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EPA Uses Novel 'Social Cost Of Methane' In Landfill, Oil & Gas Proposals
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EPA is using its novel “social cost of methane” (SCM) estimate to calculate the climate benefits of its newly proposed methane rules for landfills and the oil and gas sector, using values that are significantly larger than its similar, and controversial, carbon dioxide (CO2)-focused metric to calculate the bulk of the proposals' quantified benefits.


The agency has used the new values at least once before, to suggest potential co-benefits from reducing upstream and downstream methane emissions as a result of its proposed phase 2 fuel efficiency standards for medium- and heavy-duty trucks.  But use of the metric in the landfill and oil and gas proposals is significant because it marks the first time the agency has used the metric to quantify direct climate benefits of a regulation limiting methane, resulting in a cost-benefit calculation that accounts for nearly all of the rules' monetized benefits.


The values are pleasing environmentalists, who have long called for the measures to help justify strict new climate rules that regulate methane, the greenhouse gas (GHG) that is significantly more potent than CO2. “It's good to see EPA undertaking a serious effort to value these pollution reductions,” one environmentalist says.  But they have already begun to attract criticism from at least one industry attorney who argues that the agency's new methane values suffer from many of the same flaws that afflict the administration's social cost of carbon (SCC) metric, including an insufficient discount rate, use of global, rather than only domestic, benefits, and a failure to subject the calculations to adequate peer review.


Like the administration's SCC, the agency's SCM monetizes the climate damages that are expected to result from each incremental ton of the gas that is released.  As a result, the value can be used to quantify the benefits of rules that curb the gas.  The CO2 values in the SCC have already been used in a host of EPA, Department of Energy and other agencies' rules that reduce GHG emissions, including the agency's final Clean Power Plan, which uses the SCC to show $20 billion in climate benefits in 2030.


While the administration's current SCC value for CO2 emitted in 2025 is $48 per ton using a 3 percent discount rate, EPA estimates that an incremental ton of methane emissions released that same year would inflict a $1,500 cost to society, using a 3 percent discount rate.  The per-ton damage estimates for the SCM are higher than the SCC because methane is a much more potent GHG over the short term than CO2.  The most recent estimates from the International Panel on Climate Change (IPCC) say methane is 28 to 36 times as potent as CO2 over 100 years, compared to an earlier estimate of 25 times as potent.


Using these SCM values, EPA says its recently proposed methane rules for new and existing landfills, as well as its NSPS for new and modified oil and gas drilling sources, yield up to $1.2 billion in combined climate benefits in 2025.  For landfills, EPA says the August 14 proposed guidelines for existing facilities would yield about 440,000 metric tons of methane cuts in 2025, resulting in $660 million in benefits compared to a range of $35 million to $47 million in costs.  The August 18 NSPS for the oil and gas sector, EPA says, would drive between 310,000 and 360,000 metric tons of emissions cuts, yielding between $460 million and $550 million in climate benefits compared to a range of $320 million to $420 million in costs.  In each case, the climate benefits tied to the SCM represent the vast majority of the proposal's quantified benefits.


EPA outlines its justification for the new SCM calculations in regulatory impact analyses (RIAs) for the landfill and oil and gas proposals.  The agency notes that it earlier used an “interim” methane valuation approach in two prior rules that converted methane emission cuts to CO2 equivalents using a global warming potential (GWP) calculation.  That approach was used in both a prior oil and gas NSPS targeting volatile organic compounds, promulgated in 2012, and the phase 2 light-duty vehicle GHG rule, which was also finalized in 2012.  But instead of including the GWP-based estimates in the main cost-benefit analysis for those rules, EPA included the figures only in “sensitivity” analyses.  EPA is seeking comment on the use of the estimates in the RIAs.
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