines daily weather. If this is forecast incorrectly, then
	any subsidiary forecast of surface weather regimes are of
	little to no value. To deny that is to deny science.
	There is another systematic error on the previous
	calculations of the SCC. We live on a planet that is becoming
	greener because of the direct--next image----
	[Slide.]
	--physiological effects of increasing carbon dioxide on
	plant photosynthesis. A massive survey of the scientific
	literature by Dr. Craig Idso shows this caused a $3.2 trillion
	increment in agricultural output from 1961 through 2011. My
	colleague Mr. Dayaratna has shown that a more realistic
	sensitivity in carbon dioxide fertilization can result in a
	negative SCC or a net external benefit from the production of
	carbon dioxide.
	In closing, I provide you this image of the greening of our
	luke-warming home planet, as taken by NASA satellites. Where
	there are dots, the changes are statistically significant. Note
	that the greatest increases, the ones in pink, are in the
	margins of the world's deserts and the tropical rainforest,
	places we all feared for. To acknowledge this is to affirm
	reality.
	Thank you very much for inviting my testimony.
	[The prepared statement of Mr. Michaels follows:]

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

	Chairman Biggs. Thank you. I thank each of the witnesses
	for their testimony today. The Chair recognizes himself for
	five minutes.
	Dr. Gayer, because the Interagency Working Group ignored
	Office of Management and Budget guidelines and used a global
	perspective in determining the SCC, agencies issue regulations
	with substantial domestic cost based on benefits to non-
	Americans. In what way does this global perspective method of
	calculating the SCC potentially mislead the public?
	Dr. Gayer. So I'll answer in two parts. First, the--it's--
	the models that are discussed here today are global models, so
	it's inordinately difficult for them to come up with domestic
	estimates, but the interagency review--interagency process did
	kind of benchmark it to 4 to 14 times differential. So the
	domestic benefits are 1/4 to 1/14 what the global benefits are
	based on the models that they used.
	And just to clarify, based on comment earlier, I think the
	approach should be taken, if it is going to use a global
	measure, it is not a zero-one, right? You could use a domestic
	measure, you can use a full global measure. Michael referred to
	straining credibility to assume that there's no global
	benefits. I think it strains credibility to suggest that
	there's going to be full global benefits, meaning if we act,
	the rest of the world will act instantaneously as well.
	So to the extent that that doesn't happen and we're using a
	domestic measure, we're overestimating the benefits. And the
	example I gave with the Clean Power Plan on the climate benefit
	side, it's enough to tip the scales that the costs outweigh the
	benefits.
	Chairman Biggs. And, Dr. Gayer, just to follow up, do
	agencies have a duty to inform the American public of the
	domestic benefits in a cost-benefit analysis for federal
	regulations?
	Dr. Gayer. Yes. And those are the OMB guidelines. As I
	suggested at the end, I think I'd be less kind of worked up
	over it if they did both, but they should lead with the
	domestic measure.
	Chairman Biggs. Dr. Dayaratna, what are your biggest
	concerns about using the SCC in policymaking?
	Dr. Dayaratna. Thank you for the question, Congressman.
	So there are a variety of issues with these SCCs, with
	these IAMs associated with these SCCs. The most fundamental
	issue is that they are extremely sensitive to very, very
	reasonable changes in assumptions. As I was referring to, the
	time--using the time horizon to 300 years, if you shift that to
	150 years, which is still unrealistic, you get a drastically
	different estimate of the SCC.
	The discount rate, if you use a seven percent discount
	rate, as mandated by the OMB, under the FUND model you will get
	a negative social cost of carbon. And the policy implication
	there would be that we shouldn't be taxing carbon dioxide
	emissions but subsidizing it.
	Then lastly, with the equilibrium climate sensitivity
	distributions, there--the ECS distribution used has--was
	published ten years ago, and it's not even based on empirical
	research. More up-to-date ECS distributions also will result in
	a substantially lower and even potentially negative SCC
	depending on the model that you use.
	So with these results all over the map, I do not understand
	how policymakers can garner any meaningful advice for
	regulatory policy.
	Chairman Biggs. So just for the laymen who are here, what
	does the negative value of the SCC kind of connote? I mean,
	what are we really saying there when we say negative value?
	Dr. Dayaratna. Basically, in a nutshell, in general when
	people think of SCC they talk about economic damages associated
	with carbon dioxide emissions. When those damages are negative,
	that implies that the SCC actually provides benefits. And the
	result of that is, you know, mostly increased photosynthesis,
	agriculture, and so forth. But that would suggest that
	increased CO<INF>2</INF> is actually good for the planet.
	Chairman Biggs. Thank you. Dr. Michaels, in 2015 the
	Interagency Working Group released a report to the public
	comments on the determination of the social cost of carbon. You
	were one of the commenters. What is the significance of having
	a comment period in the process of developing an SCC? And did
	the interagency group adopt any of these comments?
	Dr. Michaels. No, they did not, and many of the comments
	were well-reasoned based upon recent peer-reviewed literature
	reinforcing the notion that the sensitivity of temperature that
	was used in the models was too high. Nature is trying to tell
	us something. If you look at that satellite image that I showed
	earlier, you can see that the observed warming in the lower
	atmosphere is about half of what was predicted. If you look in
	the tropics, you can see that the observed warming in the
	vertical in the tropics is about half, actually maybe even a
	little bit less than what was predicted. All these things point
	to a consistent story. About twice as much warming was
	predicted as is going to occur.
	Now, the U.N.'s mean sensitivity is 3.2 degrees Celsius.
	Why don't we settle this out at 1.6, and everybody can go home
	because we're going to meet the 2 degree guideline with
	business as usual, declare victory, and let's go on.
	Chairman Biggs. So when the report refused to adopt any of
	the comments, what does that say to the validity of the report
	and its objectivity?
	Dr. Michaels. I would say that they were wedded to a point
	of view, and I understand. I live in Washington. I understand
	the pressures in this town. If anyone gave an official answer
	that this was not a problem, I hate to say we probably wouldn't
	be chatting here so amiably because nobody would care.
	Chairman Biggs. Thank you, Dr. Michaels.
	I recognize Ranking Member Bonamici for questions.
	Ms. Bonamici. Thank you, Mr. Chairman.
	Dr. Greenstone, it's been suggested that the Interagency
	Working Group operated under some sort of veil of secrecy while
	developing the social cost of carbon. The GAO, in a 2014
	report, found that many of the social cost of carbon estimates
	were developed with input from the public. Now, you and Cass
	Sunstein convened and led this Interagency Working Group. So
	did the Interagency Working Group hear concerns that were
	raised by the other witnesses today, and how were those
	considered in the process? And can you also talk about the role
	that public comment played in the development of the social
	cost of carbon?
	Dr. Greenstone. Yes. Thank you, Congresswoman, for letting
	me talk about that. So it's probably worth going back in time a
	little bit. The process--the social cost of carbon was
	developed in a very methodical way. The--we convened and led
	this group that met many times and it drew expertise from
	agencies across the Administration. We then first put out--the
	first put-out was an interim number that was put out for public
	comment. Then, the final number of $21 was released in 2010.
	That has been attached to, I think, approximately 80 different
	rules. Public comment was received on that through that
	process. And then the Administration later I think in 2013 just
	put it out for public comment by itself.
	So there was tremendous effort to engage the public. There
	was tremendous effort to draw expertise from all corners of
	government, and it was a highly technical exercise that led to
	what we perceive to be and I believe to be describing the
	frontier of science.
	Now, it is possible that some of my fellow witnesses feel
	spurned, and I think that's why we often use peer-reviewed
	literatures to determine what's true and what's not true. And I
	think just because their ideas were not judged to be on the
	frontier does not mean that the whole process was flawed.
	Ms. Bonamici. Thank you. And, Dr. Greenstone, just because
	a comment is made and received but not included does not mean
	it was not considered, correct?
	Dr. Greenstone. Indeed.
	Ms. Bonamici. So, Dr. Greenstone, Dr. Dayaratna said that
	if the social cost of carbon was implemented, the country would
	suffer--I believe it was--he said disastrous economic
	consequences, including a loss of jobs and income and an
	increase in electricity prices. I'd like you to address what
	would happen if indeed the Trump Administration has been
	promoting energy policies without regard to what the policies
	may do to the environment. So will you explain what would
	happen if we were to roll back regulations designed to reduce
	greenhouse gas emissions, if there's an economic price to pay
	for undermining the science supporting the social cost of
	carbon and environmental regulations? And also, how would other
	countries like China or India respond if the United States
	retreats from or even appears to be retreating from its
	obligations to address greenhouse gas emissions?
