Commenter 9685 continues these flawed scenarios are then used in a Monte Carlo analysis that cloaks the errors in an opaque process. The pseudo sophistication implied by using a Monte Carlo analysis is at best misleading. If the input data is wrong, the output distributions are wrong (this is Garbage In, Garbage Out). As discussed below, the greenhouse gas emissions data are wrong. Therefore the resulting greenhouse gas concentrations are seriously flawed. The climate sensitivity related to the flawed concentrations based on flawed emissions is based on the failed IPCC AR4 models that are demonstrated failures. The Equilibrium Climate Sensitivity (ECS) probability density functions (PDFs) developed using the AR4 models are fatally flawed. The resulting temperatures based on the flawed emissions driving flawed driving flawed concentrations driving flawed climate sensitivity are then input to "damage" calculations based on fictional un-validated formulations. These results are even more egregiously flawed.

Commenter 10091 states there is a misleading disconnect between climate change and the SCC in the IAMs. It is generally acknowledged, the results from IAMs are highly sensitive not only to the model input parameters but also to how the models have been developed and what processes they try to include. One prominent economist, Robert Pindyck of M.I.T. recently wrote (Pindyck, 2013) that the sensitivity of the IAMs to these factors renders them useless in a policymaking environment: Given all of the effort that has gone into developing and using IAMs, have they helped us resolve the wide disagreement over the size of the SCC? Is the U.S. government estimate of $21 per ton (or the updated estimate of $33 per ton) a reliable or otherwise useful number? What have these IAMs (and related models) told us? I will argue that the answer is very little. As I discuss below, the models are so deeply flawed as to be close to useless as tools for policy analysis. Worse yet, precision that is simply illusory, and can be highly misleading. [A]n IAM-based analysis suggests a level of knowledge and precision that is nonexistent, and allows the modeler to obtain almost any desired result because key inputs can be chosen arbitrarily. Nevertheless, the EPA incorporates the IWG2013 determinations of the SCC into this proposed regulation ill-advisedly so in our opinion.

Commenter 10091 continues stating if one considers the following: the social cost of carbon should reflect the relative impact on future society that human-induced climate change from greenhouse gas emissions would impose. In this way, we (policymakers and regular citizens) can decide how much (if at all) we are willing to pay currently to reduce the costs to future society. It would seem logical that we would probably be more willing to sacrifice more now if we knew that future society would be impoverished and suffer from extreme climate change than we would be willing to sacrifice if we knew that future society would be very well off and be subject to more moderate climate change. We would expect that the value of the social cost of carbon would reflect the difference between these two hypothetical future worlds - the SCC should be far greater in an impoverished future facing a high degree of climate change than an affluent future with less climate change. But if you thought this, you would be logically correct, but wrong. Instead, the IAMs as run by the IWG2013 produce nearly the opposite result the SCC is far lower in the less affluent/high climate change future than it is in the more affluent/low climate change future. Such a result is not only counterintuitive but misleading. We illustrate this illogical and impractical result using the DICE 2010 model (hereafter just DICE) used by the IWG2013 (although the PAGE and the FUND models generally show the same behavior). The DICE model was installed and run at the Heritage Foundation by Kevin Dayaratna and David Kreutzer using the same model set up and emissions scenarios as prescribed by the IWG2013. The projections of future temperature change (and sea level rise, used later in the Comment) were provided to us by the Heritage Foundation. The figure below shows the projections of the future change in the earth's average surface temperature for the years 2000-2300 produced by DICE from the five emissions scenarios employed by the IWG2013. The numerical values on the right-hand side of the illustration are the values for the social cost of carbon associated with the temperature change resulting from each emissions scenario (the SCC is reported for the year 2020 using constant $2007 and assuming a 3% discount rate numbers taken directly from Table A3 of the IWG2013 report). The temperature change can be considered a good proxy for the magnitude of the overall climate change impacts. Notice in the figure above that the value for the SCC shows little (if any) correspondence to the magnitude of climate change. The MERGE scenario produces the greatest climate change and yet has the smallest SCC associated with it. The "5th Scenario" is a scenario that attempts to keep the effective concentration of atmospheric carbon dioxide at 550 ppm (far lower than the other scenarios) has a SCC that is more than 20% greater than the MERGE scenario. The global temperature change by the year 2300 in the MERGE scenario is 9dC while in the "5th Scenario" it is only 3dC. The highest SCC is from the IMAGE scenario a scenario with a mid-range climate change. All of this makes absolutely no logical sense - and confuses the user.

Commenter 10091 states if the SCC bears little correspondence to the magnitude of future human-caused climate change, then what does it represent? The figure below provides some insight. When comparing the future GDP to the SCC, we see, generally, that the scenarios with the higher future GDP (most affluent future society) have the higher SCC values, while the futures with lower GDP (less affluent society) have, generally, lower SCC values. Combining the results from the two figures above thus illustrates the absurdities in the IWG's use of the DICE model. The scenario with the richest future society and a modest amount of climate change (IMAGE) has the highest value of the SCC associated with it, while the scenario with the poorest future society and the greatest degree of climate change (MERGE) has the lowest value of the SCC. A logical, thinking person would assume the opposite. While we only directly analyzed output data from the DICE model, by comparing Tables 2 and Tables 3 from the IWG2010 report, it can be ascertained that the FUND and the PAGE models behave in a similar fashion.

Commenter 10091 states this counterintuitive result occurs because the damage functions in the IAMs produce output in terms of a percentage decline in the GDP which is then translated into a dollar amount (which is divided by the total carbon emissions) to produce the SCC. Thus, even a small climate change-induced percentage decline in a high GDP future yields greater dollar damages (i.e., higher SCC) than a much greater climate change-induced GDP percentage decline in a low GDP future.  In principle, the way to handle this situation is by allowing the discount rate to change over time. In other words, the richer we think people will be in the future (say the year 2100), the higher the discount rate we should apply to damages (measured in 2100 dollars) they suffer from climate change, in order to decide how much we should be prepared to sacrifice today on their behalf. Until (if ever) the current situation is properly rectified, the IWG's determination of the SCC is not fit for use in the federal regulatory process, such as this EPA regulation, as it is deceitful and misleading.

Commenter 9681 sated that updates to the SCC should also consider other models that are similarly peer reviewed and based on the state of the art of climate-economic modeling. One such model is Climate and Regional Economics of Development (CRED); another is the World Bank's ENVironmental Impact and Sustainability Applied General Equilibrium (ENVISAGE) model. CRED borrows its fundamental structure from William Nordhaus's DICE and RICE models but also offers significant changes. For one, it uses updated damage functions and Marginal Abatement Cost Curves (MACC). Moreover, it uses different global equity weights, and uses additional state-of-the-art methodologies. ENVISAGE represents a broader modeling effort by the World Bank, where perhaps the largest contribution is a more detailed sectoral breakdown, using 57 different sectors. This level of detail allows for a more detailed view of agriculture as well as food and energy sectors that are particularly important to any climate-economy modeling. No model fully captures the costs of climate impacts to society. In fact, virtually all uncertainties and current omissions point to a higher SCC value. That makes it essential to use the established IWG process, which provides for updating the SCC estimates every two to three years in order to capture the advances in physical and social sciences that have been incorporated into the models during the intervening period, in order to revisit both the choice of models and the key inputs used.

Commenter 9681 continues the IWG's choice of three IAMs was fully justified but should still be revisited in its next iteration. In its calculations of the SCC, the IWG relied on the three Integrated Assessment Models (IAMs) available at the time, all with a long record of peer-reviewed publications that link physical and economic effects: the Dynamic Integrated Model of Climate and the Economy (DICE), the Climate Framework for Uncertainty, Negotiation, and Distribution (FUND), and Policy Analysis of the Greenhouse Effect (PAGE). The government's first SCC estimates, published in 2010, used the then-current versions of the models; the recent update employed revised, peer-reviewed versions of the models but maintained the underlying assumptions of the 2010 IWG analysis. As stated by the 2010 IWG, the main objective of [the 2010 IWG modeling] process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. DICE, FUND, and PAGE are well-established, peer-reviewed models. They represent the state-of-the-art IAMs. Each of these models has been developed over decades of research, and has been subject to rigorous peer review, documented in the published literature. However, updates to the SCC should also consider other models that are similarly peer reviewed and based on the state of the art of climate-economic modeling. One such model is Climate and Regional Economics of Development (CRED); another is the World Bank's ENVironmental Impact and Sustainability Applied General Equilibrium (ENVISAGE) model. CRED borrows its fundamental structure from William Nordhaus's DICE and RICE models but also offers significant changes. For one, it uses updated damage functions and Marginal Abatement Cost Curves (MACC). Moreover, it uses different global equity weights, and uses additional state-of-the-art methodologies. ENVISAGE represents a broader modeling effort by the World Bank, where perhaps the largest contribution is a more detailed sectoral breakdown, using 57 different sectors. This level of detail allows for a more detailed view of agriculture as well as food and energy sectors that are particularly important to any climate-economy modeling. No model fully captures the costs of climate impacts to society. In fact, virtually all uncertainties and current omissions point to a higher SCC value. That makes it essential to use the established IWG process, which provides for updating the SCC estimates every two to three years in order to capture the advances in physical and social sciences that have been incorporated into the models during the intervening period, in order to revisit both the choice of models and the key inputs used.

Commenter 9681 states the IWG should update its socio-economic assumptions to reflect the latest Shared Socio-economic Pathways (SSPs). One key input is the use of socio-economic scenarios reflected in the choice of economic growth rates and emissions trajectories. Current IWG socio-economic and emissions scenarios were chosen from the Stanford Energy Modeling Forum exercise, EMF-22, and consist of projections for income/consumption, population, and emissions (CO2 and non-CO2). The IWG selected five sets of trajectories, four of which represent business as usual (BAU) trajectories (MiniCAM, MESSAGE, IMAGE, and MERGE models) and a fifth that represents a CO2 emissions pathway with CO2 concentrations stabilizing at 550 ppm. Given the possibility of increases in emissions above those expressed by Business As Usual Scenarios, a high-CO2 emissions pathway should also be considered. The assumptions used in calculating the SCC should be updated regularly to reflect the latest thinking around possible scenarios, reflecting the latest Shared Socio-economic Pathways (SSPs). These SSPs represent the latest, consistent pathways, feeding, for example, into the latest IPCC report.

Commenter 9514 states the cost of a partial CCS standard, or, indeed, a full CCS standard, is small when considering a broad view of costs that accounts for the social costs of carbon.  The Joint Environmental Commenters maintain that the social cost of carbon is much higher than the values in the interagency rule. Commenter 10525 states the financial benefit attributed to avoided CO2 pollution is actually greater than estimated by the task force, explaining that other elements that should have been considered by the task force but which were not include the effects on drought, energy, and water supply; forest fires; temperature extremes on crops and increasing food prices; food scarcity; impacts of air pollution from enhanced smog; and the consequences of total ecosystem losses.

Commenter 8925 states the 2300 extensions are inconsistent across variables, explaining specifically, the land-use CO2 emissions and non-CO2 radiative forcing extensions have no relationship to the population, GDP, and fossil and industrial CO2 emissions extensions, as well as each other.

Commenter 8925 states the use of a 550 ppm policy emissions/socioeconomic projection is inconsistent with the other scenarios. The current averaging of the results across socioeconomic/emissions scenarios requires that (a) the values being averaged are from the same statistical population, and (b) that the values are all equally likely. As for (a), given the 550 ppm scenario's assumption of a global climate policy (targeting 550 ppm in 2100), it is difficult to claim that it is from the same statistical population of potential futures as scenarios with no climate policy. As for (b), the specific 550 ppm scenarios used in the analysis assume immediate global cooperation in decarbonizing the global economy in achieving the 550 ppm target in 2100. This is inconsistent with current global mitigation efforts and is therefore not equally likely to business-as-usual (BAU) futures. A similar assessment of likelihood would be appropriate for all the socioeconomic/emissions scenarios to avoid including scenarios that can be reasonably ruled out, or at least to recognize that some scenarios may be less likely.  One commenter 8925 states the creation of the "average" 550 ppm emissions/socioeconomic scenario is problematic because internal consistency is lost when averaging the variables, and the resulting set of average socioeconomic and emissions projections do not represent an internally consistent scenario.

