U.S. state governments are moving to include social cost of carbon calculations in their energy and climate programming, in direct defiance of a federal administration that is turning away from what InsideClimate News calls “an arcane but important tool in the federal climate toolbox.”
Donald Trump targeted the Obama-era metric in a March 2017 executive order meant to undermine a menu of federal climate actions. Since then, “it’s been striking to see the progress on this front even as the Trump administration has tried to undermine the use of a social cost of carbon,” said Union of Concerned Scientists Chief Economist Rachel Cleetus. By calculating the cost of future climate impacts in today’s dollars, InsideClimate adds, “states can put cleaner energy sources on a more level playing field with fossil fuels. Wind and solar farms, nuclear power, and energy conservation efforts are often less expensive than harmful alternatives when the damage potential of fossil fuels is taken into account.”
One consultant and former regulator said 10 to 20 state public utility commissions (PUCs) are probably using a social cost of carbon calculation in their planning and procurement activities, “although they may be flying under the radar,” ICN notes.
Cleetus added that many corporations already use a “shadow carbon price” to factor future costs of climate change into their present-day investment decisions. “When making investments that are going to be around for decades, you want to make sure they take account of future conditions,” she noted.
For governments, meanwhile, ICN reports that a social cost of carbon calculation can be a more effective driver than carbon pricing, since the social cost in a market like California often comes in about three times higher.
Correspondent Peter Fairley cites Minnesota and Colorado as two states that are considering social cost of carbon metrics, with one utility, Xcel Energy, taking contradictory positions in regulatory processes in the two jurisdictions.
In Minnesota, Environmental Policy Manager Nicholas Martin told the state public utilities commission that “bold action is needed” on climate change, and a higher social cost of carbon would help the utility reduce its emissions “aggressively and affordably”. In Colorado, when Xcel called the regulation “burdensome” and unreliable, “advocates for climate action and solar power pushed back hard,” Fairley notes.
“It got pretty heated,” said Erin Overturf, chief energy counsel for Boulder-based Western Resource Advocates. But “you’re really just sticking your head in the sand” by ignoring “externalities” resulting from fossil generation. “We know that climate change makes our [electricity] generation fleet less efficient. We know that it causes wildfires and other natural disasters that affect our transmission and distribution system. We know that there are actual costs to utility customers that come from not acting to prevent catastrophic climate change.”
Leigh Currie, senior staff attorney for the Minnesota Center for Environmental Advocacy, cited two instances where her state PUC favoured clean energy investments that featured slightly higher costs today, but bigger savings tomorrow: a utility-scale solar project that beat out the natural gas competition in 2014, and Xcel’s proposal last year to speed up the retirement of the state’s biggest coal-fired generating station and replace it with a mix of wind, solar, and natural gas.