	Dr. Greenstone. Yes. So I think Dr. Dayaratna is making a
	very important point, which is that regulations have costs, so
	we should all agree on that and we should--we can move on.
	On the flipside of that is that regulations to reduce
	carbon emissions have benefits, and there's--it's a tradeoff,
	like many things in economics. There's no free lunch. And, you
	know, if we were to roll back regulations on climate emissions
	or carbon emissions, what we would--the world would face and
	certainly the United States would face higher temperatures; it
	would face sea level rise. It would face a variety of risks
	that would impose costs on us, our children, and our
	grandchildren.
	And let me just also return--you also asked, Congresswoman,
	about how it would be perceived globally if we reverted to a
	domestic social cost of carbon, and I think that's an important
	question because it's not--what--a narrative here about using
	the domestic damages only I think misses that this is an
	international problem. And in particular when--as I said in my
	testimony, when China or India or the EU reduces emissions, it
	gives great benefits to the citizens of the United States. And
	to not account for that leverage puts us at risk of higher
	costs.
	And so I think the case for reverting to a domestic-only
	damage is essentially asking the rest of the world to ramp up
	their measures.
	Ms. Bonamici. And finally, I know the recent National
	Academy of Sciences report ``Valuing Climate Damages: Updating
	Estimation of the Social Cost of Carbon'' provides some
	recommendations to the Interagency Working Group on how to
	improve the methodology. Do the recommendations for an updated
	estimation undermine the current working group values of the
	social cost of carbon or would using the Academy's
	recommendation methodology invalidate existing regulations----
	Dr. Greenstone. No, the----
	Ms. Bonamici. --that use the----
	Dr. Greenstone. Thank you for that question. I think rather
	than have people cherry-pick particular features, which seems
	to be what's happening today, that they dislike or that they
	know can change the social cost of carbon, a methodical and
	scientific approach would be to follow the National Academy of
	Sciences' recommendations. And indeed, in the Interagency
	Working Group, we suggested that, as science advanced, the
	numbers should be updated periodically. And the National
	Academy of Sciences' report gives a terrific blueprint that
	would allow for updating.
	And, you know, it is true things have advanced since 2009
	and 2010. Our understanding about the impacts of climate
	change, for instance, on human mortality have greatly advanced.
	And I expected a--following NAS's blueprint would allow for a
	refresh.
	Ms. Bonamici. Thank you. My time is expired. I yield back.
	Thank you, Mr. Chairman.
	Chairman Biggs. Thank you.
	Dr. Michaels, you wish to respond?
	Dr. Michaels. Yes, I think it's time to actually take a
	good, clear look at the effect of policies with regard to the
	Paris agreement. The EPA uses a model called the Model for the
	Assessment of Greenhouse Gas-Induced Climate Change. And if
	you're following, the acronym for that model is MAGIC. It is
	the standard tool that is used. And you can put in emissions
	scenarios, climate sensitivity, and come out with a temperature
	saving as a result of any given policy.
	So let's assume a sensitivity that is probably too high, 3
	degrees Celsius, and let's reduce United States' emissions to
	zero right now through the year 2100. The amount of warming
	that would be prevented would be between 1/10 and 2/10 of a
	degree Celsius.
	Now, let's talk about China and India candidly rather than
	merely using adjectives and adverbs. The Chinese emission
	commitments at the Paris agreement are nothing but business as
	usual. It has long been recognized as their economy matures
	that their emissions will stabilize around 2030, and that is
	precisely what they said they would do.
	The Indian commitment is less than nothing. As economies
	mature, the amount of CO<INF>2</INF> you emit per unit GDP
	declines. It's called an increase--or a decrease in emissions
	intensity. They vowed in Paris to decrease their emissions
	intensity less, underline less, than the business-as-usual
	scenario for the country of India.
	So really what we do doesn't mean anything to these other
	countries because they're not doing anything. Thank you.
	Chairman Biggs. I recognize the Chairman of the Oversight
	Committee, LaHood, for his five minutes of questions.
	Mr. LaHood. Thank you, Mr. Chairman. I want to thank all
	the witnesses for being here today and your valuable testimony.
	Dr. Gayer, I wanted to ask you, you know, as we try to
	better understand what Congress and the Trump Administration
	can do to make agency rulemaking based on more accurate cost-
	and-benefit information, I do have concerns--I'm not sure
	whether you're familiar--last year, the Seventh Circuit Court
	of Appeals, the federal jurisdiction, ruled in a unanimous
	decision basically against the petitioners, which was an
	organization by the name of Zero Zone, which is an air-
	conditioning/heating unit that sued the Department of Energy
	based on the rulemaking process. And that unanimous decision,
	their conclusion--and I'm summarizing here--but the DOE
	conducted a cost-benefit analysis that is within the statutory
	authority and is supported by substantial evidence. Its
	methodology and conclusions were not arbitrary or capricious.
	And I guess do you have concerns that the court did not
	criticize this process in this court case?
	Dr. Gayer. Thank you for the question.
	I feel like I'm in a funny position in many ways. If you
	lock me and Michael Greenstone in a room, I'm not sure that
	we'd come up with a very different policy outcome. But I think
	the process of getting there matters, and I think the
	regulatory process that was used did involve a lot of
	assumptions and complexities that I would say lean into
	arbitrary considerations.
	That's not to say I think that the social cost of carbon,
	this true number out there is negative; I don't. And as I
	alluded to in my testimony, I do think we should act. I just
	don't think we should act through kind of the mechanisms of
	existing statutes through regulations that take a very
	piecemeal approach and to my mind sort of put a veneer of
	scientific legitimacy on something that I think is highly,
	highly uncertain. So that's a longwinded way of me getting at
	your question, so I apologize.
	Yes, I'm concerned when the courts disagree with me to some
	degree. I don't know what--you know, in the kind of motivation
	of your question, we are existing in a world where all the
	action on climate is happening under existing statutes and
	therefore do--and going through the agencies. And so to the
	extent that there's too much focus on global, not domestic, I
	do think it's addressable from Office of Information and
	Regulatory Affairs and guidance given to the agencies about how
	they should conduct this.
	And I don't want to speak for other people on the panel,
	but I think there is, you know, a lot of discretion in the
	choices that were made in how we come up with these numbers. I
	don't think it was kind of rigged or deception or manipulated.
	I just think that people disagree. And I think with the new
	Administration and new OMB and OIRA Director, they can come to
	a different determination of how much to weigh global versus
	domestic, as well as issues like discount rates and others,
	which is a highly difficult, complex, in many ways ethical
	question.
	Mr. LaHood. Well, thank you for that.
	And just as a follow-up, I think in your opening testimony
	you went through kind of, you described it as a suite of
	regulatory policies that we put in place domestically that, you
	know, have worked fairly well with reducing some of those
	environmental concerns that people talked about.
	In terms of a public policy position here in Congress on
	what we should do, beyond what you said with working in the
	Administration, any recommendations for us here in terms of
	legislation and what we should look at to address this problem?
	Dr. Gayer. Well, I think I--you know, I have an
	iconoclastic view perhaps on this. I first approached this
	problem because I thought a lot of these regulations--not
	because I didn't think climate change was a problem but I
	thought these regulations were much too costly way to go about
	doing it. And in the analysis that they were using to justify
	it, I thought they were in some sense making decisions I
	disagreed with to make them look better than they are.
	I testified actually at the House a few years ago. A lot of
	these regulations are justified not on environmental grounds
	but because they purport to save consumers money because the
	underlying thesis there is that consumers are kind of
	irrational in their consumption decisions, so therefore, you
	know, the regulator has to come and make the decision for them,
	which is to my mind kind of a dangerous assumption and
	shouldn't be used to justify rules.
	I have the kind of minority opinion on what should be done,
	but I think it should go through Congress. I, as I said before,
	favor kind of a trade for a carbon tax on one side that's
	revenue-neutral, meaning affording a tax cut and also lighter
	regulations so that we're not going to the regulatory approach,
	as we currently have been.
	Mr. LaHood. Thank you. Those are all my questions.
	Chairman Biggs. Thank you.
	I recognize Mr. Beyer for five minutes.
	Mr. Beyer. Yes, Thank you, Mr. Chairman, very much.
	Thank you all very much for being here. It's fun to have
	three economists and mathematicians, which we don't often get
	and a bona fide Ph.D. climatologist. And I want to thank all of
	you for recognizing that climate change is in fact real. You
	may have different notions of is it as fast as it was, but this
	is a great leap forward for the Committee and for America.