Commenter 9396 The SCC is based on three Integrated Assessment Models (IAMs). The SCC ascribes a level of certainty that far exceeds what the IAMs actually deliver. Despite the admonition that the level of uncertainty associated with the development of the SCC reduced its relevance as a policymaking tool for the purposes of establishing cost-benefit analysis where GHG reductions present the predominant benefit, the US EPA is proceeding with regulatory actions that base significant regulatory burdens on industry based on GHG reductions calculated using the SCC.
The comments mirror those submitted to the Office of Management and Budget's separate comment solicitation on the SCC (78 FR 70586; November 26, 2013).  As a member of the interagency working group (IWG) on SC-CO2, EPA has carefully examined and evaluated comments submitted to OMB's separate solicitation.  EPA has also carefully examined and evaluated all comments received regarding SC-CO2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the SC-CO2 methodology, including the models used to estimate the SC-CO2. Specifically, EPA concurs with the IWG's response to these comments and hereby incorporates them by reference.  The remainder of this section elaborates on these comments in the context of this rulemaking.
 EPA appreciates the commenters' recommendations for potential opportunities to improve the SC-CO2 estimates and has considered each one in the context of this rulemaking. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology and estimates to ensure that they continue to reflect the best available science and economics. Furthermore, EPA has determined that the SC-CO2 methodological recommendations require additional research, review, and public comment before it can apply them to a rulemaking context.
 To help synthesize the technical information and input reflected in the comments, and to add additional rigor to the next update of the SC-CO2, the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO2 estimates, including the approaches suggested by commenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC-CO2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer-reviewed literature, will help to ensure that the SC-CO2 estimates used by EPA continue to reflect the best available science and methodologies.
 After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC-CO2 estimates until further updates can be made to reflect forthcoming guidance from the Academies.  EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO2 emissions changes into regulatory analysis.  Therefore, EPA has presented the current SC-CO2 estimates in the analysis of illustrative benefit-cost scenarios for new sources in RIA Chapter 5.   EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process.
 The remainder of this section provides more detailed responses to the comments and recommendations.
 Choice of IAMs used to estimate the SCC.
 EPA agrees with the commenters who regard the selection of the three IAMs -- DICE, FUND, and PAGE -- as the most appropriate for the purpose of estimating the SCC. EPA and all of the other IWG members made this determination when they began developing the SCC estimates in 2009-2010. DICE, FUND, and PAGE are the most widely used and widely cited models in the economic literature that link physical impacts to economic damages for the purposes of estimating the SC-CO2. As stated in the 2010 TSD:
       These models are frequently cited in the peer-reviewed literature and used in the IPCC assessment. ... These models are useful because they combine climate processes, economic growth, and feedbacks between the climate and the global economy into a single modeling framework. ... Other IAMs may better reflect the complexity of the science in their modeling frameworks but do not link physical impacts to economic damages.
 In addition, the National Academies of Science (NAS) identified these three models as "the most widely used impact assessment models" in a 2010 report (NAS, 2010). Furthermore, in a comprehensive literature review and meta-analysis conducted in 2008, the vast majority of the independent impact estimates that appeared in the peer-reviewed literature were derived from FUND, DICE, or PAGE (Tol, 2008).
 While the development of the DICE, FUND and PAGE models necessarily involved assumptions and judgments on the part of the modelers, the damage functions are not simply arbitrary representations of the modelers' opinions about climate damages. Rather they are based on a review by the modelers of the currently available literature on the effects of climate change on society. The conclusions that the modelers draw from the literature, and the bases for these conclusions are documented, and all three models are continually updated as new information becomes available. While EPA recognizes that there are limitations with these models, including some of those discussed in Pindyck (2013), nonetheless IAMs provide valuable information for regulatory impact analysis. In a recent article in the peer-reviewed literature, Weyant (2014) addressed this issue as follows:
       While Pindyck's observations about the empirical weaknesses of IAMs or calculations of the SCC are worthy of careful study, the conclusion that IAMs are therefore useless fundamentally misconceives the enterprise. IAMs and the SCC are conceptual frameworks for dealing with highly complex, non-linear, dynamic, and uncertain systems. The human mind is incapable of solving all the equations simultaneously, and modeling allows making "If..., then..." analyses of the impacts of different factors. The models have provided important insights into many aspects of climate-change policy.
 EPA thus believes that it was appropriate to base the SC-CO2 estimates on the DICE, FUND and PAGE models. Moving forward, EPA will continue to follow and evaluate the latest peer reviewed literature applying IAMs. As previously noted, EPA and all of the other IWG members will seek external expert advice on the technical merits and challenges of using additional models (e.g., CRED, ENVISAGE) to estimate the SC-CO2 and/or removing existing models from the ensemble (DICE, FUND, and PAGE) used to estimate the SC-CO2.
 Improving the IAMs or damage functions
 To date, EPA has accepted the models as currently constituted, and omitted any damages or beneficial effects that the model developers themselves do not include. EPA recognizes that none of the three IAMs fully incorporates all climate change impacts, either positive or negative. Some of the effects referenced by commenters (e.g., "catastrophic" effects, disease, and CO2 fertilization) are explicitly modeled in the damage functions of one or more of the current models (although the treatment may not be complete), and the model developers continue to update their models as new research becomes available. In fact, EPA and all of the other IWG members undertook the 2013 revision because of updates to the models, which include new or enhanced representation of certain impacts, such as sea level rise damages. In addition, some of the categories mentioned by commenters are currently speculative or cannot be incorporated into the damage function for lack of appropriate data. Using an ensemble of three different models was intended to, at least partially, address the fact that no single model includes all of the impacts. EPA recognizes that there may be effects that none of the three selected models addresses (e.g., impacts from ocean acidification) or that are likely not fully captured (e.g. catastrophic effects).
 EPA agrees that it is important to update the SC-CO2 periodically to incorporate improvements in the understanding of greenhouse gas emissions impacts and will continue to follow and evaluate the latest science on impact categories that are omitted or not fully addressed in the IAMs. Also, EPA and all of the other IWG members will seek external expert advice on the technical merits and challenges of potential approaches to update the damage functions in future revisions to the SCC estimates.
 For EPA's more detailed response to comments on climate sensitivity and other climate science components of the IAMs, see 4.4-2, and for treatment of CO2 fertilization in the IAMs, see 4.4-6.
 For EPA's more detailed response to comments on consistency with the OMB Circular A-4, the Information Quality Act, and peer review, see 4.4-5.
 For EPA's more detailed response to comments on aggregation issues, see 4.4-8.
 Recommendations and comments regarding socioeconomic scenarios.
 The rationale for using the EMF-22 scenarios is explained in the 2010 TSD. In addition to the fact that they were recent, peer-reviewed, and publicly available, they had the key advantage that GDP, population, and emissions trajectories are internally consistent for each model and scenario evaluated. As noted in the 2010 TSD, the scenarios used "span a wide range, from the more optimistic (e.g. abundant low-cost, low-carbon energy) to more pessimistic (e.g. constraints on the availability of nuclear and renewables)."
 OMB guidance in Circular A-4 requires benefits and costs to be computed relative to a baseline that represents "the best assessment of the way the world would look absent the proposed action." EPA and the other members of the IWG determined that BAU socioeconomic scenarios best reflect this approach. While the IWG agrees that, all else equal, the baseline used for the SCC calculation should be updated periodically to reflect the latest projections of BAU scenarios, the RCP/SSP scenarios used in support of AR5 may not be easily adaptable for use in SCC modeling.
 To understand why, it is important to note some key differences between the criteria used by the IWG to select socioeconomic-emissions scenarios and what the RCP/SSP scenarios represent and how they were developed. Each scenario in the EMF-22 exercise used by the IWG was clearly identified as reflecting a reference case BAU or a specific CO2 stabilization scenario. Lacking data on the probabilities of specific scenarios, the IWG chose four BAU scenarios and one scenario representing stabilization at 550 ppm CO2-e and weighted them equally in its analysis. The IWG acknowledges that this is not a precise characterization of the baseline but believes it is a reasonable approach at present, in light of data limitations.
 Some of the AR5 scenarios differ from these scenarios in ways that make them difficult to adapt to the SCC context. An ad-hoc group was formed in anticipation of AR5 to develop new scenarios to support climate impacts, adaptation, and vulnerability research. The initial work focused on the development of RCPs, which represent a wide range of potential radiative forcing pathways over the 21st century. The SSPs are a series of human development pathways that could lead to radiative forcing pathways described by the RCPs. The RCPs are not based on a fixed future path of key socioeconomic parameters, which means that multiple SSPs are associated with an RCP. No assessment was made as to the likelihood of any particular RCP being realized, but some of the scenarios clearly would require large-scale global mitigation efforts to be achieved and U.S. involvement in these efforts may be necessary for their success.
 In other words, the developers did not assign likelihoods that the various scenarios would achieve the RCPs in the absence of policy interventions, which means that it is not clear which scenarios could reasonably serve as BAU projections. Therefore, using the RCP/SSP scenarios would require the IWG to conduct an assessment of which RCP/SSPs represent BAU scenarios, or of the probability that each scenario occurs in a BAU case. The IWG believes that data are currently lacking to conduct such an assessment.
 EPA will continue to follow and evaluate the latest science on socioeconomic-emissions scenarios and, along with the members of the IWG, will seek external expert advice on the technical merits and challenges of potential approaches to update these scenarios in future revisions to the SC-CO2 estimates.
 Regarding the inclusion of a scenario associated with stabilization of atmospheric concentrations of GHGs at 550 ppm CO2-e, the 2010 TSD clearly notes that this is "not derived from an assessment of what policy is optimal from a benefit-cost standpoint. Rather, it is indicative of one possible future outcome." As noted above, OMB guidance in Circular A-4 states that the correct baseline for regulatory impact analysis is an agency's best assessment of the state of the world without the regulation, and specifically states that this may include the potential for new domestic and foreign policies that would occur absent the regulation. Including a scenario representative of future mitigation actions is consistent with this guidance, as long as those future policy actions are expected to occur with or without the regulation under examination. As explained in the 2010 TSD, the IWG aimed to select scenarios that span most of the plausible range of outcomes for the socioeconomic variables. Given the level of uncertainty in these trajectories, the IWG felt that it was appropriate to consider a trajectory with significant global mitigation, assuming that this is a distinct possibility even in the absence of U.S. actions. Because there were five scenarios, and each received equal weighting, the stabilization scenario received 20% of the total probability weight.
 Regarding potential inconsistencies between scenarios and IAMs, given the nature of estimating the SC-CO2 and available data/resources, a full harmonization along all possible dimensions of the three IAMs used to estimate the SC-CO2 with the four models used to develop the scenarios was not possible. Therefore, the IWG chose to harmonize the models with respect to the scenario variables to which SCC estimates are most sensitive (GDP, population, and emissions) using common techniques in the literature. The scenarios used were developed by highly respected international modeling groups and published in the peer-reviewed literature. In terms of potential inconsistencies across scenario variables past 2100, an effort was made to account for some basic correlations among scenario variables in the post-2100 extrapolation. For example, extrapolations were based on GDP per capita growth, which implicitly correlates population and GDP growth, rather than GDP levels or growth alone. Similarly, extrapolations were based on CO2 emissions intensity with respect to GDP, which correlates emissions and GDP growth, rather than CO2 emissions levels or growth alone.
 Consistent with historical observations, it is expected that growth rates of rapidly developing economies will exceed those of already developed economies in the near term. Scenarios with projections of global economic growth that exceed recent trends in developed economies are consistent with this expectation.
 The chosen scenarios capture a wide range of potential future states of the world, but were not intended to represent a comprehensive accounting of the full range of uncertainty, and therefore it is possible that future outcomes will fall outside of this range. The IWG acknowledges that the projection of the scenarios beyond 2100 has greater uncertainty than shorter-term projections and will continue to monitor the literature, including the development of extended RCP/SSP scenarios, for ways to improve the estimated trajectories and improve internal consistency.
 Other

