Shaun Donovan, the Director of the Office of Management and Budget (OMB) and former Secretary of the Department of Housing & Urban Development (HUD) along with lead on Hurricane Sandy relief, gave his first public talk as OMB Director this this morning at the Center for American Progress. A notable point: this first talk focused on climate change issues, the costs of inaction, and the payoffs from incorporating climate in our decision-making processes.
when you consider the impact of climate change on the Federal Budget, it’s bad news for everyone. Even a small reduction in real GDP growth can dramatically reduce Federal revenue, drive up our deficits, and impact the government’s ability to serve the public.
Donovan's prepared remarks are beneath the fold and are worth reading. And, his responses to questions were substantial and thoughtful.
Rather than, however, attempt to dissect the comments, perhaps some impressions:
Quite simply, Donovan spoke forcefully and thoughtfully. Having an OMB Director who has a substantive understanding of and serious concern about climate change matters. The OMB has, over the decades, has been all too often a serious obstacle to movement forward on environmental issues. Donovan's way of engagement suggests that is undergoing serious change.
What might be called climate adaptation and post-disaster rebuilding with climate change in mind truly had the strongest focus. Climate mitigation and the payoffs from aggressive efforts to reduce future climate change did not, imo, receive forceful enough attention from Donovan.
Perhaps, however, the most important part of Donovan's visit to CAP came at the very end, when he spoke to "the incredibly wonky stuff that we do at OMB" and the need to get cost-benefit analysis right. This arena is one where, almost without exception, we see too pessimistic analysis: even strong advocates for climate mitigation / adaptation typically over-estimate the costs for acting while underestimating the benefits. Donovan stated that the OMB staff, under his direction, are seeking to get the cost-benefit analysis correct when they review government policies, regulations, and programs. To insure "that we are appropriately pricing in climate change in all that we do."
To support this point, Donovan provided an intriguing and specific example. When investing in infrastructure, how does one account for the differing trajectories of 'concrete' vs 'green infrastructure'. He pointed to flood control measures -- comparing building up dikes and other concrete with investing in wetlands. That poured infrastructure begins to decay from the moment construction stops while the wetlands restoration is a longer term prospect and, in fact, should become stronger and more resilient (rather than less) over time as plants spread and trees grow (and root structures strengthen). How does one account for this difference in analyzing life-cycles and cost-benefit analysis? That is the sort of question that Donovan says he is of asking of staff, that is being asked with OMB?
As he put it, "incredibly wonky stuff" but the incredibly important wonky stuff that drives how policy concepts get transformed into reality.
A question worth asking ...
Within that wonkiness, there are innumerable questions. Here is one that merits asking:
With the focus on assuring "that we are appropriately pricing in climate change in all that we do", will OMB require the use of social cost of carbon within the fiscal accounting of all government decision making?
As background and context of that question, here are three more specific 'sub' questions.
- Leasing of coal fields: There is not a single Federal mining lease related to coal, that I have been able to discover, that would show a profit for the taxpayer if there were a reasonable social cost of carbon (SCC) applied to the burning of mined coal (let along accounting for all the other coal costs/impacts, from mining through transportation to burning to disposal of ash). In fact, it appears that coal leases return to the Federal government just pennies on the dollar in terms of the actual social costs of the resulting burned carbon. The authorization of coal exports and leasing coal mining rights should include the SCC in the decision-making processes. Has OMB directed that this be done?
- Keystone XL pipeline: Without question, the tar sands projects produce liquid fuel with a higher carbon load than traditional fuels and alternatives (from efficiency through emergent bio/synthetic fuels). The Department of State analysis essentially ignored the social cost of this carbon. How has OMB evaluated the SCC from Keystone XL in its examination of the DOS report?
- LNG Export: There is a strong push underway for liquid natural gas (LNG) export. Natural gas -- especially with the methane leakage rates from fracking -- potentially has a higher carbon load than burning coal, the energy costs for liquifying and transporting LNG around the globe turn this "potentially" into a simple reality. While natural gas has a lower carbon implication than coal during actual combustion, full life-cycle analysis changes that equation. Has OMB required incorporating full LNG life-cycle carbon loads and that a SCC be applied against that true carbon implication as part of the export license approval process?
See here for the prepared remarks provided by OMB that were embargoed until the presentation.
There is excellent work, by the way, laying out how the entire concept of "cost-benefit analysis" when it comes to environmental issues is bankrupt and inappropriate. To be clear, "cost-benefit analysis' is near uniformly stacked against moving forward with environmental protection policies and regulations for a number of reasons (difficulty of analysis, reliance on industry for cost estimates, etc ...) And, the entire concept of 'cost-benefit analysis' is a good example of the shifting the Overton Window to the right -- the structure and concept originated from those seeking to stop and reverse regulatory protections. See Frank Ackerman's Poisoned for Pennies.
Donovan, however, is operating within existing legal and policy constraints, which mandate OMB put programs under a cost-benefit analysis scrutiny.
While Ackerman's (and others') arguments about why cost-benefit analysis is unaffordable and cannot be accurate in the environmental space merit serious consideration, that Donovan is setting out to make the OMB cost-benefit analysis re climate mitigation/adaptation stronger and more accurate merits praise and strengthening.