	And I'm particularly pleased that Dr. Greenstone is the
	Milton Friedman Professor of Economics, which should make all
	of my Republican friends very comfortable and happy. And I
	thank Dr. Gayer for the quote that says that ``The social cost
	of carbon is a conceptually valid and important consideration
	when devising policies and treaties to address climate
	change.''
	Dr. Greenstone, the two things that have come up again and
	again--in fact, our Chairman's opening statement was, number
	one, this whole notion of the appropriate discount rate. And
	you said--you quoted the appropriate discount rate comes down
	to a judgment about whether climate change involves a
	substantial risk of being disruptive. Now, the OMB has a
	circular that says we should use seven percent. Why the
	decision to ignore the seven percent. Can you tell us simply
	again why we would choose a number like three percent rather
	than a 7?
	Dr. Greenstone. Yes, thank you for your question, Mr.
	Congressman.
	So the discount rate is, as Dr. Gayer mentioned, it's a
	very tough issue. With respect to climate change or with
	respect to any public investment, what one would like to do is
	to use a discount rate where--that reflects an interest rate
	from the market where the payoffs from that investment are
	similar to the payoffs from climate mitigation.
	And if you think--when you start to think about what
	climate change might offer, and a lot of it is unknown--as you
	put it, it could be very disruptive--that would tend to push
	people to lower discount rates and lower interest rates. And as
	I said in my testimony, the example of gold is really a good
	one in the sense that people are willing to hold gold. It has a
	very low mean rate of return of about three percent, but the
	reason they're willing to hold it is because it pays off when
	times are bad. And so if we end up with a bad state of the
	world with respect to climate, I think that would push us to
	having--wish we'd used the low discount rate.
	It's also worth noting that we're having a somewhat
	artificial discussion about the 3 and seven percent. Those were
	set in 2003 when global capital markets looked extraordinarily
	different than they do today. If we were to instead use what
	global capital markets are trying to tell us now, the three
	percent number would very likely be below two percent. That is
	that's the return on a long--on a long-term government bond.
	That is a real return. The real return is probably less than
	two percent to be honest. And there--the seven percent number
	would also be much lower as well.
	So, ultimately, we chose to go with 3 and five percent to
	reflect the character of the climate problem.
	Mr. Beyer. Okay. Great. Thanks.
	The second half of that is that there are apparently--
	according to the majority memo--longstanding OMB guidance to
	only consider the domestic cost-benefits. And Dr. Gayer I think
	went on pretty eloquently about, you know, we're considering
	what's happening around the world, but they're not necessarily
	affecting their policies. How would you justify the notion of
	using a global measure of the impacts?
	Dr. Greenstone. Yes. So actually--so let's establish that
	I'm not a lawyer, and how nice it was to hear that there was--
	people were interested in having economists in the room. So
	that was a surprise. But my understanding of OMB circular A-4,
	which is what we're talking about, is that it leaves open the
	option to look at global effects, and that was the path that we
	drove on. Now, I'm not the legal expert.
	The second thing that I want to come back to, and I thought
	it was very interesting. I saw some light or--between mine and
	Dr. Gayer's testimony there, which is that I think to do an
	analysis where--of the benefits of carbon regulations that
	ignore the leverage from emissions reductions inside the United
	States, and that leverage comes in the form of emissions
	reductions in other countries I think is an extraordinarily
	incomplete analysis. And using the global number is one way and
	I think a valid way to reflect that leverage.
	Mr. Beyer. Thank you. Thank you very much.
	Dr. Michaels, congratulations on your Nobel Prize.
	Dr. Michaels. I didn't say that. That went to the group.
	Mr. Beyer. Okay. Well, still.
	Dr. Michaels. People there, certainly not to the worker
	bees.
	Mr. Beyer. You know, so it was the group that came up with
	the two percent target I think----
	Dr. Michaels. Two degree target.
	Mr. Beyer. Two degree target, two degree target.
	Dr. Michaels. That was----
	Mr. Beyer. Now you're thinking that we're going to be more
	like 1.6. Will you be part of the IPCC going forward? And will
	they come to a 1.6----
	Dr. Michaels. The----
	Mr. Beyer. --consensus in the next couple of years?
	Dr. Michaels. The numbers that I have always given in my
	decades of testifying in both the House and the Senate are all
	within the range of the IPCC consensus so there's nothing new
	here.
	Mr. Beyer. Okay. Great. Thank you very much.
	Mr. Chairman, I yield back.
	Dr. Greenstone. Can I just add one----
	Chairman Biggs. Thank you.
	Dr. Greenstone. I believe the IPCC----
	Chairman Biggs. Dr. Greenstone, please.
	Dr. Greenstone. --is from 1.5 to 4 or is it 1.5 to----
	Dr. Michaels. Yes, I believe 1.6 is in there.
	Dr. Greenstone. I think you're right at the bottom of the
	range, yes, but I think the IPCC's consensus is actually--
	you're right at the bottom of that range.
	Chairman Biggs. Thank you. I recognize----
	Dr. Greenstone. Just making sure we're all on the same
	page.
	Chairman Biggs. I recognize Chairman Smith.
	Chairman Smith. Thank you, Mr. Chairman.
	Dr. Dayaratna, let me address my first question to you, and
	it is this: Do you feel that the social cost of carbon is based
	upon legitimate science or is it based upon arbitrary figures
	and subjective reasoning?
	Dr. Dayaratna. That's a very interesting question, so thank
	you, Congressman. In terms of the science, so as, you know, Pat
	and I both alluded to, the ECS--the equilibrium climate
	sensitivity distribution that is implemented in these models by
	the IWG has--was published ten years ago in the journal
	Science. That is a whole decade ago, and it is not even
	empirically estimated. It was calibrated to a priori
	assumptions that the IWG wanted to use regarding climate
	change.
	Now, if you look at the more recent distributions, you will
	notice significantly lower probabilities of extreme global
	warming. So what ended up happening was that using this
	outdated distribution, there was an overstated probability of
	extreme global warming, and that gets manifested in higher
	estimates of the SCC. So basically, the SCC estimates were
	essentially beefed up.
	Chairman Smith. Okay. Thank you.
	And, Dr. Michaels, are there benefits to carbon emissions?
	And if so, should they be factored into the social cost?
	Dr. Michaels. Well, if you're going to factor costs, you
	should factor benefits, and the increment just from direct
	carbon dioxide fertilization for agricultural production is
	about $3 trillion from 1961 through 2011. But more importantly,
	the satellite data shows a remarkable greening of the planet
	Earth, and the illustration that I showed earlier is remarkably
	reassuring because the massive greenings, the largest greenings
	are occurring in the margins of the great desert. The Sahelian
	region in Africa that you and I were taught in school this is
	desertifying and it will never come back. The tropical
	rainforest, the lungs of the Earth, have the largest increase
	in greening on the planet, all brought to you by carbon
	dioxide. So, yes, you should factor those things in I would
	think. Thank you.
	Chairman Smith. Okay. Thank you, Dr. Michaels, for that.
	One other question. What are some important climate change
	factors that are not accounted for in the social cost?
	Dr. Michaels. Oh, God. How many hours do I have to answer
	that?
	Chairman Smith. How about a minute-and-a-half but----
	Dr. Michaels. Okay.
	Chairman Smith. Okay.
	Dr. Michaels. One of the problems is that we spend
	tremendous amounts of taxpayer money on climate models--
	Chairman Smith. Okay.
	Dr. Michaels. --and very, very--models for what happens
	when you increase carbon dioxide and very, very little money on
	what's called natural climate variability. We know there are
	these great oscillations in the Atlantic and the Pacific that
	drive, modulate hurricanes, modulate storm tracks, modulate
	weather. Those things are not simulated in these climate
	models, and we need to understand that variability and subtract
	that out.
	I'll close in one second here. The warming of the late 20th
	century, which began in 1976 and either ended in 1998 or
	continued--attenuated after 1998 depending upon what we
	believe--is the same magnitude as the warming of the early 20th
	century that occurred between 1910 and 20--and 1945. That
	warming could not have been caused by carbon dioxide.
	Chairman Smith. Right.
	Dr. Michaels. It means that natural variability is as large
	as the largest human signal, and yet we only model the human
	signal. What's wrong with this picture, Congressman?
	Chairman Smith. Yes. Yes. That last point, the last couple
	points you seldom see covered in the media, but I think they're
	great points to make.
	Final question is should we be using the social cost at
	all?