In addition, EPA disagrees with Commenter 10502's characterization of the SC-CO2 as a rulemaking.  The commenter has misunderstood what the SC-CO2 is and how it is used.  The SC-CO2 itself is not a rulemaking, it is an estimate of the net economic damages resulting from CO2 emissions, and therefore is used to estimate the benefit of reducing those emissions. The SC-CO2 calculation does not make any assumptions about a "solution to all potential problems that a warming planet might cause, i.e. CO2 emissions control." The SC-CO2 is just one component of a larger analysis that includes consideration of many other potential impacts. See EPA's response to comments 4.4-3 for explanation as to why EPA uses global estimates of the SC-CO2, response to comments 4.4-6 for details about the treatment of CO2 fertilization in the IAMs, response to comments 4.4-8 for details about the application of the SC-CO2 to the illustrative cost and benefit scenarios in the RIA.
4.4.2 Climate Science Components of the Modeling Underlying SC-CO2
Commenter 9685 states the following climate sensitivity errors: the methane contribution to the radiative forcing is severely underestimated resulting in an over-estimate of the relative contribution by CO2. Dynamic analysis is required to estimate the radiative forcing for atmospheric concentrations of methane. Even worse, EDF claims that using the long term GWP100 (lower) for methane is incorrect, the true methane GWP requires a dynamic analysis since the emissions occur 24/7. This has the potential for quadrupling the impact of methane concentrations and reducing the relative importance of CO2 even more. This is another correction that the SCC has not addressed. The impact is substantial and will dramatically affect the model results in calculations for CO2 only. The possible adjustment required for the non-CO2 gases contribution to radiative forcing: 0.48(86/21) + 0.16 + 0.34 = 2.47(v 0.98) W/m2. The result is a major shift in the relative importance on CO2 and a major reduction in the "climate sensitivity" for increased CO2. Surely EPA advised the IWG of this major error. Commenter 9685-7210 continues stating the methane contribution to the radiative forcing is severely underestimated resulting in an over-estimate of the relative contribution by CO2. The IPCC has revised upward its estimates for the global warming potential (GWP) of methane. The GWP compares the amount of heat methane adds to the climate system against the amount of heat that carbon dioxide adds. The GWP of CO2 is assumed to be constant, while the GWP of methane varies substantially over time. Over a 20-year time frame, methane has a global warming potential (GWP20) of 86, up from 72, in the IPCC AR5. Methane is 34 times more potent a greenhouse gas than carbon dioxide on a 100-year time scale (GWP100). It was previously assumed to be 25 times more potent (EPA uses an out-dated value of 21). The SCC models do not reflect this correction. The net effect of this adjustment is lowering the "climate sensitivity" of CO2 because the contribution of methane would correspondingly increase, reducing the relative importance of CO2. Dynamic analysis is required to estimate the radiative forcing for atmospheric concentrations of methane. Also, Commenter 9685-7212 states that the methane contribution to the radiative forcing is severely underestimated resulting in an over-estimate of the relative contribution by CO2. Also, the AR5 indicates another correction is required: Emissions of CH4 alone have caused an RF of 0.97 [0.74 to 1.20] W m-2. This is very likely much larger than the concentration-based estimate of 0.48 [0.38 to 0.58] Wm-2 (unchanged from AR4). This difference in estimates is caused by concentration changes in ozone and stratospheric water vapor due to CH4 emissions and other emissions indirectly affecting CH4 (see Figure SPM.4).  These corrections of the methane GWP are another major flaw in the IAMs.
Commenter 10091 states the IWG2010 notes (p.14) that the calibrated Roe and Baker distribution better reflects the IPCC judgment that "values substantially higher than 4.5degrees C still cannot be excluded." The IWG2010 further notes that  "Although the IPCC made no quantitative judgment, the 95th percentile of the calibrated Roe & Baker distribution (7.1 dC) is much closer to the mean and the median (7.2 dC) of the 95th percentiles of 21 previous studies summarized by Newbold and Daigneault (2009). It is also closer to the mean (7.5 dC) and median (7.9 dC) of the nine truncated distributions examined by the IPCC (Hegerl, et al., 2006) than are the 95th percentiles of the three other calibrated distributions (5.2-6.0 dC)."  In other words, the IWG2010 turned towards surveys of the scientific literature to determine its assessment of an appropriate value for the 95th percentile of the ECS distribution. Now, more than three years hence, the scientific literature tells a completely different story.  Instead of a 95th percentile value of 7.14 degreesC, as used by the IWG2010, a survey of the recent scientific literature suggests a value of 3.5 degreesC-more than 50% lower. And this is very significant and important difference because the high end of the ECS distribution has a large impact on the SCC determination -a fact frequently commented on by the IWG2010. For example, from IWG2010 (p.26): "As previously discussed, low probability, high impact events are incorporated into the SCC values through explicit consideration of their effects in two of the three models as well as the use of a probability density function for equilibrium climate sensitivity. Treating climate sensitivity probabilistically results in more high temperature outcomes, which in turn lead to higher projections of damages. Although FUND does not include catastrophic damages (in contrast to the other two models), its probabilistic treatment of the equilibrium climate sensitivity parameter will directly affect the non-catastrophic damages that are a function of the rate of temperature change." And further (p.30): Uncertainty in extrapolation of damages to high temperatures: The damage functions in these IAMs are typically calibrated by estimating damages at moderate temperature increases (e.g., DICE was calibrated at 2.5 degreesC) and extrapolated to far higher temperatures by assuming that damages increase as some power of the temperature change. Hence, estimated damages are far more uncertain under more extreme climate change scenarios. And the entirety of Section V [sic] "A Further Discussion of Catastrophic Impacts and Damage Functions" of the IWG 2010 report describes "tipping points" and "damage functions" that are probabilities assigned to different values of global temperature change. Table 6 from the IWG2010 indicated the probabilities of various tipping points. The likelihood of occurrence of these low probability, high impact, events ("tipping points") is greatly diminished under the new ECS findings. The average 95th percentile value of the new literature survey is only 3.5degrees C indicating a very low probability of a warming reaching 3-5 degrees C by 2100 as indicated in the 3rd column of the above Table and thus a significantly lower probability that such tipping points will be reached. This new information will have a large impact on the final SCC determination using the IWG's methodology. The size of this impact has been directly investigated.
Commenter 10091 continues in their Comment on the Landmark Legal Foundation Petition for Reconsideration of Final Rule Standards for Standby Mode and Off Mode Microwave Ovens, Dayaratna and Kreutzer (2013) ran the DICE model using the distribution of the ECS as described by Otto et al. (2013) a paper published in the recent scientific literature which includes 17 authors, 15 of which were lead authors of chapters in the recent Intergovernmental Panel on Climate Change's Fifth Assessment Report. The most likely value of the ECS reported by Otto et al. (2013) was described as "2.0degreesC, with a 5-95% confidence interval of 1.2-3.9degreesC." Using the Otto et al. (2013) ECS distribution in lieu of the distribution employed by the IWG (2013), dropped the SCC by 42 percent, 41 percent, and 35 percent (for the 2.5%, 3.0%, 5.0% discount rates, respectively). This is a significant decline. In subsequent research, Dayaratna and Kreutzer (2014) examined the performance of the FUND model, and found that it too, produced a greatly diminished value for the SCC when run with the Otto et al. distribution of the equilibrium climate sensitivity. Using the Otto et al. (2013) ECS distribution in lieu of the distribution employed by the IWG (2013), dropped the SCC produced by the FUND model to $11, $6, $0 compared with the original $30, $17, $2 (for the 2.5%, 3.0%, 5.0% discount rates, respectively). Again, this is a significant decline. The Dayaratna and Kreutzer (2014) results using FUND were in line with alternative estimates of the impact of a lower climate sensitivity on the FUND model SCC determination. Waldhoff et al. (2011) investigated the sensitivity of the FUND model to changes in the ECS. Waldhoff et al. (2011) found that changing the ECS distribution such that the mean of the distribution was lowered from 3.0 degrees C to 2.0degrees C had the effect of lowering the SCC by 60 percent (from a 2010 SCC estimate of $8/ton of CO2 to $3/ton in $1995). While Waldhoff et al. (2011) examined FUNDv3.5, the response of the current version (v3.8) of the FUND model should be similar. Additionally, the developer of the PAGES model affirmed that the SCC from the PAGES model, too drops by 35% when the Otto et al. (2013) climate sensitivity distribution is employed (Hope, 2013).
Further, Commenter 10091 states these studies make clear that the strong dependence of the social cost of carbon on the distribution of the estimates of the equilibrium climate sensitivity (including the median, and the upper and lower certainty bounds) requires that the periodic updates to the IWG SCC determination must include an examination of the scientific literature on the topic of the equilibrium climate sensitivity. There is no indication that the IWG undertook such an examination. But what is clear, is that the IWG did not alter its probability distribution of the ECS between its 2010 and 2013 SCC determination, despite a large and growing body of scientific literature that substantially alters and better defines the scientific understanding of the earth's ECS. It is unacceptable that a supposed "updated" social cost of carbon does not include updates to the science underlying a critical and key aspect of the SCC. Commenter note that there has been one prominent scientific study in the recent literature which has argued, on the basis of recent observations of lower tropospheric mixing in the tropics, for a rather high climate sensitivity (Sherwood et al., 2014). This research, however, suffers from too narrow a focus. While noting that climate models which best match the apparent observed behavior of the vertical mixing characteristics of the tropical troposphere tend to be the models with high climate sensitivity estimates, the authors fail to make note that these same models are the ones whose projections make the worst match to observations of the evolution of global temperature during the past several decades. The figure below shows the observed global surface temperature history from 1951-2013 compared with the temperature evolution projected by the collection of models used in the new IPCC 2013 report. We broke the climate models down into two groups-those which have a climate sensitivity greater than 3.0 degreesC (as suggested by Sherwood et al., 2014) and those with a climate sensitivity less than 3.0 degreesC. The Figure shows that while neither model subset does a very good job is capturing evolution of global temperature during the past 15-20 years (the period with the highest human carbon dioxide emissions), the high sensitivity models do substantially worse than the lower sensitivity models.
Commenter 10091 adds while Sherwood et al. (2014) prefer models that better match their observations in one variable, the same models actually do worse in the big picture than do models which lack the apparent accuracy in the processes that Sherwood et al. (2014) describe. The result can only mean that there must still be even bigger problems with other model processes which must more than counteract the effects of the processes described by Sherwood et al. After all, the overall model collective is still warming the world much faster than it actually is (see Figure below). In fact, for the observed global average temperature evolution for the past 30 years largely lies below the range which encompasses 95% of all climate model runs an indication that the observed trend is statistically different from the trend simulated by climate models. And for periods approaching 40 years in length, the observed trend lies outside of (below) the range that includes 90% of all climate model simulations and indication that the observed trend is marginally inconsistent with climate model simulations.  These results argue strongly against the reliability of the Sherwood et al. (2014) conclusion and instead provide robust observational evidence that the climate sensitivity has been overestimated by both climate models, and the IWG alike.
Commenter 10091 states regarding equilibrium climate sensitivity that in May 2013, the Interagency Working Group (IWG) produced an updated SCC value by applying updates to the underlying three Integrated Assessment Models (IAMs) used in its initial 2010 SCC determination, but did not update the equilibrium climate sensitivity (ECS) employed in the IAMs. This was not done, despite there having been, since January 1, 2011, at least 11 new studies and 17 experiments (involving more than 44 researchers) examining the ECS, each lowering the best estimate and tightening the error distribution about that estimate. Instead, the IWG wrote in its 2013 report: "It does not revisit other interagency modeling decisions (e.g., with regard to the discount rate, reference case socioeconomic and emission scenarios, or equilibrium climate sensitivity)."  The earth's equilibrium climate sensitivity is defined in the Interagency Working Group on Social Cost of Carbon 2010 (hereafter, IWG2010) report as "the long-term increase in the annual global-average surface temperature from a doubling of atmospheric CO2 concentration relative to pre-industrial levels (or stabilization at a concentration of approximately 550 parts per million (ppm))" and is recognized as "a key input parameter" for the integrated assessment models used to determine the social cost of carbon.
Commenter 10091 continues that the IWG2010 report has an entire section (Section III.D) dedicated to describing how an estimate of the equilibrium climate sensitivity and the scientific uncertainties surrounding its actual value are developed and incorporated in the IWG's analysis. The IWG2010, in fact, developed its own probability density function (pdf) for the ECS and used it in each of the three IAMs, superseding the ECS pdfs used by the original IAMs developers. The IWG's intent was to develop an ECS pdf which most closely matched the description of the ECS as given in the Fourth Assessment Report of the United Nation's Intergovernmental panel on Climate Change which was published in 2007. The functional form adopted by the IWG2010 was a calibrated version of Roe and Baker (2007) distribution. It was described in the IWG2010 report in the following Table and Figure (from the IWG2010 report): The calibrated Roe and Baker functional form used by the IWG2010 is no longer scientifically defensible; neither was it at the time of the publication of the IWG 2013 SCC update. The figure below vividly illustrates this fact, as it compares the best estimate and 90% confidence range of the earth's ECS as used by the IWG2010/2013 (calibrated Roe and Baker) against findings in the scientific literature published since January 1, 2011. Whereas the IWG2010/2013 ECS distribution has a median value of 3.0 dC and 5th and 95th percentile values of 1.72 dC and 7.14 dC, respectively, the corresponding values averaged from the recent scientific literature are 2.0 dC (median), 1.1 dC (5th percentile), and 3.5 dC (95th percentile). These differences will have large and significant impacts on the SCC determination.
Commenter adds (10091) the IWG2010 report noted that, concerning the low end of the ECS distribution, its determination reflected a greater degree of certainty that a low ECS value could be excluded than did the IPCC. From the IWG2010 (p. 14): "Finally, we note the IPCC judgment that the equilibrium climate sensitivity "is very likely larger than 1.5dC." Although the calibrated Roe & Baker distribution, for which the probability of equilibrium climate sensitivity being greater than 1.5 degrees C is almost 99 percent, is not inconsistent with the IPCC definition of "very likely" as "greater than 90 percent probability," it reflects a greater degree of certainty about very low values of ECS than was expressed by the IPCC." In other words, the IWG used its judgment that the lower bound of the ECS distribution was higher than the IPCC 2007 assessment indicated. However, the collection of the recent literature on the ECS shows the IWG's judgment to be in error. As can be seen in the chart above, the large majority of the findings on ECS in the recent literature indicate that the lower bound (i.e., 5th percentile) of the ECS distribution is lower than the IPCC 2007 assessment. And, the average value of the 5th percentile in the recent literature (1.1dC) is 0.62dC less than that used by the IWG-a sizeable and important difference which will influence the SCC determination.  In fact, the abundance of literature supporting a lower climate sensitivity was at least partially reflected in the new IPCC Fifth Assessment Report issued in 2013. In that report, the IPCC reported: Equilibrium climate sensitivity is likely in the range 1.5dC to 4.5dC (high confidence), extremely unlikely less than 1dC (high confidence), and very unlikely greater than 6dC (medium confidence). The lower temperature limit of the assessed likely range is thus less than the 2dC in the AR4.... Clearly, the IWG's assessment of the low end of the probability density function that best describes the current level of scientific understanding of the climate sensitivity is incorrect and indefensible. But even more influential in the SCC determination is the upper bound (i.e., 95th percentile) of the ECS probability distribution.
Commenter 10502 included a report (BOUNDING GHG CLIMATE SENSITIVITY FOR USE IN REGULATORY DECISIONS) published in February 2014 to argue that the computing Social Cost of Carbon (SCC) is scientifically flawed. In the Purpose section of the report they also state that: "We believe that a metric, the Equilibrium Climate Sensitivity (ECS), is being misused by the Interagency Working Group (IWG) that developed the SCC calculation process. The IWG included participants from a number of US Government agencies in their attempt to justify the economics of CO2 and other "Green House Gas" (GHG) emissions control regulations". They explain that: "This report provides rigorous scientific documentation of how the ECS metric is being misused in a number of ways as described in the TSDs and proposes a more scientifically based metric to replace ECS use in regulatory activity." In the 86 pages report they provided the following tables and figures: Table 1.1 (page 15) describing all the metrics used and derived in the report.  Table 1.2 (page 29) presents the Climate Model TCR/ECR Ratio. Table 5.0 (page 72) shows Statistical Distributions for ECS. Figure 1.1 (page 18) which is the Dr. John Christy Study - Climate Model Comparison to Actual Physical Data of the mid- Troposphere Temperature Anomalies. Figure 1.2 (page 30) show the IPCC AR4 Climate Model TCR/ECS Trends vs. ECS. Figure 1.3 (page 30) showing the IPCC AR4 Climate Model ECS/TCR Trends VS. TCR. Figure 2.1 (page 34) showing the Simple Spring-Mass-Damper Dynamic System. Figure 3.1 (page 38) presents Atmospheric CO2 Concentration 1832-2013 and Projections to 2100. Figure 4.1 (page 46) shows Comparison of Several Popular Global Average Temperature Databases. Figure 4.2 (page 49) presents Ljungqvist Temperature Reconstruction for the Northern Hemisphere. Figure 4.3 (page 51) shows HadCRUT4 Global Yearly Average Temperature Anomaly. Figure 4.4 (page 53) presents Case 1 HadCRUT4 Data Curve Fit, TCSTRF = 1.5 deg. C. Figure 4.5 (page 56) presents HadCRUT4 Data Fit with TCSTRF = 0.8 deg. C and 1000 Year Climate Cycle. Figure 4.6 (page 58) shows determining an Upper Bound for Transient Climate Sensitivity, TCSTRF. Figure 4.7 (page 60) presents Historical Reconstruction of TSI by Kopp - (1610 - 2010). Figure 4.8 (page 61) presents Total Solar Irradiance (TSI) Variation: 1650 - Present and Beyond. Figure 4.9 (page 65) presents Recent Published Trends in ECS Uncertainty Range. Figure 4.10 (page 68) shows Bounding Maximum Possible AGW Temperature Rise. Figure 5.1 (page 74) shows the Comparison of ECS Probability Density Functions.

