This is pretty funny. In my Senate testimony one of the key points I made was that the Office of Management and Budget (OMB) guidelines state that federal agencies are supposed to do cost/benefit calculations using both a 3% and a 7% discount rate. Yet the Obama Administration Working Group only used 3% and 5% when estimating the “social cost of carbon.” My conjecture was that they avoided the 7% figure since it would show a SCC close to $0/ton, if not negative, making it awkward to clamor for immediate action to stop the catastrophe brewing before our very eyes.

To see just how serious a pickle they are in, consider EPA’s discussion of a proposed regulation on steam electric power plants. Look at this shot of a table summarizing their results:

See the part in yellow? The EPA is dutifully following Executive Branch guidelines, as laid out by the OMB. They are reporting the estimated benefits of the proposed rule at both a 3% and 7% rate. Yet, since one component of the benefits is the reduction in CO2, they have to include a footnote explaining that actually, they will be plugging in the number for a 5% discount rate, since the social cost of carbon (SCC) at a 7% rate is “not available.” (Note that the modeled benefits from reducing NOx and SO2 aren’t about climate change, but are considered direct health hazards. That’s why computing their harms–and the corresponding benefits from reductions–doesn’t do anything screwy going from 5% to 7% discount rates, as does the “social cost of carbon” since climate change is actually beneficial, according to the government’s own suite of models, for the next few decades.)

I hope this underscores just how screwy this is. From now on, federal agencies will have to include footnotes in all of their cost/benefit tables, since the Working Group explicitly chose not to estimate the number that they are all required to plug into their calculations.

To be crystal clear: The Working Group ignored the OMB guidelines, but at least reported accurately on their number: They said it was a 5% rate when giving those figures. Yet the EPA rule above, and others like it from now on, will be reporting the benefits of various rules at the “7%” rate while including the social benefits of CO2 emission reductions at the 5% rate. In other words, they are literally plugging in the wrong number; they have no choice.