	Dr. Michaels. We should use the social cost of carbon if
	it's accurately calculated, and I think there's a lot of debate
	about what we're supposed--what----
	Chairman Smith. Yes.
	Dr. Michaels. --what it comprises----
	Chairman Smith. Okay.
	Dr. Michaels. --and what the natural variability component
	of it is and all this good stuff. We're just not there. It's
	not ready for prime time, Congressman.
	Chairman Smith. Okay. Thank you, Dr. Michaels.
	I yield back, Mr. Chairman.
	Chairman Biggs. Thank you, Mr. Chairman.
	I recognize Chairman LaHood.
	Mr. LaHood. Mr. Chairman, I would just like--I forgot to
	submit a document for the record from the American Road and
	Transportation Builders Association regarding our hearing
	today. I would ask to submit it for the record.
	Chairman Biggs. Without objection.
	[The information appears in Appendix II]
	Chairman Biggs. The Chair recognizes Mr. McNerney.
	Mr. McNerney. Well, thank you, Mr. Chairman. Thank you for
	holding the hearing. I thank the witnesses this morning.
	Dr. Gayer, I'm very pleased to hear that you support a
	carbon tax. I think that's the way to go. I'm going to be
	proposing a carbon tax and benefit package a little bit later,
	and I hope to get your support on that. Can we follow through
	with that?
	Dr. Gayer. I'd be delighted to, yes.
	Mr. McNerney. Very good.
	About the domestic versus international impacts, do you
	believe that the physical impacts of climate change on other
	nations don't have an impact on our domestic economy or
	security?
	Dr. Gayer. No, I don't believe that, but what I believe is
	that the actions that we've taken thus far won't lead to
	reductions matched throughout the entire world. And there are
	many policies that we have outside of environmental or climate
	that we--that if other countries did the same thing--and you
	can think about foreign aid or any number of policies, the
	world would be a better place and we'd benefit perhaps from it,
	but we don't take those benefits into account. The regulations
	where----
	Mr. McNerney. So if we drop out of the Clean Power Plan and
	the Paris agreements, then that's not going to have an impact
	on China or India or the other countries that are big emitters?
	Dr. Gayer. I don't think the Clean Power Plan--well, I
	don't know that the Clean Power Plan would have an effect. If
	there's an international agreement and a treaty that is
	binding, then certainly we should consider the global benefits.
	Absent that, an EPA regulation I don't think will actually lead
	to realize the effects throughout the world and certainly not
	100 percent throughout the world.
	Mr. McNerney. So you think--you do think that climate
	change is a problem?
	Dr. Gayer. Sure. Yes. Yes.
	Mr. McNerney. And that the United States should have a
	leadership role in this issue?
	Dr. Gayer. Yes.
	Mr. McNerney. Thank you.
	Dr. Greenstone, what impact will eliminating the SCC have
	on current and future environmental protections designed to
	reduce greenhouse gas emissions? How is that going to affect us
	if we eliminate that measure?
	Dr. Greenstone. Thank you for the question. I think it will
	increase emissions. Of course it would naturally increase
	emissions in the United States, and that would increase the
	rate of climate change and global warming. What I think--the
	point I've been trying to make that I just want to underscore
	is I think it would also increase emissions in other countries,
	and so there would be a multiplier effect. And I think it's a
	mistake to conclude that the Paris agreement did not reflect
	U.S. leadership and did not reflect that the United States had
	adopted a robust climate policy. So--you know, let me also add
	there's I think again surprising agreement on this panel, at
	least among two of us, that there is climate change. Climate
	change is real. And there seems to be a little disagreement on
	the tactics.
	You know, our other two witnesses here I think are much
	more focused on cherry-picking particular features of it, and I
	think I couldn't agree with them more that updating the
	assumptions that underlie the social cost of carbon based on
	the advances in science in the last 7 or eight years is an
	important thing to do. And indeed, thankfully, the National
	Academy of Sciences has put out a very clear report on how to
	go about doing that.
	Mr. McNerney. Thank you. Now, some of the critics have
	implied that the SCC is created by the Obama Administration and
	pushed by environmentalists, but it's my understanding that the
	Reagan Administration first demanded the Federal Government to
	do a cost-benefit analysis, and the federal courts required the
	George W. Bush Administration to monetize these benefits. Is
	there any other way to do that than using the social cost of
	carbon?
	Dr. Greenstone. No. The--really what the courts were
	requiring that a social cost of carbon be developed. And I
	think when one thinks back to 2009, what was striking is that
	even though a ton of CO<INF>2</INF>, wherever it's emitted in
	the U.S. economy has the same impact, you had a complete
	discordant approach. The department--some departments were
	treating it as if there were zero costs associated with it,
	which is, just to be clear, effectively implying that climate
	change has no negative impacts.
	Mr. McNerney. Right.
	Dr. Greenstone. And others were effectively treating it as
	if it were infinity costs. And so I think landing at the
	approach and the number that we ended--tried to instill some
	discipline and coherence across--policy across the government.
	Mr. McNerney. And so what's the context of how this came
	about, how this measure came about?
	Dr. Greenstone. Yes. No, it was--sorry. The Court had
	required it, and the President had ordered that a number be
	developed and that--as I mentioned earlier, that used expertise
	from all branches of government.
	Mr. McNerney. And this was done in a transparent fashion?
	Dr. Greenstone. It was done in a transparent fashion.
	There's been endless opportunities for public comments. It's
	been at least 80 rules. In addition, it was put out for public
	comment on its own.
	Mr. McNerney. Is there some kind of consensus on what
	parameters to use for this model?
	Dr. Greenstone. Yes. There was great debate about it, and
	what--actually what--a rule that I tried to impose when we were
	leading the process was that we should not be making science--
	we are, after all, faceless bureaucrats sitting in a room--but
	instead that our job was to summarize the frontier of science.
	And I feel that we were quite faithful to that goal.
	Mr. McNerney. Thank you. Thank you, Mr. Chairman. I yield
	back.
	Chairman Biggs. Thank you. Dr. Michaels, you looked like
	you might want to respond to the assertion of cherry-picking.
	Dr. Michaels. I would like to--oh, sorry. I would like to
	respond to the assertion that without the social cost of carbon
	that our emissions would go up. That's what I call maybe herd
	reasoning, and I'd like to show you how well herd reasoning
	works with regard to emissions.
	This, which I just happen to be carrying in my backpack, is
	a shale oil rock. Ten years ago if I said that there were
	hundreds of years of oil--shale gas rather, which produces half
	the emissions of carbon dioxide when combusted for power
	production under our feet, polite company--and we would get it
	by exploding rocks, polite company would have laughed me out of
	every Washington cocktail hour. But that's the way people work.
	Regulation is not required to create efficiency. Markets
	are required to create efficiency. This is cheaper than its
	competitors, and emissions will continue to go down as long as
	our economy is free for the simple reason that the future
	belongs to the efficient.
	Mr. McNerney. Industry can be relied on to clean itself up.
	That's basically what you're saying.
	Dr. Michaels. No, the market can be relied upon to clean up
	industry.
	Mr. McNerney. Mr. Greenstone----
	Chairman Biggs. I'm sorry. The gentleman's time is expired.
	Mr. McNerney. I'm sorry.
	Chairman Biggs. The Chair recognizes Mr. Posey.
	Mr. Posey. Thank you, Mr. Chairman.
	As policymakers, I think it's important that we all know
	what we don't know, and therefore, our attempts to predict the
	future impact of regulations are always speculative and subject
	to error.
	And that being said, it's also true that some predictions
	are more speculative and uncertain than others. The time
	between the implementation of a regulation and the onset of any
	potential benefits is a great example of a factor that makes
	some forecasts more reliable and others less so. Clearly, the
	longer the period of time is between the implementation of a
	rule and the realization of its benefits, the less reliable the
	analysis of the predicted benefits can be due to the increased
	likelihood of intervention from unforeseen sources.
	My first question is for Dr. Dayaratna. With what I've said
	in mind, can you give me an idea of the time horizon used in
	calculating the social cost of carbon? How far into the future
	are we looking at when we talk about this cost?
	Dr. Dayaratna. The time horizon for computing the social
	cost of carbon by the IWG is 300 years into the future. And
	it's interesting that you ask that question, Congressman.
	Firstly, it's difficult to forecast what the economy will look
	like, you know, even a couple decades into the future, let
	alone centuries.
	Now, Dr. Michaels had a slide about the temperature
	projections that John Christy talked about juxtaposing the
	IPCC's forecast versus satellite and weather balloon data. And
	I just find it astounding that people would want to use these
	models to try to make forecasts 300 years into the future when
	they can't even predict 20.