Commenter 10502 states the SCC attempts to weigh possible future damage to the world-wide society from US CO2 emissions, against the immediate and certain increases to US energy and related economic cost created by issuance of each new regulation. Such unilateral US CO2 emissions regulations imposed on US citizens, without an enforceable world-wide agreement to limit CO2 emissions, will have insignificant effect on global warming, and will almost certainly cause a migration of US energy intensive manufacturing jobs to other countries that do not impose CO2 emission regulations on themselves. Total curtailment of US-only CO2 emissions could not prevent the joint statistical probability of high climate sensitivity to CO2 and high atmospheric CO2 levels that lead to high computed values of SCC. Such conditions using the IWG's scientifically unsupported ECS distribution of Figure 6 <page 11> are related to a significant computed probability of high temperatures and high CO2 levels that could melt permanent ice sheets on Greenland and West Antarctica and cause rapid sea level rise. There is not much scientific agreement on the probability that significant portions of these permanent ice sheets will be melted by rising GHG levels. Therefore, the assumptions in the SCC process that lead to high values of SCC must be carefully scrutinized. These are key issues that need to be reviewed in detail by an independent scientific review team to ensure that no unnecessary harm to the US population results from unilateral US CO2 emission regulations. Commenter states 10502 that the ECS method used to determine the Social Cost of Carbon (SCC) is flawed and compared it with other metrics that in their opinion are more appropriate. In the current SCC calculation process, temperature rise estimates from present until the year 2300, a key driver of SCC damage estimates, are highly corrupted by the inappropriate use of the ECS metric for computing temperature changes due to atmospheric CO2 changes over the next 300 years. The "best available science" that the IWG is required to employ in computing SCC should be based on a less uncertain transient climate sensitivity metric, such as the IPCC's Transient Climate Response (TCR) metric or our research team's Transient Climate Sensitivity (TCS) metric, defined and very accurately determined and bounded from actual climate data as documented in Ref. 1 (Attached document ending with Docket ID ending with 10502-A1). Commenter says that these transient climate sensitivity metrics are much more scientifically appropriate than ECS for computing temperature changes over the next 300 years and do not include highly disputed and uncertain effects that have been postulated to occur much more than 300 years from now, and that have led to so much uncertainty in establishing a confident value for ECS. Both the IPCC AR4 report and AR5 report that compute global average temperature rise from slowly increasing levels of GHG, inherently use the transient climate sensitivity aspects of climate simulation models, as opposed to the much larger effects that develop over 1000's of years in the totally inappropriate ECS simulations. However, as we have demonstrated in Ref.1 (Docket ID ending with 10502-A1) , it is not necessary to use complex and un-validated climate simulation models to accurately estimate and bound global average surface temperature rise due to CO2 emissions over the next 300 years. There is ample climate data to accurately determine the TCS metric and to use it in an algebraic equation that captures the direct and climate feedback warming effects of GHG forcing of the climate as a function of various proposed Representative Concentration Pathways (RCP). The IWG's SCC is computed for climate changes they expect only from the present until the year 2300. At present, global atmospheric CO2 levels are only about 397 ppm and increasing at a rate of about 0.5 percent per year. But, ECS is defined by the IPCC to be the climate response that would occur after the atmospheric CO2 level is suddenly doubled from pre-industrial levels of about 280 ppm to about 560 ppm and held at that level until the climate stabilizes at a new equilibrium condition. Because of long feedback responses of the oceans to give up even more CO2 as they gradually warm, and cause amplified GHG warming, the final equilibrium state imbedded in the ECS value is not reached until 1000 or more years later after the sudden doubling of CO2 levels. It is not clear how, or if, the IWG recognizes this fact in how it predicts global temperature rise and related damages for each ton of CO2 emitted between now and 2300. Moreover, at the present time, with an actual slowly increasing atmospheric CO2 level, not at all like the sudden doubling of atmospheric CO2 required to compute the ECS value in climate models, our oceans are cool enough to absorb about half of the CO2 emitted each year, leaving only about half of the yearly emissions available to increase atmospheric CO2 levels. Since ECS, TCR and TCS are metrics that attempt to describe temperature sensitivity to atmospheric CO2 levels, not CO2 emissions, the TSDs have not clearly described how the ECS value selected from the assumed statistical distribution for ECS can be used to accurately compute global temperature rise due to the slowly rising CO2 levels over the next few hundred years. This critical aspect of the SCC calculation process is not based on the best science available to the IWG and its member organizations, and indicates the need for an in-depth and independent scientific review of the entire SCC process. The commenter included a number of Figures, some of which are also included in the attached report document (Docket ID ending with 10502-A1). The list of Figures in this document is as follows: Figure 1 (page 6): Dr. John Christy Study - IPCC AR5 Report Climate Model Comparison to Actual Physical Data of the mid- Troposphere Temperature Anomalies. Figure 2 (page 8): Merged Law Dome and Mauna Loa Datasets for Atmospheric CO2 Concentration. Figure 3 (page 9): Extracting Transient Climate Sensitivity (TCS) from the HadCRUT4 Data. Figure 4 (page 10): Extracting an Upper Bound for TCS from the HadCRUT4 Data. Figure 5 (page 10): Max Possible GHG Warming Forecast, Present - 2300. Figure 6 (page 11): Comparison of TRCS and IWG probability distributions for ECS.
Commenter 9681 counters, stating IWG's treatment of climate sensitivity is appropriate and could go further in highlighting the costs of fundamental uncertainties. In addition to choosing an appropriate discount rate and sensitivity analyses around different SSPs, another important parameter to which the SCC estimates are sensitive is Equilibrium Climate Sensitivity (ECS) how the climate system responds to a constant radiative forcing, which is typically expressed as the temperature response to a doubling of CO2 concentration in the atmosphere. In its current iteration, the IWG conducted extensive sensitivity analyses over a range of equilibrium climate sensitivity estimates. (Specifying the climate sensitivity parameter as a random variable has a basis in PAGE02, which species a probability distribution function for the parameter. The IWG calibrated the Roe and Baker distribution, a right-skewed distribution, to characterize the probability distribution function of this parameter. The 2010 TSD explains the IWG's choice of the Roe and Baker distribution. The right-skewed nature of the climate sensitivity parameter's probability distribution function is independent of the IWG's choice of the Roe and Baker distribution. Rather, this skewness results from the IPCC's finding that values of the climate sensitivity parameter above 4.5 degree Celsius cannot be excluded. As a result, all of the probability distribution functions fit by the IWG for the climate sensitivity parameter were skewed to the right (see Figure 2 in the 2010 TSD), including Roe and Baker. See 2010 TSD, supra note 5, at 14, fig. 2.) The assumptions are clearly stated in the TSD. In addition to its sensitivity analysis, the IWG conducted a Monte Carlo simulation over the climate sensitivity parameter and the other random variables specified within the three IAMs.97 (A Monte Carlo simulation will run an integrated assessment model thousands of times, each time randomly picking the value of uncertain parameters from a probability distribution function, i.e. a function that assigns a probability to each possible parameter value. In the case of the SCC, the IWG ran 10,000 Monte Carlo simulations for each of the three IAMs and five socio-economic scenarios, randomizing the value of climate sensitivity, i.e., the change in average global temperature associated with a doubling of CO2, and all other uncertain parameters in the IAMs by the original authors. For each randomly drawn set of values, the IAM estimated the associated damages, with the final SCC estimate equaling the average value across all 10,000 runs, five socio-economic scenarios, and then across all three models. Therefore, each SCC estimate is calculated using 150,000 runs.) The range for the Equilibrium Climate Sensitivity (ECS) is derived from a combination of methods that constrain the values from measurements in addition to models. These include measured ranges from paleoclimate records, observed comparisons with current climate, as well as responses to recent climate forcings. The currently agreed likely range for the ECS (from both the IPCC TAR and AR5) is 1.5-4.5 degrees Celsius, with a best estimate of 3 degrees Celsius. Physical constraints make it extremely unlikely that the ECS is less than 1 degree Celsius and very unlikely greater than 6 degrees Celsius.98 (IPCC, supra note 95, at 14.) A host of analyses points to the costs of such uncertainty both for values that go outside the likely range and for uncertainty within it: in short, the optimal SCC tends to increase with increased uncertainty, sometimes dramatically so. While the current treatment of uncertainty around climate sensitivity by the IWG is sufficient to highlight the range of possible uncertainties, a reconsideration of the assumptions feeding into the SCC ought to take the latest advances highlighting the potentially higher costs of deep uncertainty into account.
Commenter 9685 continues that Senate testimony comparing model predictions with actual observations. The data presented in testimony confirms that all of the models used by the IPCC, including the 19 U.S. models, are fatally flawed and cannot be used in any policy analysis, including the ECS input to the IAMs used in the SCC.
Commenter 9685 also states estimates of climate sensitivity should be based on data, not flawed models. Although most of the IPCC AR5 models incorporate a mean sensitivity of 3.4 degreesC (range of 2.1 to 4.7 degreesC), recent studies either ignored by the IPCC or papers available after the cut-off date for the AR5 indicate the true sensitivity is much lower as suggested by Dr. Spencer. Rather than using the demonstrably flawed IPCC models, these studies use a combination of simple climate models bounded by data or use only data. These papers indicate the ECS is substantially lower than what was used as input to the IAMs and that the "fat tail" is constrained by real data. The consequence: the SCC is as much as 90% lower based on the ECS correction alone. Commenter believes that EPA must withdraw SCC2010 and SCC2013 and proceed with a wholesale revision of the ECS input to the IAMs using the recent papers that document a substantially lower value than used in the SCC reports.
Commenter 9685 states Damage function errors: sea level rise is based on the flawed IPCC models.  The Sea Level Rise (SLR) treatment in the IAMs is highly suspect. Nordhaus announced "changes" in DICE, but provided no data to show the projection of SLR versus time or temperature. This is a major problem for the IAMs: there is no data to compare results. Dependence on the flawed AR4 and AR5 models for SLR projections is another major problem for the IAMs. The public is unable to examine the details because the Damage Function aggregates the results. Each element has to be unbundled, this is especially important for SLR. EPA must require that each IAM provide the details of each element of the Damage Function. Commenter 9685-7221 continues, stating the model does not properly reflect benefits of fossil fuel use and CO2 fertilization. The damage functions for the three IAMs are presented in SCC2010 Figures 1A and 1B, using the modeler's default scenarios and mean input assumptions. There are significant differences between the three models both at lower (figure 1B) and higher (figure 1A) increases in global-average temperature. But the results displayed in Figures 1A and 1B show that the FUND model has negative damages ("benefits") through roughly 2080. Since the detailed elements of the "damage" function are not transparent, one can only surmise that the "benefits" are dominated by the CO2 fertilization effects. It is apparent that the other two models either do not reflect this effect or minimize the effect and are thus seriously deficient. This is a substantial flaw in SCC2010, SCC2013, and SCC2013r . Rising amounts of CO2 in the atmosphere have the effect of increasing U.S. and global crop yields. Other benefits of CO2 include reducing the amount of fresh water needed to produce any given amount of crop and improving the response to environmental stress (NIPCC2009) The amounts of increased yields by crop have been calculated for certain elevated levels of CO2 in the atmosphere. The benefits manifest themselves in the form of greater availability of food and lower prices which in turn contribute to improved health and quality of life. These benefits largely flow to those who otherwise struggle to afford an adequate supply of food, in other words, the poor. This effect is the dominant "negative damage" from the effects of CO2 emissions. The IAMs do not properly account for this effect.
Commenter 10091 continues the determination of the SCC used by the EPA in its cost comparison analysis is discordant with the best scientific literature on the equilibrium climate sensitivity and the fertilization effect of carbon dioxide two critically important parameters for establishing the net externality of carbon dioxide emissions at odds with existing Office of Management and Budget (OMB) guidelines for preparing regulatory analyses, and founded upon the output of Integrated Assessment Models (IAMs) which encapsulate such large uncertainties as to provide no reliable guidance as to the sign, much less the magnitude of the social cost of carbon.

