In early 2009, in part to improve consistency in agencies’ use of social  cost of carbon estimates for regulatory impact analysis, OMB’s Office of  Information and Regulatory Affairs and the Council of Economic Advisers  convened the Interagency Working Group on Social Cost of Carbon. In June 2013, after using the 2010 estimates in an  earlier proposal of the rule, the Department of Energy’s final rule on  energy standards for microwaves was the first regulatory action to  incorporate the revised estimates developed by the working group in the  2013 update to the Technical Support Document. The working group’s processes and methods for developing  the estimates reflected three key principles. Specifically, according to  participants, the working group (1) used consensus-based decision  making; (2) relied largely on existing academic literature and models,  including technical assistance from outside resources; and (3) took steps  to disclose limitations and incorporate new information by considering  public comments and revising the estimates as updated research became  available. Participating Entities

According to the Technical Support Document and participants we spoke  with, OMB and the Council of Economic Advisers convened and led the  working group, and four other EOP offices and six federal agencies  actively participated in the group. According to several participants, the  participating EOP offices included the relevant subject-matter experts to  best contribute on behalf of the EOP, and the other participating  agencies were those likely to conduct rulemakings affecting carbon  emissions and, therefore, use the social cost of carbon estimates in the  future. According to the Technical Support Document, the working group was  convened under the broad direction of Executive Order 12866 for  agencies to assess the costs and benefits of intended regulations. According to OMB staff, there was no  requirement that the informal working group should document its activities  or proceedings, including the meetings held or specific discussions that  occurred at each. However, OMB staff and EPA officials stated that all  major issues discussed during working group meetings are documented  in the Technical Support Document and its 2013 update, which is  consistent with the control activities standard in the federal standards for  internal control. Processes and Methods

Participants told us that the working group’s processes and methods  reflected three key principles. First, the group used consensus-based  decision making. The participants  generally stated that they were satisfied that the final Technical Support  Document successfully addressed individual comments on the draft  version and the overall consensus of the working group and its  participating offices and agencies. Relied on Existing Academic Literature and Models

The Technical Support Document states that the main objective of the  working group was to develop a range of estimates of the social cost of  carbon using a defensible set of modeling inputs based on existing  academic literature. According to the Technical Support Document and many  participants we spoke with, the working group calculated its estimates  using three models that integrate climate and economic data into a single  modeling framework for estimating future economic effects resulting from  climate change. All other model assumptions and features were  unchanged by the working group, which weighted each model equally to  calculate the final estimates. Many participants stated that the working group also consulted  with the developers of the models used by the group to develop the  estimates. Specifically, the developers updated  the academic models to reflect new scientific information, such as in sea  level rise and associated damages, resulting in higher estimates. The  working group did not make changes in the modeling inputs that it used  for the 2010 estimates. The Technical Support Document discusses  several limitations of its estimates and areas that the working group  identified as being in particular need of additional exploration and  research. Since 2008, agencies have published over three dozen regulatory actions  for public comment in the Federal Register that use various social cost of  carbon estimates in regulatory impact analyses. Several participants told us that the working group decided to  revise the estimates for the first time in 2013 after agencies received a  number of public comments encouraging revisions because the models  used to develop the 2010 estimates had been subsequently updated and  used in peer-reviewed academic literature. The Technical Support Document set a goal of revisiting the estimates  within 2 years, or when substantially updated models become available. Agency Comments

We provided a draft of this report for review and comment to the  Departments of Agriculture, Commerce, Energy, Transportation, and the  Treasury; EPA; and OMB.
Why GAO Did This Study

Executive Order 12866 directs federal agencies to assess the economic effects of their proposed significant regulatory actions, including a determination that a regulation's benefits justify the costs. In 2008, a federal appeals court directed DOT to update a regulatory impact analysis with an estimate of the social cost of carbon—the dollar value of the net effects (damages and benefits) of an increase in emissions of carbon dioxide, a greenhouse gas.
In 2009, the Interagency Working Group on Social Cost of Carbon was convened to develop estimates for use governmentwide, and it issued final estimates in its 2010 Technical Support Document. In 2013, the group issued revised estimates that were about 50 percent higher than the 2010 estimates, which raised public interest.
GAO was asked to review the working group's development of social cost of carbon estimates. This report describes the participating entities and processes and methods they used to develop the 2010 and 2013 estimates. GAO reviewed executive orders, OMB guidance, the Technical Support Document, its 2013 update, and other key documents. GAO interviewed officials who participated in the working group on behalf of the EOP offices and agencies involved. GAO did not evaluate the quality of the working group's approach.
GAO is making no recommendations in this report. Of seven agencies, OMB and Treasury provided written or oral comments and generally agreed with the findings in this report. Other agencies provided technical comments only or had no comments.

What GAO Found

To develop the 2010 and 2013 social cost of carbon estimates, the Office of Management and Budget (OMB) and Council of Economic Advisers convened and led an informal interagency working group in which four other offices from the Executive Office of the President (EOP) and six federal agencies participated. Participating agencies were the Environmental Protection Agency (EPA) and the Departments of Agriculture, Commerce, Energy, Transportation (DOT), and the Treasury. According to several working group participants, the working group included relevant subject-matter experts and the agencies likely to use the estimates in future rulemakings. According to OMB staff, there is no single approach for convening informal interagency working groups and no requirement that this type of working group should document its activities or proceedings. However, OMB and EPA participants stated that the working group documented all major issues discussed in the Technical Support Document, which is consistent with federal standards for internal control. According to the Technical Support Document and participants GAO interviewed, the working group's processes and methods reflected the following three principles:
Used consensus-based decision making. The working group used a consensus-based approach for making key decisions in developing the 2010 and 2013 estimates. Participants generally stated that they were satisfied that the Technical Support Document addressed individual comments on draft versions and reflected the overall consensus of the working group.
Relied on existing academic literature and models. The working group relied largely on existing academic literature and models to develop its estimates. Specifically, the working group used three prevalent academic models that integrate climate and economic data to estimate future economic effects from climate change. The group agreed on three modeling inputs reflecting the wide uncertainty in the academic literature, including discount rates. Once the group reached agreement, EPA officials—sometimes with the assistance of the model developers—calculated the estimates. All other model assumptions and features were unchanged by the working group, which weighted each model equally to calculate estimates. After the academic models were updated to reflect new scientific information, such as in sea level rise and associated damages, the working group used the updated models to revise its estimates in 2013, resulting in higher estimates.
Took steps to disclose limitations and incorporate new information. The Technical Support Document discloses several limitations of the estimates and areas that the working group identified as being in need of additional research. It also sets a goal of revisiting the estimates when substantially updated models become available. Since 2008, agencies have published dozens of regulatory actions for public comment that use various social cost of carbon estimates in regulatory analyses and, according to working group participants, agencies received many comments on the estimates throughout this process. Several participants told GAO that the working group decided to revise the estimates in 2013 after a number of public comments encouraged revisions because the models used to develop the 2010 estimates had been updated and used in peer-reviewed academic literature.