	Mr. Posey. Yes, we have trouble getting the weather
	predicted a day ahead of time----
	Dr. Dayaratna. Oh, absolutely.
	Mr. Posey. --oftentimes. So, wow, you're telling me we're
	basing our regulatory decisions on assumptions about what the
	world will be like in 300 years. In some ways that's kind of
	like our Founding Fathers trying to predict and regulate the
	internet.
	Dr. Dayaratna. Yes. I gave a talk, you know, a couple weeks
	ago on this topic. You know, John Adams once said America will
	one day become the greatest empire in the world, and he was
	right, but yet he'd have no idea what people are doing today
	using microphones, smartphones, tablets, and so forth.
	Similarly, we have no idea what things are going to look like
	that far into the future. And I quite frankly find it's--these
	models are quite foolish in actually trying to make those types
	of forecasts.
	Mr. Posey. Okay. Can you describe for us how the social
	cost of carbon estimates change when you use a more reasonable
	horizon?
	Dr. Dayaratna. So as I was referring to in my testimony,
	they change as--by--a reasonable figure is around 25 percent.
	That figure varies but on average around I think around 25
	percent or so, perhaps more.
	Mr. Posey. And given what you just said, do you think it's
	advisable to continue using the current social cost of carbon
	estimates in rulemaking proceedings?
	Dr. Dayaratna. Absolutely not. I think these models--you
	know, they're interesting for academic exercises but they need
	to be revised to be suitable for regulatory policy.
	Mr. Posey. Do you think in the future the agencies can and
	should be more forthcoming about the highly speculative nature
	and variable quality of social cost of carbon estimates?
	Dr. Dayaratna. I tend to think so, yes. To be quite honest,
	like the sheer fact that they are using an ECS distribution
	that was--that is ten years old and not even based on empirical
	research is one thing that is, you know, just not in detail
	talked about in the IWG's analysis. They did respond to this in
	the public comments; I will say that. But, yes, there are so
	many other things out there that they should be more
	forthcoming about.
	And, you know, there was a question that came up earlier
	about the use of a seven percent discount rate and why it was
	not used. Quite frankly, here's the reason why I think it
	wasn't used. Even using the outdated Roe Baker distribution,
	you still get a negative estimate of the SCC under a seven
	percent discount rate. That's why it wasn't used.
	Mr. Posey. Okay. There's been a lot of discussion about
	climate change. Can anyone on the panel give me a date certain,
	even a year certain that there was absolutely no climate change
	on this planet since the forming of it?
	Dr. Dayaratna. I believe that the climate has been changing
	since the planet was first formed.
	Mr. Posey. Any others?
	Dr. Greenstone. Mr. Congressman, are you talking about--
	just so we're on the same page, are you talking about climate
	changing or climate changing due to the release of
	CO<INF>2</INF>? Because I can't quite tell from your question.
	Mr. Posey. I thought I was fairly clear.
	Dr. Greenstone. Okay. Well, then----
	Mr. Posey. Can you give me any date certain----
	Dr. Greenstone. The climate has certainly----
	Mr. Posey. --in the history of the Earth that the climate
	has not changed?
	Dr. Greenstone. Since the release of CO<INF>2</INF>, it has
	been changing more rapidly.
	Dr. Michaels. That's not true.
	Mr. Posey. You know, that's speculative, and I didn't ask
	you to describe a clock. I asked you if you knew what time it
	was.
	Yes, sir, at the end.
	Dr. Michaels. I think the climate was quite stable about
	one year before the Big Bang.
	Mr. Posey. Okay. Dr. Dayaratna.
	Dr. Dayaratna. Yes, there was actually a paper published in
	the Journal of the American Statistical Association last year
	that looked at tree ring analysis in Tornetrask, Sweden, and
	they found interestingly using their Bayesian modeling that in
	1750 the temperatures there it may have been just as warm if
	not warmer than they were today in 1750 before, you know, all
	the things that we--people tend to complain about today.
	Chairman Biggs. Thank you.
	Mr. Posey. Do you have any idea what----
	Chairman Biggs. The gentleman's time is expired.
	Mr. Posey. Any idea what the temperature was pre the last
	Ice Age when the dinosaurs were roaming the Earth?
	Dr. Dayaratna. Pat actually might have an answer to that.
	Dr. Michaels. The answer--that's a very good question and
	I'm glad you asked that. I don't think we have to go pre the
	last Ice Age. Let's go not to the most recent interglacial but
	to the penultimate one, the one between what some people call
	the Illinois glaciation and the Wisconsin glaciation. At the
	end of the current Ice Age, temperatures got quite a bit warmer
	than they are now, the beginning of the current interglacial.
	The beginning of the penultimate one, they were much warmer
	than they were in our interglacial.
	In Greenland, temperatures in summer averaged around 6
	degrees Celsius higher than now for 6,000 years. And guess
	what? The vast majority of the ice on Greenland survived, a
	heat load that human beings could not put on Greenland if they
	tried. And then somebody found a skeleton of a bear from 5,000
	years before that, and it turns out the DNA sequence was that
	of a polar bear.
	Chairman Biggs. Thank you. The gentleman's time is expired.
	Dr. Michaels. Thank you very much.
	Mr. Posey. Thank you.
	Chairman Biggs. The Chair recognizes my friend from
	Florida, Mr. Crist.
	Mr. Crist. Thank you very much. Good morning.
	I was wondering--Dr. Michaels, good morning. How are you?
	Dr. Michaels. I'm good.
	Mr. Crist. Do you believe that climate change is real?
	Dr. Michaels. Of course.
	Mr. Crist. Fabulous.
	Dr. Michaels. I also believe the sun will rise tomorrow.
	Mr. Crist. That's breathtaking.
	Dr. Michaels. I know. It's mindboggling.
	Mr. Crist. Do you--what would you estimate is the cause of
	the climate change you believe in?
	Dr. Michaels. There are natural causes and there is a human
	component. You have to understand, the warming of the second--
	the second warming in the 20th century is accompanied by a
	cooling of the lower stratosphere. Now, if you change the
	greenhouse effect, because you change the upwelling flux of
	infrared radiation, you will warm the lower layers of the
	atmosphere but you will cool the stratosphere. That's what Karl
	Popper would call a difficult test of a theory. And indeed, the
	lower stratosphere cools concurrent with the warming of the
	troposphere, our neck of the woods. That's a greenhouse
	signature.
	But here's the cool part, Congressman Crist. In 1997, 1998,
	everybody knows that something happened to warming unless you
	really jimmy the records and it either slowed down or stopped.
	Mr. Crist. Attenuated you said.
	Dr. Michaels. Attenuated is a good word because you can
	attenuate----
	Mr. Crist. Sure.
	Dr. Michaels. --a lot or you can attenuate a little. But
	the stratospheric cooling also stopped. Now, if you want me to
	explain that, I'm going to tell you the three most important
	words in life.
	Mr. Crist. My question is simple. What causes climate
	change in your estimation?
	Dr. Michaels. Lots of things.
	Mr. Crist. What's the primary cause?
	Dr. Michaels. The fact that we live on a fluid
	discontinuous earth with long-period oscillations. I mean, the
	biggest climate change that you and I know of is an ice age
	oscillation, and I don't think CO<INF>2</INF> is going to be
	capable of doing that, and those occurred, you know, without
	human influence. Again, I say the warming of the late 20th
	century has a greenhouse component because of the stratospheric
	cooling. By did the stratosphere stop cooling when the surface
	warming either stopped or attenuated? You know what the answer
	why that happened is?
	Mr. Crist. May I ask another member a question?
	Dr. Michaels. No one knows is the answer.
	Mr. Crist. Dr. Greenstone, what do you think causes climate
	change, please?
	Dr. Greenstone. I think what we're here to talk about today
	is the climate change is caused from the release of
	CO<INF>2</INF>----
	Mr. Crist. Yes, sir.
	Dr. Greenstone. --of which I think that's a settled issue
	scientifically. And I can't help but note the contrast here
	between the concerns of the development of the SCC was an
	opaque process, which is the claims here. Let me just say the
	character of the conversation that occurred in those many, many
	meetings was really quite sober. It was rigorous. It was very
	scientifically based. And we--at no point did anyone talk about
	a skeleton of a polar bear as a way to make an argument.
	And my own view is that there's a great path forward, and I
	think there's agreement in the room that there should be a
	development that the social cost of carbon should be refreshed
	to reflect the scientific advances that have occurred since
	2009 and 2010. And literally, the National Academy of Sciences
	has outlined a terrific way forward that would also be
	rigorous, scientifically based, and sober, and I think there's
	a great opportunity for the Trump Administration to do that.