Commenter 10091: Additionally, as run by the Interagency Working Group (IWG) (whose results were incorporated by the EPA in this action), the IAMs produce illogical results that indicate a misleading disconnect between a climate change and the SCC value. And we show that the sea level rise projections (and thus SCC) of at least one of the IAMs (DICE 2010) cannot be supported by the mainstream climate science. Commenter states that until this situation in its entirety can be properly rectified, the SCC should be barred from use in this and any other federal rulemaking. It is better not to include any value for the SCC in cost/benefit analyses such as these, than to include a value which is knowingly improper, inaccurate and misleading.
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Response 4.4-2: All of the comments on the climate science components of the modeling underlying the SC-CO2 estimates mirror those submitted to the Office of Management and Budget's separate comment solicitation on the SCC (78 FR 70586; November 26, 2013).  As a member of the interagency working group (IWG) on SC-CO2, EPA has carefully examined and evaluated comments submitted to OMB's separate solicitation.  EPA has also carefully examined and evaluated all comments received regarding SC-CO2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the climate science components of the modeling underlying the SC-CO2. Specifically, EPA concurs with the IWG's response to these comments and hereby incorporates them by reference.
EPA appreciates the commenters' recommendations for potential opportunities to improve the SC-CO2 estimates and has considered each one in the context of this rulemaking. EPA and other members of the IWG have reconfirmed their commitment to periodic review and update of the methodology and estimates to ensure that they continue to reflect the best available science and economics. Furthermore, EPA has determined that the SC-CO2 methodological recommendations require additional research, review, and public comment before it can apply them to a rulemaking context.
To help synthesize the technical information and input reflected in the comments, and to add additional rigor to the next update of the SC-CO2, the EPA and all of the other IWG members plan to seek independent expert advice on technical opportunities to improve the SC-CO2 estimates, including the approaches suggested by commenters and summarized in this document. Specifically, EPA and all of the other IWG members plan to ask the National Academies of Sciences, Engineering, and Medicine (Academies) to examine the technical merits and challenges of potential approaches to improving the SC-CO2 estimates in future updates. Input from the Academies, informed by the comments submitted to this rulemaking and the peer-reviewed literature, will help to ensure that the SC-CO2 estimates used by EPA continue to reflect the best available science and methodologies.
 After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC-CO2 estimates  until further updates can be made to reflect forthcoming guidance from the Academies.  EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO2 emissions changes into regulatory analysis.  Therefore, EPA has presented the current SC-CO2 estimates in the analysis of illustrative benefit-cost scenarios for new sources in RIA Chapter 5.
EPA will continue to consider these comments and will share the recommendations with the IWG as it moves forward with the Academies process.

