Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Politics

Why This White House Regulatory Overhaul Is a Big Deal for Climate Policy

Here are three big changes the White House is proposing.

Patchwork of regulations.
Heatmap Illustration/Getty Images

The White House proposed a major overhaul to the country’s guidelines for analyzing regulations and government spending on Thursday. The changes to an incredibly dense, wonky set of documents known as “Circular A-4” and “Circular A-94” would affect how government agencies, like the Environmental Protection Agency, measure the costs and benefits of decisions that have big implications for climate change, like power plant regulations, clean car rules, and highway expansion projects.

It’s hard to overstate the magnitude of the makeover. More than anything, the changes represent a shift in philosophy. The proposed guidelines would change the way the government views and takes into account inequity, not just within the United States but also how U.S. actions affect people in other nations and future generations.

The current documents were also sorely outdated. The government hasn’t updated its instructions for regulatory analysis in 20 years, and the guidance for public investment is more than 30 years old. In the years since, academic thinking on how to conduct cost-benefit analysis has changed, financial markets have changed, and the philosophy of the White House has changed, said Noah Kaufman, a senior research scholar at Columbia University who previously served as a senior economist at the Biden administration’s Council of Economic Advisors.

“There's a lot of disagreement about a lot of what's in here, but pretty much everyone kind of agreed that they needed to be redone,” he said.

The proposal will go through a public comment period before being finalized by the federal Office of Information and Regulatory Affairs.

Cost-benefit analysis is but one consideration in government decision making, and often not the most important one, so Kaufman cautions against reading too much into the changes. Perhaps most significant to him is the overall vibe shift between the old guidance and what the White House released on Thursday. He said the old version reads like it’s written by people who are trying to convince you that there’s a very limited role for the government to play. “The people who worked on this document are far more interested in a more proactive role for how government programs and regulations can help address market failures.”

Here are three big changes the White House is proposing.

Changing the discount rate

The proposed guidance makes a big adjustment to an incredibly complicated, confusing, but consequential number called the discount rate. The discount rate determines how much government analysts weigh distant, future benefits of a policy versus its cost today. A higher discount rate downplays future gains, making it much harder to justify the expense of flood protection infrastructure or rules that limit carbon emissions from power plants.

While the old instructions called for a discount rate between 3% and 7%, the new proposal suggests a dramatically lower rate of 1.7%. This means that when regulators look at the cost to society of putting more carbon in the atmosphere — and they take into account all of the potential future lost lives, reduced crop yields, and damages caused by rising seas — it would look a lot more expensive than it does under the current guidelines. To get a sense of how much more, the Obama administration used a discount rate of 3%, and estimated that the cost of every ton of carbon spewed into the atmosphere was about $51 per ton. The nonprofit research group Resources for the Future estimates that with a 2% discount rate, that number would jump to $185.

Factoring in global impacts

The new guidelines encourage agencies to take the global impact of decisions — such as potential lives lost to extreme weather outside the U.S. — into account when conducting a cost-benefit analysis. This is a big deal, according to Paul Kelleher, an associate professor at the University of Wisconsin-Madison who studies the ethics of public policy.

“This probably is an acknowledgement that when Americans emit carbon dioxide, it doesn’t only harm Americans,” Kelleher said. It also incentivizes American policymakers to approach international climate negotiations from a more cooperative standpoint, rather than only being interested in what happens within American borders, he said.

It’s an important, if admittedly wonky, way for the Biden administration to acknowledge the United States’ role in global climate change — suddenly, the lives of billions of people around the world are added to the accounting sheets of government agencies. That means a proposal to, for example, limit tailpipe emissions would appear to have larger financial benefits.

Equity-weighting

Today, the benefits of a proposed policy are weighed against how much the potential beneficiaries would be willing to pay for it. The problem is the government assumes a dollar means the same thing to everyone. But the value of a dollar to a grocery store clerk is a lot higher than the value of a dollar to, say, Elon Musk.

Under the current system, “climate damages in the poorest parts of the world will be registered as not as serious as climate damages that are much less serious in richer parts, where people’s willingness to pay can be quite high because their ability to pay is higher,” Kelleher said.

The new guidelines allows agencies to use an approach known as “equity-weighting,” or to account for the differential impacts of a given regulation or investment. “Now, instead of just counting up the dollars that people are willing to pay to avoid damages, you try to account for the real effect on wellbeing,” said Kelleher.

Take, for example, a new rule to reduce pollution from power plants, which low-income communities are disproportionately affected by. Under the new system, the financial benefits of such a regulation would appear much higher than they currently do, because more weight would be given to the health rewards and other gains the community would see from that regulation. And because the new guidelines allow analysts to look beyond U.S. borders, the practice of equity-weighting could also account for the disproportionate harms that a poorer country like Bangladesh would face from a warmer planet, significantly raising the cost of emissions.

If this approach is finalized, “it would be a titanic shift in the federal cost-benefit analysis framework,” Kelleher said.

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Sustainability

Window Heat Pumps Could Change the Game

A new report from the American Council for an Energy-Efficient Economy has some exciting data for anyone attempting to retrofit a multifamily building.

A Midea heat pump.
Heatmap Illustration/Midea, Getty Images

By now there’s plenty of evidence showing why heat pumps are such a promising solution for getting buildings off fossil fuels. But most of that research has focused on single-family homes. Larger apartment buildings with steam or hot water heating systems — i.e. most of the apartment buildings in the Northeast — are more difficult and expensive to retrofit.

A new report from the nonprofit American Council for an Energy-Efficient Economy, however, assesses a handful of new technologies designed to make that transition easier and finds they have the potential to significantly lower the cost of decarbonizing large buildings.

Keep reading...Show less
Yellow
Climate

AM Briefing: Noem Defends FEMA’s Response to Texas Floods

On FEMA’s response in Texas, climate diplomacy, and the Grand Canyon fire

Noem Defends FEMA’s Response to Texas Floods
Heatmap Illustration/Getty Images

Current conditions: Two people are missing after torrential rains in CataloniaThe daily high will be over 115 degrees Fahrenheit every day this week in Baghdad, IraqThe search for victims of the Texas floods is paused due to a new round of rains and flooding in the Hill Country.

THE TOP FIVE

1. Trump admin pushes back on reports of FEMA’s slow response to Texas floods

Homeland Security Secretary Kristi Noem defended the Federal Emergency Management Agency after The New York Times reported it failed to answer nearly two-thirds of the calls placed to its disaster assistance line by victims of the Central Texas floods. Speaking on NBC’s Meet the Press on Sunday, Noem repudiated reports by the Times and Reuters that her requirement that she personally approve expenses over $100,000, as well as the deployment of other critical resources, created bottlenecks during the crucial hours after the floodwaters receded. “Those claims are absolutely false,” she said.

Keep reading...Show less
Yellow
Energy

The Pentagon’s Rare Earths Deal Is Making Former Biden Officials Jealous

The multi-faceted investment is defense-oriented, but could also support domestic clean energy.

A rare earths mine.
Heatmap Illustration/MP Materials, Getty Images

MP Materials is the national champion of American rare earths, and now the federal government is taking a stake.

The complex deal, announced Thursday, involves the federal government acting as a guaranteed purchaser of MP Materials’ output, a lender, and also an investor in the company. In addition, the Department of Defense agreed to a price floor for neodymium-praseodymium products of $110 per kilogram, about $50 above its current spot price.

Keep reading...Show less
Blue