	Mr. Crist. Thank you. I'm from the Sunshine State, and I'm
	very proud of that. But having said that, we use less solar
	energy than New Jersey. And New Jersey's a great place, but
	it's the Garden State and we're the Sunshine State. And so the
	point I'm trying to make is if we're going to address climate
	change and probably the primary cause, which is CO<INF>2</INF>,
	carbon, then wouldn't it be better for us to try to get more of
	our energy from solar, from sun or wind in order to mitigate
	the cause?
	Dr. Greenstone. I think there's a great case for energy
	markets being in a very unlevel playing field. In particular,
	the fossil fuels, which involve the release of CO<INF>2</INF>,
	when we go to the gas pump and when we pay our electricity
	bill, we don't pay for the climate damages that are associated
	with using them. And if we were to level the playing field so
	that all sources of energy could compete on equal grounds, it
	would naturally be the case that there would be a greater
	reliance on, as you suggested, renewables, probably on nuclear
	as well, and other low-carbon energy sources.
	Mr. Crist. Thank you, Doctor.
	Thank you, Mr. Chairman.
	Chairman Biggs. Thank you.
	The Chair recognizes Mr. Rohrabacher from California.
	Mr. Rohrabacher. Thank you very much. And let me just note
	that I--one of my colleagues suggested that there is a
	consensus among scientists that global warming is being caused
	by CO<INF>2</INF> emissions, and let me just note that a
	consensus may mean 75 percent, it may mean 60 percent, it may
	mean ten percent and the others don't know for sure. But a
	consensus is not how you determine whether or not something is
	scientifically viable. You have to really look to see whether
	or not it makes sense what people are saying and whether or
	not, for example, attempts to receive government contracts for
	research were in some way influencing someone to target their
	outcome of their research because what I have heard in the last
	few years is that droughts are caused by global warming and the
	CO<INF>2</INF> level and then now it's floods are caused by
	CO<INF>2</INF> level and more tornados. I mean, how many times
	have we heard that the tornados and the hurricanes are more
	frequent, but they're not. You know, come to find out they are
	not more frequent. And all of this coming back to CO<INF>2</INF>
	and whether or not it is something that we should be concerned
	about at the level of CO<INF>2</INF>.
	You know, I drove across the country last year and I saw
	all these hothouses, and covered-up places, and they were
	growing all sorts of vegetables. And I went and stopped at
	several of them and guess what they were pumping into the
	hothouses? CO<INF>2</INF>. Now, why? Because it makes the
	plants grow better and that means there's more food.
	Now, let me ask you this. If we have less CO<INF>2</INF> in
	the air, does that mean that the plants, and I think we saw
	something there, that the plants will not grow as robustly if
	we have less CO<INF>2</INF> in the air? Whoever wants to go
	into that.
	Dr. Dayaratna. That is actually one of the aspects about
	the FUND model compared to the other models that is actually
	incorporated, the feedback from CO<INF>2</INF> into plants and
	agriculture from CO<INF>2</INF> fertilization. So the other
	models, the DC. and PAGE model the IWG used, do not account for
	this type of feedback.
	Mr. Rohrabacher. So that's a great benefit if we have trees
	that are growing stronger and more trees, more edible plants
	growing stronger, but that benefit was not calculated into the
	cost-benefit of other studies?
	Dr. Dayaratna. That benefit was incorporated in the FUND
	model analysis. Out of the three models used by the IWG, the
	FUND model actually incorporated that benefit. And, you know,
	Pat can talk more about this, but there are other benefits in
	there that could potentially be modeled that, you know, the
	FUND model doesn't take into account such as, say, aquatic
	life----
	Mr. Rohrabacher. Okay.
	Dr. Dayaratna. --you know, detailed aspects about
	vegetation, detailed aspects about agriculture, and so forth
	that the economy could benefit from.
	Mr. Rohrabacher. Well, let me just put it this way. It's
	clearer that in the past there were higher levels of CO<INF>2</INF>
	and great plant life throughout the planet, and we know that
	and that's very easily discovered in any research. But now, our
	CO<INF>2</INF> level is looked at as if it's going to be
	harmful, and let me just say that I don't think that there is a
	consensus at a high level of percentage, and I think we need to
	make sure that before we jump into international agreements
	that it's not just whether it's global benefit or whether it's
	local benefit. We just have to see whether there's any validity
	to this concept in the first place so----
	Dr. Michaels. Congressman, can I offer an observation?
	Mr. Rohrabacher. Please do.
	Dr. Michaels. I understand that it is thought to be
	socially responsible to pay for the costs of emission of carbon
	dioxide, and I also would argue that the fossil fuel-driven
	societies since 1900 in the developed world have increased
	their lifespan by 100 percent and their per capita wealth 11-
	fold. Are we to not also take into account that massive
	benefit? We should all be dead given our ages in this room if
	this were 1900, but it is that society that allows us to live.
	Chairman Biggs. Thank you.
	Mr. Rohrabacher. That's a very good point and I'm glad I'm
	not dead. There you go.
	Chairman Biggs. The gentleman's time is expired. Thank you.
	The Chair recognizes Mr. Marshall from Kansas.
	Mr. Marshall. Thank you, Mr. Chairman. I wish my colleague
	from Florida was still here. I was going to share with him that
	we have more sunny days in Kansas than there. Oh, you are still
	here, Governor. So we have more sunny days in Kansas than
	Florida, so we look forward to continuing the diversity of
	energy from Kansas. So thanks for sharing that. I want to
	acknowledge a good friend of mine, John Francis, who's in the
	audience, flew all the way in from Great Bend, America, to hear
	our President speak.
	Dr. Gayer, the first question's for you. You mentioned that
	you would be in favor of a carbon tax being implemented. If we
	implemented a carbon tax, do you think we could also do away
	with some of the regulations governing all these carbon
	producers and just let us pay a tax and be done with it if we
	can measure it in some way?
	Dr. Gayer. Yes. So certainly in many ways that's kind of
	the thrust of my critique of what's going on in the regulatory
	sphere. The--and I'm a--Michael Greenstone mentioned leveling
	the playing field. And so for me the carbon tax is a way to
	level the playing field, and the regulatory interventions that
	we've had are a very, very flawed approach to trying to do
	that. And in my view, the modeling and the global versus
	domestic are sort of justifications for what I think is a
	flawed approach.
	So, you know, the ultimate trade is a carbon tax in
	exchange for a tax reduction for more harmful taxes and less
	regulation and just stick to the pricing.
	Mr. Marshall. Anybody else want to weigh in on that? Dr.
	Greenstone, please.
	Dr. Greenstone. Yes, I think there's a great opportunity
	for applying a carbon tax at an appropriate level and using--
	the revenues could be used in a variety of ways. It could be
	refunded. They could be used to reduce other taxes. And I think
	they would provide a great opportunity as well for--as a--they
	could be an excellent substitute for a lot of the regulations
	that are in place. So there's agreement here.
	Dr. Michaels. And with regard to the revenue neutrality, I
	would offer my comment in the form of a question. Do you really
	expect $3 trillion to walk down K Street unmolested?
	Mr. Marshall. Okay. I don't know what to say to that. I
	hope the question wasn't for me.
	This social carbon tax is a perfect example of government
	making the simple complicated. I don't think we'll ever agree.
	It's a social number; it's a political number. That's what it
	seems to me and I'm very new to this game.
	I guess what I'm more concerned about is, as I watched the
	Olympics in China and so on and so forth, it would seem to me
	that whatever measure you use that some of our biggest
	competitors are producing more of this carbon. And I'm just
	curious in the big scheme of things in today's world how much
	carbon is America producing in relationship to China or India,
	regardless of the social cost we can argue? But what percentage
	are we now responsible for?
	Dr. Greenstone. I think this is a rough number. I think
	historically--I think right now China is producing about 50
	percent more per year than we are. I think we are the second-
	largest emitter, larger than the EU, larger than India. I think
	starting from the Industrial Revolution--someone else might
	know here--but I'm going to guess that I think we're
	responsible for about maybe a quarter of all emissions.
	Mr. Marshall. Okay.