The remainder of this section provides more detailed responses to the comments and recommendations.
 Regarding comments on equilibrium climate sensitivity (ECS), the EPA is aware that this is an active area of research and remains committed to updating the SC-CO2 estimates to incorporate new scientific information and accurately reflect the current state of scientific uncertainty regarding the ECS. While we agree with commenters that the ECS distribution, along with other climate modeling inputs to the SCC calculation, should be updated periodically to reflect the latest scientific consensus, care must be exercised in selecting an appropriate range of estimates for this important parameter. Many studies estimating climate sensitivity have been published, based on a variety of approaches (instrumental record, paleoclimate observations, models, etc.). These individual studies report differing values and provide different information. Picking a single study from the high or low end of the range, or even in the middle, will exclude relevant information. A valid representation of uncertainty regarding climate sensitivity should be obtained from a synthesis exercise such as that done by the IPCC that considers the full range of relevant studies.
 At the time the 2013 SC-CO2 update was released, the most authoritative statement about ECS appeared in the IPCC's AR4. Since that time, as several commenters noted, the IPCC issued a Fifth Assessment Report that updated its discussion of the likely range of climate sensitivity compared to AR4. The new assessment reduced the low end of the assessed likely range (high confidence) from 2°C to 1.5°C, but retained the high end of the range at 4.5°C. Unlike in AR4, the new assessment refrained from indicating a central estimate of ECS. This assessment is based on a comprehensive review of the scientific literature and reflects improved understanding, the extended temperature record for the atmosphere and oceans, and new estimates of radiative forcing.
 Several of the post-AR4 studies highlighted by some commenters were cited in the AR5 assessment. In particular, both Aldrin et al. (2012) and Otto et al. (2013) were cited in both Chapter 10 and Chapter 12 of the AR5 Working Group I assessment. Eight of the authors of Otto et al. (2013), including the lead author, were authors of Chapter 12 for AR5's Working Group I and one was a lead author for the chapter. Hence it is clear that the IPCC considered Otto et al. (2013) in its synthesis of literature on the ECS. More broadly, the AR5 climate sensitivity distribution likely incorporates much of the literature identified by the commenters. EPA will continue to follow and evaluate the latest science on the equilibrium climate sensitivity.  Furthermore, EPA and the other members of the IWG are seeking external expert advice on the technical merits and challenges of potential approaches prior to updating the ECS distribution in future revisions to the SCC estimates, including (but not limited to) using the AR5 climate sensitivity distribution for the next update of the SC-CO2.
 As discussed in preamble section II, RTC section 4.1, the 2009 Endangerment Finding, and in the OMB RTC, among other resources, the links between CO2 and temperature are established beyond question by laboratory measurements, physical theory, paleoclimate observations, instrumental observations, and observations of other planets. Climate change and its impacts, such as sea level rise, have been exhaustively documented, and synthesized internationally by the IPCC and domestically by the U.S. National Climate Assessment. Based on the wide acceptance of these conclusions in the scientific community, EPA believes that: (1) anthropogenic emissions of greenhouse gases are causing atmospheric levels of greenhouse gases in our atmosphere to rise to levels unprecedented in human history; (2) the accumulation of greenhouse gases in our atmosphere is exerting a warming effect on the global climate; (3) there are multiple lines of evidence, including increasing average global surface temperatures, rising ocean temperatures and sea levels, and shrinking ice in glaciers, ice sheets, and the Arctic, all showing that climate change is occurring, and that the rate of climate change in the past few decades has been unusual in the context of the past 1000 years; (4) there is compelling evidence that anthropogenic emissions of greenhouse gases are the primary driver of recent observed increases in average global temperature; (5) atmospheric levels of most greenhouse gases are expected to continue to rise for the foreseeable future; and (6) risks and impacts to public health and welfare are expected to grow as climate change continues, and that climate change over this century is expected to be greater compared to observed climate change over the past century.
 While there are inherent uncertainties associated with modeling climate systems over long time spans, the general circulation models (GCMs) upon which estimates of ECS and other climate science research are based have been extensively evaluated. For example, since 1989 the DOE has had a large program (The Program for Climate Model Diagnosis and Intercomparison) dedicated to evaluating these models.
 The ECS parameter is a useful parameter for summarizing the strength of the climate system's response to accumulating GHG concentrations in the atmosphere. However, it is influenced by many highly complex and uncertain natural processes, some of which adjust over very long periods of time. Therefore, persistent uncertainty about the ECS is not surprising. Furthermore, persistent uncertainty does not suggest an absence of useful information. However, EPA does not agree that progress has not been made in reducing this uncertainty. Over the last 30 years the scientific community has elucidated many aspects of the climate system's response to GHGs accumulating in the atmosphere. While the AR5 "likely" range is slightly larger than that of AR4, the assessment presented greater confidence in the tails. AR5 found that climate sensitivity is very unlikely to be greater than 6°C, whereas AR4 stated that the "lack of strong constraints limiting high climate sensitivities prevents the specification of a 95th percentile bound." Similarly, while the AR5 and the IPCC's (2001) Third Assessment Report (TAR) bounds look similar, the TAR bounds were presented as a range without estimated probabilities.
 In response to the commenter citing Pindyck on climate feedbacks and the shape of the ECS distribution, we agree that potential climate feedbacks and their strength are uncertain. However, the IWG chose a distribution from the peer-reviewed literature based on its evaluation of the scientific literature and the relationship between this distribution and IPCC range of the ECS. Regarding the skewness of the calibrated ECS distribution, this characteristic is common among the many approaches that have been used to study the ECS distribution and is not unique to the theoretical approach used by Roe and Baker to define the functional form of their distribution.  Consistent with the AR4 discussion on limiting the distribution to a range considered possible by experts, such as from 0°C to 10°C, the IWG truncated the distribution at 10oC (Hegerl 2007, p 719).
 EPA disagrees with the comment that "AR5 moderates many of the key findings of AR4." This response has already discussed in detail EPA's assessment of the AR5 findings on climate sensitivity and the implications for the SC-CO2 estimates.  The other examples given by the commenter -- anthropogenic warming, rate of warming, extreme temperatures, and tropical cyclone activity -- are not findings that have been moderated in AR5.  In fact, AR5 strengthened the conclusions about attribution of anthropogenic global warming by accounting for pollutants with a cooling effect and by strengthening the likelihood of warming ("very likely" in AR4 to "extremely likely" in AR5).  Similarly, the AR5 findings on tropical cyclone activity strengthened from "suggestions" in AR4 to "virtually certain" increases in frequency and intensity of the strongest tropical cyclones in the North Atlantic basin. The remaining two examples given by the commenter highlight historical information, not projections.  EPA further notes that the commenter has not identified or discussed whether and how these particular AR5 findings would affect the SC-CO2 estimates.
 In addition, EPA notes that the preamble section II discusses many new assessment reports published since the 2009 Endangerment Finding, including the recent USGCRP's 2014 Third National Climate Assessment (NCA3), the IPCC's 2013-4 Fifth Assessment Report (AR5) and IPCC's 2012 "Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation" (SREX). Section II of the preamble highlights changes, such as sea level rise, and cites the confidence in human attribution.  The preamble concludes that the "findings of the recent scientific assessments confirm and strengthen the conclusion that greenhouse gases endanger public health, now and in the future."  See also section 4.2 of this RTC for EPA's response to comments about use of the latest climate science, including AR5 findings, in analyses separate from the IWG SCC estimates.  Section 4.4-1, provides a detailed response to comments on the methodology and the integrated assessment models, including the damage functions, used to estimate the SC-CO2. Section 4.4-5 provides a detailed response to comments regarding the transparency of the SC-CO2 process and compliance with OMB guidance.
 Other physical science components of the integrated assessment models.
 A key objective of the IWG was to draw from the insights of the three models while respecting the different approaches to linking GHG emissions and monetized damages taken by modelers in the published literature. After conducting an extensive literature review, the interagency group selected three sets of input parameters (climate sensitivity, socioeconomic and emissions trajectories, and discount rates) to use consistently in each model. All other model features were left unchanged, relying on the model developers' best estimates and judgments, as informed by the then-current literature. While the IAMs are periodically updated, the rapid pace of research in the area of climate science means that at any given time there may be new research that has not yet been incorporated into one or more models. Thus, while a given model may not always reflect the most recent research regarding any given climate subsystem, the IWG concluded that, at the time, the IAMs collectively represented the state of the science by bringing all these systems together into a single framework.
 A benefit of using an ensemble of three models is that they cover a range of potential outcomes as expressed in the literature. For example the three models used collectively span a range of carbon cycle and climate change responsiveness that reflects the uncertainty in the literature.
 With regards to comments on the temperature response function, the past 15 years of observed atmospheric temperatures cannot be compared directly to climate model simulations because (1) observed temperatures were influenced by volcanic eruptions that were not included in simulations because the timing and spatial distribution of eruptions are not known in advance; and (2) the last 15 years of atmospheric temperatures have been strongly influenced by natural climate variability due to oceanic fluctuations, such as the El Niño Southern-Oscillation; models include this variability, but no attempt is made to synchronize the models' timing of this variability with observed variability. In other words, while the models incorporate variability around a trend over time, they cannot predict how that variability affects measured temperatures in a specific year.
 Regarding the criticisms by commenters of the sea level rise projections in DICE, the IWG recognizes that sea level rise projections are also an area of ongoing research. One key issue involves projections of melt from the Greenland and West Antarctic ice sheets. The IPCC AR5 report notes there is a possibility of sea level rise "substantially above" their best estimate of a likely range because of uncertainties regarding the response of the Antarctic ice sheet (AR5 Working Group I, Chapter 13). In AR5 the IPCC also discusses semi-empirical methods, stating a low confidence in projections based on such methods, which calibrate a mathematical model against observations rather than projecting individual processes. However, the IPCC did not entirely discount these methods. Further supporting the use of semi-empirical methods, the U.S. National Climate Assessment uses an average of the high end of semi-empirical projections in order to define their "Intermediate-High" Scenario (Parris et al., 2012). Therefore, it is reasonable for one out of three models used by the IWG to include some reliance upon semi-empirical methods.
 EPA is aware that more sophisticated yet still relatively simplified climate models, such as MAGICC, could be used to replace the highly simplified climate science components of the three IAMs. However, given the range of climate models available and the technical issues associated with such a change, replacing the climate modules or other structural features of the IAMs requires additional investigation before it can be applied to SCC estimation. EPA will continue to follow and evaluate the latest science on climate modeling and, along with other members of the IWG, is seeking external expert advice on the technical merits and challenges of potential approaches to updating this component of the IAMs in future revisions to the SCC estimates.
 We agree with the commenters who suggested the IAMs do not fully capture the impacts associated with changes in climate variability and weather extremes. For example, as discussed in the 2010 TSD, the calibrations in FUND and DICE do not account for increases in climate variability that may occur and would affect the agricultural sector. Similarly, we agree that the models' functional forms may not adequately capture potentially discontinuous "tipping point" behavior in Earth systems. In fact, large-scale earth system feedback effects (e.g., Arctic sea ice loss, melting permafrost, large scale forest dieback, changing ocean circulation patterns) are not modeled at all in one IAM, and are imperfectly captured in the others. This limitation of the three IAMs is discussed extensively in the 2010 TSD, and again in the 2013 update. The SCC estimate associated with the 95th percentile of the distribution based on the 3 percent discount rate is included in the recommended range partly to address this concern. EPA and the other members of the IWG will continue to follow and evaluate the latest science on  climate variability and potential tipping points, and seek external expert advice on the technical merits and challenges of potential approaches to improve the representation of these components of the modeling in future revisions.
4.4.3 Global vs. Domestic Value
Commenter 10091 states the IWG only reports the global value of the SCC which the IWG determines to accrue from continued carbon dioxide emissions in the United States. This is in direct violation of existing Office of Management and Budget (OMB) guidelines. OMB Circular A-4 (September 17, 2003) regarding Regulatory Analysis explicitly states: Your analysis should focus on benefits and costs that accrue to citizens and residents of the United States. Where you choose to evaluate a regulation that is likely to have effects beyond the borders of the United States, these effects should be reported separately. In reporting the SCC, the IWG argues away the need to focus on benefits and costs that accrue to citizens and residents of the United States and instead bases its SCC solely on its determinations of effects beyond the borders of the United States. Rather than reporting the latter separately, as recommended by OMB guidelines, the IWG only reports the global costs and makes no determination of the domestic costs. Considering that the majority (if not all) of the federal regulations incorporating the SCC into cost/benefit analysis apply to rules regulating domestic activities (including this one), reporting only the global impact the knowledge (in all areas, i.e., economics, social, environmental, etc.) of which is far less constrained than potential U.S. impacts imparts a huge degree of uncertainty and is a grossly misleading. Thus, the IWG's determination of the SCC is not appropriate for use in this or any federal regulatory analysis.  During the public comment period associated with new regulations such as this one which incorporate the SCC, a distinction should be made between domestic costs/benefits and foreign cost/benefits such that the public can judge for itself the value of the regulation. As it currently stands, the public likely has no idea that the benefits of the proposed regulations on domestic activities that supposedly accrue from incorporating the SCC are largely conferred upon foreign nations. This is clearly not a transparent situation.
 Commenter 10502 included a report stating: "The scientifically flawed Social Cost of Carbon (SCC) computational process attempts to compute the future global warming damage to the entire world-wide population that would be avoided by each ton of CO2 not emitted by US sources and count that highly uncertain world-wide avoided damage as a benefit of the regulation. But the SCC cost/benefit analysis only burdens the US economy and population (not the entire world) with the immediate cost impacts from issuance of the US regulations. These impacts to the US economy result in part from effective elimination of coal fired power plants, our most inexpensive electrical power source. This will result in much higher US energy costs and loss of jobs to other countries with lower coal-produced energy costs that do not choose to bear the burden of CO2 emissions control. Only the Legislative and Justice Branches of our government, duly protecting interests of US citizens, can sort out the wisdom of US citizens paying for the GHG emission sins of other nations that choose not to restrict their emissions, while willingly accepting the transfer from the USA of energy intensive industries to their lower-cost energy economies."  Commenter 10502 remarks stating the unilateral USA CO2 emissions regulations justified by the SCC, commit the USA population to bear the increased costs imposed by the regulations (a "hidden carbon tax" expressed by some critics) for highly uncertain future damages to be incurred not only in the USA, but by the entire world-wide society. This certainly inflates the cost of SCC with respect to the cost that would accrue to the US only.
 Commenter 10095 states in accordance with the White House Office of Management and Budget's (OMB) guidance on completing regulatory impact analyses, EPA must "focus on benefits and costs that accrue to citizens and residents of the United States." The RIA refers to the federal government's conclusion in its 2010 SCC technical support document that a global measure of the benefits from reducing U.S. emissions is preferable; however, solely using global SCC values contradicts OMB's guidance and is an issue that was raised in public comments regarding the 2013 SCC Technical Support Document ("TSD"). EPA, when applying SCC values in the RIA, also failed to analyze a seven percent discount rate which OMB's guidance suggests using as a base-case for regulatory analyses. EPA, to remain in accordance with explicit OMB guidance, must reassess the proposal's impact assessment using domestic, not global, SCC values and SCC values with a discount rate of seven percent.
 Commenter 9194 adds that the IWG/OMB process is fatally flawed in that it fails to calculate the SCC using OMB's prescribed "base case" discount rate of 7% and impermissibly calculates global benefits instead of domestic benefits.
Commenter 10023 states because the proposed rule would govern only domestic activities, it is inappropriate for EPA to use a global social cost of carbon value to estimate the benefits of those activities. Cost-benefit analysis for domestic policy should examine domestic costs and benefits; including global benefits leads to bias in favoring regulation.
Commenter 9396 International Benefits: The IWG chose to model the global benefits of GHG reductions and then to assign those benefits to US reductions. The inclusion of costs of international harm is unprecedented and illegal. Administration authority to regulate international action or regulate for the international community is non-existent. By choosing to include international benefits the IWG has mixed apples in with oranges in the development of an appropriate SCC.
Commenter 9681 states that use of a global SCC value is already influencing other international actors to follow suit, the International Monetary Fund (IMF) applies in its policy reviews an SCC estimate based on the IWG number. Given the potential influence of the IMF on the environmental policies of developing countries, the pull that the IWG's global estimate has at the IMF could be very advantageous to the United States, by motivating industrializing countries to use similar numbers in the future. In addition to this compelling strategic argument namely, that it is rational for the United States and other countries to continue their reciprocal, tit-for-tat use of a global SCC value to achieve the economically efficient outcome on climate change (and avoid catastrophic climate impacts) legal obligations further prescribe using a global SCC value. A basic ethical responsibility to prevent transboundary environmental harms has been enshrined in customary international law. For the United States to knowingly set pollution levels in light of only domestic harms, willfully ignoring that its pollution directly imposes environmental risks including catastrophic risks on other countries, would violate norms of comity among countries. The United States would be knowingly causing foreseeable harm to other countries, without compensation or just cause. Given that the nations most at risk from climate change are often the poorest countries in the world, such a policy would also violate basic and widely shared ethical beliefs about fairness and distributive justice. Indeed, taking a global approach to measuring climate benefits is consistent with the ideals of transboundary responsibility and justice that the United States commits to in other foreign affairs. The unmistakable implication of the Convention is that parties including the United States must account for global economic, public health, and environmental effects in their impact assessments. Binding international agreements also require consideration and mitigation of transboundary environmental harms. Notably, the United Nations Framework Convention on Climate Change to which the United States is a party declares that countries policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. The Convention further commits parties to evaluating global climate effects in their policy decisions, by employ[ing] appropriate methods, for example impact assessments . . . with a view to minimizing adverse effects on the economy, on public health and on the quality of the environment.
Commenter 9681 states obligations exist in domestic U.S. law. For example, the U.S. National Environmental Policy Act recognizes the worldwide and long-range character of environmental problems and requires federal agencies to include reasonably foreseeable transboundary effects in their environmental impact statements. While some individual statutes under which federal agencies will craft climate policies may be silent on the issue of considering extraterritorial benefits, arguably the most important statute for U.S. climate policy the Clean Air Act requires the control of air emissions that affect other countries and so encourages a global assessment of greenhouse gas effects. Specifically, Section 115 of the Clean Air Act directs EPA and the states to mitigate U.S. emissions that endanger foreign health and welfare. The global perspective on climate costs and benefits required by that provision should inform all regulatory actions developed under the Clean Air Act, including these proposed performance standards under Section 111.
Commenter 9681 states two practical considerations counsel in favor of a global SCC value. First, unlike some other significant international environmental impacts, no methodological limitations block the quantitative estimation of a global SCC value. In recent regulatory impact analyses for major environmental rules, EPA has qualitatively considered important transnational impacts that could not be quantified. For example, in the Mercury and Air Toxics Standards, EPA concluded that a reduction of mercury emissions from U.S. power plants would generate health benefits for foreign consumers of fish, both from U.S. exports and from fish sourced in foreign countries. EPA did not quantify these foreign health benefits, however, due to complexities in the scientific modeling. Similarly, in the analysis of the Cross-State Air Pollution Rule, EPA noted though could not quantify the substantial health and environmental benefits that are likely to occur for Canadians as U.S. states reduce their emissions of particulate matter and ozone pollutants that can drift long distances across geographic borders. Yet where foreign costs or benefits are important and quantifiable, other federal agencies frequently include those calculations. Given that sophisticated models already exist to quantify the global SCC, the global estimate is appropriate to use.

