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The White House Office of Management and Budget (OMB) recently collected public comments on the social cost of carbon, a measure that federal agencies use in cost-benefit analyses of regulations that affect greenhouse gas emissions. The social cost of carbon is intended to measure the dollar value of the harm caused through climate change when an extra metric ton of carbon dioxide is emitted in the United States. Unfortunately, the executive branch has not properly answered the question: Harm to whom?
Federal agencies currently use a global measure of the social cost of carbon that includes the harm that U.S. emissions impose on everyone in the world. As I explained in my comment to OMB, however, the agencies should use a domestic cost measure that includes only harms to Americans, unless and until there’s an international agreement to address climate change.
A number of federal agencies initially used domestic cost measures. In 2010, however, an interagency working group adopted a global cost measure to be used by all agencies. Choosing the right measure is important – global costs are estimated to be 10 to 14 times larger than domestic costs.
The problem with using a global measure is that it requires Americans to sacrifice their wellbeing for the sake of people elsewhere in the world. Suppose, for example, that each ton of U.S. emissions imposes $4 of climate costs on Americans and $36 of climate costs on the rest of the world, so that the domestic cost is $4 and the global cost is $40. Consider a regulation that reduces emissions by a ton while imposing $20 of costs on the U.S. economy. Under the domestic measure, this regulation – like any regulation costing more than $4 – would be rejected. Under the global measure, though, the regulation would be adopted on the grounds that Americans’ $16 sacrifice is outweighed by the $36 gain enjoyed by the rest of the world.
Should federal regulators impose these costs on Americans for the greater good of the world? Certainly, the lives and health of human beings outside the United States have the same moral value as the lives and health of human beings inside the United States. And, we are inspired when we see people working across international borders to combat poverty, disease, and oppression. Nevertheless, those sentiments offer a flawed guide for public policy because they fail to recognize that the U.S. government’s primary mission is to serve the American people.
As set forth in our Constitution, the U.S. government was established by and for “the people of the United States.” That principle is so obvious that it’s rarely even discussed. We take for granted that our government places higher priority on aiding Americans without health insurance than on assisting the vast populations overseas who lack even the rudiments of basic medical care. One economic study estimated that, if our government cared equally about Americans and the rest of the world, it would have spent $16,000 per American on foreign aid in 1999, almost 500 times more than the amount it actually spent.
The principle that the U.S. government should primarily serve the American people does not reflect any special worth of Americans. Instead, it reflects the special relationship that the citizens of any country have with their own government. International law recognizes that governments are entitled to serve their citizens to the exclusion of other people.
So, why did the interagency working group depart from these longstanding principles?The group asserted that the global cost measure was appropriate because “climate change presents a problem that the United States alone cannot solve. Even if the United States were to reduce its greenhouse gas emissions to zero, that step would be far from enough to avoid substantial climate change. Other countries would also need to take action.” But, those observations refute, rather than support, the group’s position. If our government uses a global measure without other countries agreeing to do the same, we’re just ramping up the unilateral approach that the working group admitted can’t solve the problem.
Things would be different if an international climate agreement called on all countries to use a global cost measure – then each country, including ours, could benefit as everyone reduced their greenhouse gas emissions together. It would make sense to cooperate with other countries for everyone’s mutual benefit, but it does not make sense to sacrifice Americans’ wellbeing in futile efforts to unilaterally solve global problems.
Furthermore, Congress and the president have not adopted legislation instructing federal agencies to consider the impact of climate change on people outside the United States. (In fact, when members of Congress and President Obama warn about the harmful effects of climate change, they consistently emphasize droughts, fires, and hurricanes in this country, a pattern that continued to hold in the Senate’s recent all-night discussion of climate change.) Without legislative authorization, the interagency working group lacks the democratic legitimacy to make a sweeping moral decision requiring the American people to sacrifice their wellbeing for the sake of the rest of the world.
In the absence of an international climate agreement, federal agencies should use a domestic measure of the social cost of carbon. That approach would return federal policy to its proper focus – the wellbeing of the American people.
Alan D. Viard is a resident scholar at the American Enterprise Institute.
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