	Dr. Michaels. Yes, but we are becoming more efficient. Our
	emissions intensity, which is the amount of CO<INF>2</INF>
	produced per unit GDP has dropped more rapidly than pretty much
	everywhere, and that didn't happen because of regulations. It
	happened because of markets. So if you want efficiency, you
	would prefer economic----
	Mr. Marshall. And I want to move on. So I grew up in a
	small town between two refineries, oil refineries. So proud
	that our air in Kansas is cleaner today than it was when I was
	growing up and the waters are cleaner. I want to keep moving in
	that direction. Back to my point: manufacturing. I'm trying to
	figure out why manufacturing jobs have left Kansas, and one of
	them is the cost of energy. Does anybody have any solutions?
	How do we encourage China, India, other countries to take leads
	in this responsibility? Does anybody have any solutions? Do we
	tax them or--I don't want to--does anybody have any solutions
	on how we encourage them to get into this game?
	Dr. Greenstone. I think Dr. Gayer outlined one effective
	tool, which would be to have a carbon tax and then have some
	border tariff--border tax adjustment so that if people tried to
	import--so let's say steel that had carbon embedded in it or
	carbon was used to produce it, they would face the same carbon
	tax that domestic producers would face.
	Mr. Marshall. But you would adjust that per country or how
	would you figure out--so Europe's doing good, Germany's doing
	good, but China's not.
	Dr. Greenstone. Yes, so you'd have to--there would be some
	complexity, I think, but it's imminently doable.
	Chairman Biggs. Thank you. The Chair recognizes Mr. Higgins
	from Louisiana.
	Mr. Higgins. Thank you, Mr. Chairman.
	We're here to discuss the real cost of carbon as it's
	imposed upon the American people. And it's interesting to note
	that in discussing the social cost of carbon I've heard terms
	like ``overwhelming consensus of scientific opinion'' and
	``real science'' and yet the measurement standards use a 300-
	year window to determine actual taxation and cost placed upon
	the American people. And it's interesting to consider that
	we're very fortunate that we're not bound by the science of 300
	years ago when we would be discussing egocentricity, alchemy,
	spontaneous generation of life, and the hollow Earth. And yet
	scientists tend to speak as if their scientific calculations
	are absolute and unchallengable. To me, the real overwhelming
	consensus is that the social cost of carbon is a cost measured
	not by 300-year windows of manipulated science but the
	contemporary and very real cost of American jobs and American
	treasure.
	So I ask Dr. Dayaratna, you mentioned there are updated
	equilibrium climate sensitivity distributions. These ECS
	distributions quantify the Earth's projected temperature
	response to a doubling of carbon dioxide concentrations. As you
	note, these recent ECS distributions appear to reflect a lower
	chance of extreme global warming in response to increased
	carbon dioxide concentrations. Can you explain or can you give
	us some insight or are you aware of why the previous
	Administration, through their Interagency Working Group failed
	to update the SCC or any other social cost of greenhouse gas
	estimates to reflect these more up-to-date ECS distributions?
	If it was not a political decision, then please explain, what
	was it?
	Dr. Dayaratna. So the Roe Baker distribution that was
	published in 2007 is calibrated to a priori assumptions that
	the IWG wanted to make regarding global warming based on, you
	know, a compiled research discussed by the IPCC. The thing is
	that--again, that distribution is calibrated. It is not an
	empirical distribution. The percentiles were fitted based to
	assumptions that the working group wanted to make. Subsequent
	ECS distributions are actually empirically estimated, so they
	are much more worth considering.
	Now, the question regarding why were these new
	distributions not included, I think, quite frankly, the reason
	is that they lower the estimate of the SCC substantially even
	if you don't use a seven percent discount rate, even if you use
	the assumptions that the IWG wanted to make regarding 2.5, 3,
	and five percent. You can still get a negative SCC using more
	up-to-date distributions because the fat tail of the Roe Baker
	distribution has essentially gone on a diet with the newer more
	up-to-date ECS distributions, signifying the lower probability
	of global warming.
	Mr. Higgins. Dr. Michaels, do you have something to add?
	Dr. Michaels. I think Kevin is right.
	Dr. Dayaratna. Your mike's not on.
	Chairman Biggs. Please press your mike. Thank you.
	Dr. Michaels. It was not a lower probability of global
	warming. It's a lower probability of high-end global warming--
	--
	Dr. Dayaratna. High-end global--yes.
	Dr. Michaels. --which is--and that is correct.
	Mr. Higgins. And with the increase of carbon emissions
	measured globally, would it not be a reasonable consideration
	that greenhouse gas effect would in fact assist the economies
	of the earth regarding agricultural production?
	Dr. Michaels. Well, the effect of carbon dioxide--the
	direct effect on plants is well-documented, and the image that
	I showed at the end of my presentation, which is a very recent
	image, documents the actual greening of much of the Earth, not
	just the agricultural component of the Earth. And it's very
	reassuring to see that the largest greenings--and they are
	very, very large--tends to take place in the margins of the
	deserts south of the Sahara and in the northern parts of the
	tropical rainforest where we were very concerned.
	Mr. Higgins. Dr. Greenstone, I believe----
	Dr. Greenstone. Yes.
	Mr. Higgins. --Mr. Chairman, he has something to add
	although I'm out of time.
	Chairman Biggs. Your time is expired. Sorry.
	The Chair recognizes Mr. Babin.
	Mr. Babin. Yes, sir. Thank you, Mr. Chairman.
	Fascinating testimony. I want to thank everyone for being
	here, these witnesses.
	I represent the 36th District in Texas, which contains the
	highest concentration of chemical plants and oil refineries of
	any one district in the entire country. So when the federal
	government issues carbon regulations based on questionable data
	and methods, this is of great concern to me because they have a
	direct and significant impact on my constituents.
	And, Dr. Dayaratna, putting things in a perspective from
	the Industrial Revolution, what association do you see between
	carbon dioxide emissions and the health of our economy? And
	along with what some of you folks have already said, obviously
	it's going to be a drag but I'd like to hear you elaborate a
	little bit more on that.
	Dr. Dayaratna. Okay. Well, no, that's a very good question,
	Congressman. So here's the thing. And a lot of people take for
	granted that energy is a fundamental building block of
	civilization. So whether it's, you know, powering this room,
	lighting up our homes, powering our cars and so forth, we all
	depend on energy.
	So when we think about, you know, this whole concept of
	SCC, the whole goal is to reduce carbon dioxide emissions, and
	what we end up doing is moving away from the least expensive
	and most efficient forms of electricity to more expensive and
	less efficient forms.
	So--and the bottom line is economically what we'll notice
	is that when we go to these so-called lower carbon-emitting,
	you know, forms of energy, what we would notice is a dramatic
	change to the economy in the long run. You--you know, a carbon
	tax, as I was talking about in my testimony, would--in
	conjunction with the SCC would result in around 400,000 lost
	jobs on average by 2035, 13 to 20 percent increase in
	electricity prices, a $2.5 trillion loss in GDP.
	Now, on the other hand--and I've also researched this
	question--if we were to take advantage of the vast shale oil
	and gas we have in this country, we'd actually see the exact
	opposite, in fact, even more so in the other direction. We
	would see a $3.7 trillion increase in GDP, personal income
	would skyrocket----
	Mr. Babin. Absolutely.
	Dr. Dayaratna. --and, yes, all sorts of things that would
	benefit the economy.
	Mr. Babin. Absolutely. Thank you so very much for that
	testimony. And, Dr. Michaels, it's interesting to hear you put
	a historic and prehistoric context into all this.
	Dr. Michaels. I've lived that long.
	Mr. Babin. Well, as a student of history, I've read some of
	the Norse settlements coming from Norway over to Iceland and
	onto Greenland, and they had settlements there I think from the
	year 1000 and had trade and routine ships calling on them from
	Europe for a couple of 300 years. And they were in the process
	of raising livestock, had hay crops, and then strangely, it had
	been over 150 years when a ship called on them in the 1500s and
	none of that community was left. And by that time the climate
	had cooled off considerably. The hay crops were no longer
	there. The folks had disappeared.
	So I don't think there was a huge amount of industrialism,
	carbon dioxide being released into the earth from humans during
	those centuries, so if you can kind of address that as well,
	along with some of the other----
	Dr. Michaels. Well, the nature of climate is to change.
	Mr. Babin. Right.
	Dr. Michaels. It is because we are not a uniform earth. We
	do not have a circular orbit. The sun varies and the infrared
	absorption of the atmosphere varies, sometimes with human
	activities. It's--what do they say? It's complicated,
	Congressman. And the problem is in the illustration that I
	showed, comparing the satellite and weather balloon
	observations to the average of the United Nations' 107 computer
	models shows that it's so complicated that we haven't gotten
	close to getting it right and why would you base a policy upon
	something that is so blatantly wrong?