Commenter 9681 continues a global SCC value is in the national interest because harms experienced by other countries could significantly impact the United States. Climate damages in one country could generate large spillover effects to which the United States is especially vulnerable. The mesh of the global economy is woven tightly, and disruptions in one place can have consequences around the world. As seen historically, economic disruptions in one country can cause financial crises that reverberate globally at a breakneck pace. In a similar vein, national security analysts in government and academia increasingly emphasize that the geopolitical instability associated with climatic disruptions abroad poses a serious threat to the United States. Due to its unique place among countries both as the largest global economy with trade and investment dependent links throughout the world, and as a military superpower the United States is particularly vulnerable to international spillover effects. The 2010 TSD included a rigorous examination of global versus domestic SCC estimates. Consistent with the above discussion, the 2010 IWG reached the conclusion to estimate a global SCC value, citing both the global impacts of climate change and the global action needed to mitigate climate change. The IWG restated these arguments in the 2013 TSD, and refers back explicitly to its discussion in the 2010 TSD. EPA should continue using a global SCC estimate in its regulatory impact analyses.

Commenter 9681 states the IWG correctly used a global SCC value. To design the economically efficient policies necessary to forestall severe and potentially catastrophic climate change, all countries must use a global SCC value. Given that the United States and many other significant players in the international climate negotiations have already applied a global SCC framework in evaluating their own climate policies, the continued use of the global value in U.S. regulatory decisions may be strategically important as the United States seeks to set an example for other countries, harmonize regulatory systems, and take the lead in ongoing international negotiations. Binding legal obligations, basic ethical responsibilities, and practical considerations further counsel in favor of the United States using a global SCC value. To avoid a global tragedy of the commons and an economically inefficient degradation of the world's climate resources, all countries should set policy according to a global SCC value. The climate and clean air are global common resources, meaning they are free and available to all countries, but any one country's use i.e., pollution imposes harms on the polluting country as well as the rest of the world. Because greenhouse gases do not stay within geographic borders but rather mix in the atmosphere and affect climate worldwide, each ton of carbon pollution emitted by the United States not only creates domestic harms, but also imposes additional and large externalities on the rest of the world, including disproportionate harms to some of the least-developed nations. Conversely, each ton of carbon pollution abated in another country will benefit the United States along with the rest of the world. If all countries set their greenhouse gas emission levels based on only their domestic costs and benefits, ignoring the large global externalities, the collective result would be substantially sub-optimal climate protections and significantly increased risks of severe harms to all nations, including to the United States. "[E]ach pursuing [only its] own best interest . . . in a commons brings ruin to all." By contrast, a global SCC value would require each country to account for the full damages of its greenhouse gas pollution and so to collectively select the efficient level of worldwide emissions reductions needed to secure the planet's common climate resources.

Commenter 9681 continues well-established economic principles demonstrate that the United States stands to benefit greatly if all countries apply a global SCC value in their regulatory decisions. A rational tactical option in the effort to secure that economically efficient outcome is for the United States to continue using a global SCC value itself. The United States is engaged in a repeated strategic game of international negotiations and regulatory coordination, in which several significant players, including the United States have already adopted a global SCC framework. For the United States to now depart from this implicit collaborative dynamic by reverting to a domestic-only SCC estimate could undermine the country's long-term interests in future climate negotiations and could jeopardize emissions reductions underway in other countries, which are already benefiting the United States. A domestic-only SCC value could be construed as a signal that the United States does not recognize or care about the effects of its policy choices on other countries, and signal that it would be acceptable for other countries to ignore the harms they cause the United States. Further, a sudden about-face could undermine the United States credibility in negotiations. The United States has recently reasserted its desire to take a lead in both bilateral and international climate negotiations. To set an example for the rest of the world, to advance its own long-term climate interests, and to secure greater cooperation toward reducing global emissions, strategic factors support the continued use a global SCC value in U.S. regulatory decisions. Though the Constitution balances the delegation of foreign affairs power between the executive and legislative branches, [t]he key to presidential leadership is the negotiation function. Everyone agrees that the President has the exclusive power of official communication with foreign governments. The development and analysis of U.S. climate regulations are essential parts of the dialogue between the United States and foreign countries about climate change. Using a global SCC value communicates a strong signal that the United States wishes to engage in reciprocal actions to mitigate the global threat of climate change. The President is responsible for developing and executing the negotiation strategy to achieve the United States long-term climate interests. Currently, the President has instructed federal agencies to use a global SCC value as one important part of an implicit tit-for-tat negotiating strategy that encourages other countries to take reciprocal actions that also account for global externalities. The President's constitutional powers to negotiate international agreements would be seriously impaired if federal agencies were forced to stop relying on a global SCC value.

Commenter 9681 continues the United States has already begun to harmonize with other countries its policies on climate change and on the valuation of regulatory benefits. For example, the United States has entered into a joint Regulatory Cooperation Council with Canada, which has adopted a work plan that commits the two countries to synchronizing aggressive greenhouse gas reductions, especially in the transportation sector. A separate Regulatory Cooperation Council with Mexico calls generally for improving and harmonizing policy "by strengthening the analytic basis of regulations," and its work plan acknowledges the transboundary nature of environmental risks. Mexico and Canada have both adopted greenhouse gas standards for vehicles that harmonize with the U.S. standards and that calculate benefits according to a global SCC value. Canada has also used the IWG's global SCC value in developing carbon dioxide standards for its coal-fired power plants, estimating $5.6 billion (Canadian dollars) worth of global climate benefits. The direct U.S. share of the net benefits from that Canadian regulation will likely total in the hundreds of millions of dollars.

Commenter 9681 states further efforts at regulatory harmonization are currently underway. For example, the United States is now negotiating a Transatlantic Trade and Investment Partnership with the European Union, and a key element is regulatory coordination. The European Union has already adopted an Emissions Trading Scheme (ETS) to cap its greenhouse gas emissions, and its Aviation Directive (which extends the ETS cap to international flights) is just one of the climate policies that could be shaped by these negotiations. The European Commission has indicated its willingness to further reduce its ETS cap if other major emitters make proportional commitments a result that will only occur if countries consider more than their own domestic costs and benefits from reducing greenhouse gas emissions. Moreover, several individual European nations including the United Kingdom, France, Germany, and Norway - have adopted a global SCC value for use in their regulatory analyses. Some other European countries, such as Sweden, have adopted high carbon taxes that implicitly operate as a high SCC that accounts for global externalities. Even countries that have proposed setting carbon prices below the global SCC value acknowledge that, in an optimal system, prices worldwide would fully reflect the global harms of greenhouse gas emissions.

Commenter 9666 states that RIA should not use global SCC to estimate benefits, citing UARG on OMB's recent proposed rule to require agencies to use the SCC in rulemaking proceedings. Commenters explain that because the proposed SCC value would govern only domestic activities, it is inappropriate for the asserted benefits of the activities to be measured on a global scale. Cost-benefit analysis for domestic policy should examine domestic costs and benefits.
Commenter 7977 states the use of the SCC (social cost of carbon) overinflates the social benefits of the proposed rule. Commenter 7977-4861 states that the SCC is modeled to estimate the global benefit of CO2 reductions, wherein the proposed rule is specific to U.S. EGUs. Therefore, the social benefits calculated by EPA should represent those specific to the U.S. rather than worldwide. This is also contrary to OMB Guidance as stated in the SCC Technical Support Document.
Commenter 9423 The TCEQ, PUC, and RRC understand that the SCC estimates are based on the global benefits of C02 reductions vs. the benefits that would occur domestically in the United States. Given that the SCC estimates will be used to compare benefits to the domestic costs of a regulatory action, the SCC estimates should be directly related to domestic benefits. TCEQ, PUC, and RRC note that 0MB Circular A-4 states that "analysis of economically significant proposed and final regulations from the domestic perspective is required, while analysis from the international perspective is optional." In the 2010 Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive 0rder 12866, the Interagency Working Group concluded that a global measure of benefits from reducing U.S. emissions is preferable in order to address the global nature of climate change and to show that international action is necessary since "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." The TCEQ, PUC, and RRC disagree that a global measure is preferable in that the public has the right to know the domestic benefits vs. the domestic costs of a regulatory action. The use of a global SCC could show that benefits exceed costs when they actually may not provide any net benefits for the United States. In addition, the Interagency Working Group determined that the models were currently inadequate to determine region- or country-specific estimates of the SCC, but "that a range of values from 7 to 23 percent should be used to adjust the global SCC to calculate domestic effects." This range was based on very generalized key parameter assumptions using a 2.5 or 3 percent discount rate (which in itself is a subjective and questionable rate) or alternatively by proportionally determining benefit by the U.S. share of gross domestic product. The Working Group itself acknowledged that this range was highly speculative. The TCEQ, PUC, and RRC submit that the method of translating global benefits to domestic benefits is so speculative at this time that its use is not appropriate. In summary, EPA should not use the SCC estimates in the current 111(b) rulemaking project until there has been a complete and thorough independent peer review of the process and model data.