	Mr. Babin. Thank you so very much. And the American people
	deserve to know the truth here and have sound scientific data,
	and that's what this hearing's all about. I want to thank
	everybody again for being here, and I'll yield back, Mr.
	Chairman. Thank you.
	Chairman Biggs. Thank you. The Chair recognizes Mr. Weber
	from Texas.
	Mr. Weber. Thank you, Mr. Chairman. I have a question for
	each of you all. There seemed to be some discussion about
	whether climate change was real and what that meant and the
	definition, so here's my question for each of you individually,
	and we'll start with you, Dr. Gayer. Would you agree that
	climate change is caused by temperature fluctuation?
	Dr. Gayer. Yes.
	Mr. Weber. Dr. Dayaratna?
	Dr. Dayaratna. Dayaratna.
	Mr. Weber. Thank you.
	Dr. Dayaratna. The question is would I agree that climate
	change is caused by----
	Mr. Weber. Is caused by temperature fluctuation?
	Dr. Dayaratna. Yes.
	Mr. Weber. How about you, Dr. Greenstone?
	Dr. Greenstone. It's a function of temperature variation.
	It's also a function of CO<INF>2</INF> emissions.
	Mr. Weber. Temperature variation is a good one, too. I
	didn't mention CO<INF>2</INF>. I'll come back to you. Dr.
	Michaels, would you agree climate change is caused by
	temperature fluctuation?
	Dr. Michaels. It is the contrast--oh, sorry. It is the
	contrast in temperature between the surface and the upper
	atmosphere that derives--drives most of the precipitation
	mechanisms on Earth, so the answer would be if that changes,
	yes.
	Mr. Weber. Okay. I'll take that as a yes.
	Dr. Gayer, would you agree that temperatures fluctuate when
	seasons change?
	Dr. Gayer. Yes.
	Mr. Weber. Doctor?
	Dr. Dayaratna. Yes.
	Mr. Weber. Dr. Greenstone?
	Dr. Greenstone. Yes. I also think they fluctuate----
	Mr. Weber. Dr. Michaels?
	Dr. Greenstone. --from CO<INF>2</INF> emissions.
	Dr. Michaels. Me four.
	Mr. Weber. Okay. Dr. Gayer, back to you. Would you
	believe--would you agree that temperatures fluctuate in
	historical, global, cyclical fashion? In other words, we have
	historical evidence that temperatures changed up or down
	historically.
	Dr. Gayer. Yes, I don't know cyclical necessarily but yes--
	--
	Mr. Weber. Well, okay.
	Dr. Gayer. --it's gone up, it's gone down.
	Mr. Weber. I'll give you that. How about--
	Dr. Dayaratna. Yes.
	Mr. Weber. --you, Doctor?
	Dr. Dayaratna. Yes.
	Mr. Weber. Dr. Greenstone, would you agree with that?
	Dr. Greenstone. Yes. I also think that it varies----
	Mr. Weber. It's just a yes or no.
	Dr. Greenstone. --because of CO<INF>2</INF> emissions----
	Mr. Weber. Dr. Michaels?
	Dr. Michaels. I will use the weasel word quasi-cyclical.
	Mr. Weber. Got you. Okay. Now, would you agree also,
	Doctors, that the temperatures actually fluctuate more when
	seasons change? Obviously, they go up drastically in Texas to
	100, 110 in the desert area sometimes or they go way down
	below, so when it changes from fall to winter, for example,
	temperatures fluctuate wildly. Would you agree with that, Dr.
	Gayer?
	Dr. Gayer. I'm confused by the question because I thought
	that was the previous question.
	Mr. Weber. Would you agree that temperatures fluctuate more
	when seasons change than they just do from week to week, for
	example?
	Dr. Gayer. Yes.
	Mr. Weber. Okay. Dr. Dayaratna?
	Dr. Dayaratna. Yes.
	Mr. Weber. Okay. Dr. Greenstone, minus the COT component--
	CO<INF>2</INF>?
	Dr. Greenstone. I think CO<INF>2</INF>'s important in terms
	of temperature. I also think seasons are important in terms of
	temperature.
	Mr. Weber. Dr. Michaels, would you agree they fluctuate
	more wildly when seasons change?
	Dr. Michaels. Yes, sir.
	Mr. Weber. Great. So we know that the temperatures
	fluctuate when seasons change. Now, we're talking about a
	carbon tax. And so if you go back to where we're going to
	charge carbon tax for people on industry or countries, let's
	say, that have industry, are we going to take into account when
	their seasons change because now they're using more electricity
	when it's hot or more electricity when it's cold? Do you take
	that into account at all in the proposed carbon tax?
	Dr. Gayer. I'm not----
	Mr. Weber. Do they get a credit when----
	Dr. Gayer. No, the----
	Mr. Weber. --they have a mild season.
	Dr. Gayer. The goal of the carbon tax is to include a price
	into the energy decision. So certainly when they use more
	energy, the tax will go higher and the----
	Mr. Weber. Okay. So they could put----
	Dr. Gayer. If you're tying it to like tax reduction
	somewhere else, the revenue would go higher then.
	Mr. Weber. They do get a credit when it's mild. I got you.
	Okay. Now, what happens when those countries have a tremendous
	catastrophe, whether it's a huge hurricane or a huge cyclone,
	tsunami, or you name it, and they are really hard hit and they
	have to have more energy production to rebuild their country,
	do they then get a tax credit to be able to go back and rebuild
	their country or do we punish them more because now they're
	using more energy to rebuild?
	Dr. Greenstone. Can I ask a clarifying----
	Mr. Weber. No, I'm asking him first, Dr. Gayer.
	Dr. Gayer. I don't--I didn't--I don't understand the tax--
	--they level--you level--the tax increases the price of energy,
	yes.
	Mr. Weber. So no matter what happens in a country, if they
	have a huge catastrophe and they have to use a lot of energy to
	rebuild their country, they don't get a break? They're just
	going to pay more carbon tax at that point?
	Dr. Gayer. Yes, that's the nature of a tax.
	Mr. Weber. Doctor, do you agree with that?
	Dr. Dayaratna. That--I've never put together a carbon tax
	proposal myself----
	Mr. Weber. I'm just----
	Dr. Dayaratna. --but in principle, the--yes, that seems to
	be what----
	Mr. Weber. That's what's going to happen.
	Dr. Dayaratna. --we would want to do, yes.
	Mr. Weber. Dr. Greenstone, do you agree that's going to
	happen, they use more energy, more carbon to rebuild their
	country and they're going to get taxed on it?
	Dr. Greenstone. I just want to clarify if we're talking
	about a hurricane disaster that's due to CO<INF>2</INF>
	accumulation in the atmosphere or just one that has----
	Mr. Weber. I'm talking about the tax once they have a
	disaster. Do you know where I'm going, Dr. Michaels? Can you
	see what I'm asking here?
	Dr. Michaels. Yes. I believe that you are drawing the
	analogy to what happened to this House when it passed cap-and-
	trade in 2009.
	Mr. Weber. Well, that was a catastrophe all right but----
	Dr. Michaels. Correct.
	Mr. Weber. So here's the point I'm making. Now, suppose an
	industry comes along and they develop a process of capturing
	CO<INF>2</INF> and putting it underground. Do we revoke the
	carbon tax?
	Dr. Gayer. No, you credit it. That's the--that----
	Mr. Weber. Credit it?
	Dr. Gayer. That's--and that's one of the nice incentives of
	having a tax because it incentivizes those kind of
	technological improvements.
	Mr. Weber. Okay.
	Dr. Greenstone. In fact, it would be terrific. It would
	provide a market incentive----
	Mr. Weber. Okay.
	Dr. Greenstone. --to engage for people to find ways to
	reduce----
	Mr. Weber. Okay.
	Dr. Greenstone. --CO<INF>2</INF> in the atmosphere.
	Mr. Weber. Okay. Well, let me just----
	Dr. Gayer. And be more resilient going forward.
	Mr. Weber. --add for the record, Mr. Chairman, and I'm done
	that in my district we have the largest carbon capture storage
	unit, Air Products in--over in Jefferson County in the country.
	So just interesting food for thought where we're headed with
	this idea.
	Mr. Chairman, I yield back.
	Chairman Biggs. Thanks. I thank the witnesses for their
	valuable testimony and the members for their questions. The
	record will remain open for two weeks for additional comments
	and written questions from members. This hearing is adjourned.
	[Whereupon, at 12:03 p.m., the Subcommittees were
	adjourned.]

	Appendix I

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	Answers to Post-Hearing Questions


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	Appendix II

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	Additional Material for the Record


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