The comments regarding the scope of the SC-CO2 estimates mirror those submitted to the Office of Management and Budget's separate comment solicitation on the SCC (78 FR 70586; November 26, 2013).  As a member of the interagency working group (IWG) on SC-CO2, EPA has carefully examined and evaluated comments submitted to OMB's separate solicitation.  EPA has also carefully examined and evaluated all comments received regarding SC-CO2 through this rulemaking process and determined that the IWG responses to the comments on the OMB solicitation address the comments on the scope of SC-CO2 estimates and use of the estimates in this RIA.  Specifically, EPA concurs with the IWG's response to these comments and hereby incorporates them by reference.
 After careful evaluation of the full range of comments and associated technical issues described in section 4.4, EPA has determined that it will continue to use the current SC-CO2 estimates until further updates can be made to reflect forthcoming guidance from the Academies.  EPA believes that the current estimates continue to represent the best scientific information on the impacts of climate change available in a form appropriate for incorporating the damages from incremental CO2 emissions changes into regulatory analysis.  Therefore, EPA has presented the current SC-CO2 estimates in the analysis of illustrative benefit-cost scenarios for new sources in RIA Chapter 5.
 In addition, the comments regarding consistency with OMB Circular A-4, including selection of discount rates, are addressed in 4.4-5; response to comments about the selection of discount rates applies to the SC-CO2 is in 4.4-7.
 The remainder of this section elaborates on these comments in the context of this rulemaking.
EPA agrees with the commenters who stated that a focus on global SC-CO2 estimates in RIAs is appropriate. As discussed in the 2010 TSD, the IWG determined that a global measure of SC-CO2 is appropriate in this context because emissions of most greenhouse gases contribute to damages around the world and the world's economies are now highly interconnected. To reflect the global nature of the problem, the SC-CO2 incorporates the full damages caused by CO2 emissions and other governments are expected to consider the global consequences of their greenhouse gas emissions when setting their own domestic policies.
As stated in the OMB Response to Comments on SC-CO2, if all countries acted independently to set policies based only on the domestic costs and benefits of carbon emissions, it would lead to an economically inefficient level of emissions reductions which could be harmful to all countries, including the United States, because each country would be underestimating the full value of its own reductions. This is a classic public goods problem because each country's reductions benefit everyone else and no country can be excluded from enjoying the benefits of other countries' reductions, even if it provides no reductions itself. In this situation, the only way to achieve an economically efficient level of emissions reductions is for countries to cooperate in providing mutually beneficial reductions beyond the level that would be justified only by their own domestic benefits. By adopting a global estimate of the SC-CO2, the U.S. government can signal its leadership in this effort. In reference to the public good nature of mitigation and its role in foreign relations, thirteen prominent academics noted that these "are compelling reasons to focus on a global [SC-CO2]" in a recent article on the SC-CO2 (Pizer et al., 2014). In addition, as noted by commenters, there is no bright line between domestic and global damages. Adverse impacts on other countries can have spillover effects on the United States, particularly in the areas of national security, international trade, public health and humanitarian concerns.
GHG emissions in the United States will have impacts abroad, some of which may, in turn, affect the United States. For this reason, a purely domestic measure is likely to understate actual impacts to the United States. Also, as stated above, the EPA and the other members of IWG believes that accounting for global benefits can encourage reciprocal action by other nations, leading ultimately to international cooperation that increases both global and U.S. net benefits relative to what could be achieved if each nation considered only its own domestic costs and benefits when determining its climate policies.
Further, as explained in the 2010 TSD, from a technical perspective, the development of a domestic SC-CO2 was greatly complicated by the relatively few region- or country-specific estimates of the SC-CO2 in the literature, and impacts beyond our borders have spillover effects on the United States, particularly in the areas of national security, international trade, and public health. As a result, it was only possible to include an "approximate, provisional, and highly speculative" range of 7 to 23 percent for the share of domestic benefits in the 2010 TSD. This range was based on two strands of evidence: direct domestic estimates resulting from the FUND model, and an alternative approach under which the fraction of GDP lost due to climate change is assumed to be similar across countries.
Regarding the comments on Clean Air Act Section 115 and the implications for use of a global SC-CO2, EPA notes that these commenters reads into section 115 limitations and requirements that do not appear in the statutory text.
Section 115(a) of the Clean Air Act requires the Administrator to give formal notification to the Governor of a State in a very specific and limited circumstances.  Specifically, the provision provides: "Whenever the Administrator, upon receipt of reports, surveys or studies from any duly constituted international agency has reason to believe that any air pollutant or pollutants emitted in the United States cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare in a foreign country or whenever the  Secretary of State requests [her] to do so with respect to such pollution which the Secretary of State alleges is of such a nature, the Administrator shall give formal notification thereof to the Governor of the State in which such emissions originate."  Section 115(b) further provides that notices issued under 115(a) are deemed to be findings under section 110(a)(2)(H)(ii) of the Clean Air Act and thus any state receiving such a notice must revise its state implementation plan to address the offending emissions.
Section 115(c), in turn, provides that the section only applies "to a foreign country which the Administrator determines has given the United States essentially the same rights with respect to the prevention or control of air pollution occurring in that country as is given that country by this section." In other words, unless the Administrator determines a foreign country has given the United States the same rights section 115 gives to foreign countries, the Administrator is not required issue any notification that would otherwise be required under 115(a).  Contrary to the commenter's assertion, section 115 does not mention or refer to "reciprocity agreements."  Moreover, section 115(c) does not in any way limit the Administrator's discretion to act under other statutory provisions.  It simply limits the reach of 115(a) by defining which countries are covered by the requirement for the Administrator to give formal notification under that section regarding pollution originating in the United States that affects health and welfare in a foreign country.
There is also no support in section 115 or any provision of the Clean Air Act for the commenter's assertion that EPA is forbidden from counting harms or benefits occurring in other countries without first taking action under section 115.  Section 115 requires the Administrator to issue a formal notification in the limited set of specific circumstances outlined above and identifies the obligations that flow from the issuance of such notifications.  It does not, as the commenter suggests, include language prohibiting the EPA from considering the impact of U.S. emissions on foreign countries in other contexts.  Indeed, the United States has a long history of working together with other countries to address air quality issues.  As explained above, the reciprocity provision in section 115(c) merely defines the applicability of section 115.  Nothing in the text of the section addresses the extent to which EPA may consider or address the impacts beyond its borders that are related to air pollution originating in the United States, or suggests that action under section 115 is a prerequisite to counting international harms and benefits in any analysis.
Finally, there is no support for the assertion that section 115 requires EPA to list CO2 and/or other GHGs as criteria pollutants and notify state Governors to submit plans under section 110 before taking any action to mitigate the impact of U.S. emissions on public health and welfare in foreign countries or counting international benefits in other rulemaking contexts.  Not only does the limitation commenters identify simply not appear in the statutory text, but section 115(d) explicitly retains certain prior recommendations with respect to pollutants for which NAAQS have not been established. It would be absurd to interpret a section that explicitly retains recommendations relating to the impact of non-NAAQS pollutants on foreign countries as prohibiting the Administrator from considering such impacts unless a NAAQS has been established for the pollutant.
Regarding the comment that EPA lacks authority to regulate GHG emissions outside the fenceline, EPA notes that application of the SC-CO2 to estimate the social benefits of emission reductions is entirely separate from regulating emissions. Conducting an economic analysis does not confer any legal or regulatory obligations. See the preamble, including section III, for discussion about the scope of the final rule and the legal justification.
 As stated in the OMB Response to Comments on SC-CO2, the IWG concluded that the only way to achieve an efficient allocation of resources for emissions reduction on a global basis is for all countries to base their policies on global estimates of damages.  The IWG has therefore continued to recommend the use of global SC-CO2 estimates in regulatory impact analyses.  EPA agrees with the IWG conclusion and has used the global SC-CO2 estimates in the analyses of illustrative costs and benefit scenarios in the RIA.
4.4.4 Uncertainty
 Comment 4.4-4: Commenter 9396 states that for the electric sector and the commenting parties associated with this filing, EPA's use of the SCC as a valuation tool in major rulemakings is especially important for consideration. The IWG and the National Research Council (NRC) have flagged increased uncertainty regarding the relevance and accuracy of the SCC as developed by the IWG for the purposes of regulatory actions that derive the bulk of their benefits from reductions in GHGs. Despite the serious limits of both quantification and monetization, SCC estimates can be useful in estimating the social benefits of reducing carbon dioxide emissions. Under Executive Order 12866, agencies are required, to the extent permitted by law, "to assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs." The purpose of the SCC estimates presented here is to make it possible for agencies to incorporate the social benefits from reducing carbon dioxide emissions into cost benefit analyses of regulatory actions that have small, or marginal, impacts on cumulative global emissions. Most federal regulatory actions can be expected to have marginal impacts on global emissions.
Commenter 9396 states the SCC as derived by the IAMs is an extremely subjective metric that was developed to try and quantify the benefits of reducing only domestic GHG emissions. The degree of subjectivity is best captured in the 2010 IWG report which states, "When attempting to assess the incremental economic impacts of carbon dioxide emissions, the analyst faces a number of serious challenges. A recent report from the National Academies of Science (NRC 2009) points out that any assessment will suffer from uncertainty, speculation, and lack of information about (1) future emissions of greenhouse gases, (2) the effects of past and future emissions on the climate system, (3) the impact of changes in climate on the physical and biological environment, and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and monetize the harms associated with climate change will raise serious questions of science, economics, and ethics and should be viewed as provisional." In other words, as with any economic model, the outcome is only as reliable as the input. The IWG made a number of assumptions that are questionable and worthy of a broader policy review inclusive of public participation and public comment prior to finalization and application in the regulatory development process. The IWG estimated benefits of reductions hundreds of years into the future, well beyond any reasonably predictable time horizon. Any rational assessment of future climate activity must ascribe an increasingly discounted view of future economic harm as the level of uncertainty regarding the probable outcome becomes correspondingly uncertain.

Commenter 9681: First, as a matter of law and economics, uncertainty in benefits estimates does not mean they should be excluded from regulatory impact analyses. No benefit or cost estimate is certain. Further, the courts have explicitly rejected this argument with respect to the SCC, and executive orders dating back as far as the Reagan administration have all issued guidelines specifying explicit consideration of benefits even if the precise size of the benefit is uncertain. In 2008, the U.S. Court of Appeals for the Ninth Circuit determined that agencies could not assign a zero dollar value to the social costs of the impacts of climate change. It determined that failing to count SCC benefits would be illegal. Like the Court of Appeals, executive orders dating back to 1981 have also required agencies to assess benefits and costs even when significant uncertainty exists. Every president since (and including) Ronald Reagan has issued directives requiring that agencies conduct cost-benefit analyses of proposed regulations where permitted by statute. Specifically, agencies are directed to take into account benefits and costs, both quantitative and qualitative . . . and use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In this case, the National Highway Traffic Safety Administration (NHTSA) had decided not to count any avoided climate damages in issuing fuel economy standards. The court concluded: NHTSAs reasoning is arbitrary and capricious for several reasons. First while the record shows that there is a range of values, the value of carbon emission reductions is certainly not zero. The court's decision directly contradicts the petitioners argument that uncertainty renders the SCC invalid, as well as their demand that agencies use a value of zero.