Page:Technical Support Document - Social Cost of Carbon, Methane and Nitrous Oxide Interim Estimates under Executive Order 13990.pdf/16

 “analysis should focus on benefits and costs that accrue to citizens and residents of the United States.” While Circular A-4 does not elaborate, this guidance towards a focus on U.S. populations in domestic policy analysis is broadly consistent with the fact that the authority to regulate only extends to a nation’s own residents who have consented to adhere to the same set of rules and values for collective decision-making (EPA 2010; Kopp et al. 1997; Whittington and MacRae 1986). However, guidance towards a focus on impacts to U.S. citizens and residents is different than recommending that analysis be limited to the impacts that occur within the borders of the U.S. Furthermore, OMB Circular A-4 states that when a regulation is likely to have international effects that “these effects should be reported” though the guidance recommends this be done separately. There are many reasons, as summarized in this TSD, why it is appropriate for agencies to use the global value of damages in making decisions that affect, or may be affected by, GHG emissions. Courts have upheld the use of global damages in estimating the social cost of GHGs, in part in recognition of the diverse ways in which U.S. interests, businesses, and residents may be impacted by climate change beyond U.S. borders.

Unlike many environmental problems where the causes and impacts are distributed more locally, climate change is a true global challenge making GHG emissions a global externality. GHG emissions contribute to damages around the world regardless of where they are emitted. The global nature of GHGs means that U.S. interests, and therefore the benefits to the U.S. population of GHG mitigation, cannot be defined solely by the climate impacts that occur within U.S. borders. Impacts that occur outside U.S. borders as a result of U.S. actions can directly and indirectly affect the welfare of U.S. citizens and residents through a multitude of pathways. Over 9 million U.S. citizens lived abroad as of 2016 and U.S. direct investment positions abroad totaled nearly $6 trillion in 2019. Climate impacts occurring outside of U.S. borders will have a direct impact on these U.S. citizens and the investment returns on those assets owned by U.S. citizens and residents. The U.S. economy is also inextricably linked to the rest of the world. The U.S. exports over $2 trillion worth of goods and services a year and imports around $3 trillion. Climate impacts that occur outside U.S. borders can thus impact the welfare of individuals and firms that reside in the United States through their effect on international markets, trade, tourism, and other activities. Furthermore, additional spillovers can occur through pathways such as economic and political destabilization and global migration that can lead to adverse impacts on U.S. national security, public health, and humanitarian concerns (DoD 2014, CCS 2018). As described by the National Academies (2017), to correctly assess the total damages to U.S. citizens and residents, one must account for these spillover effects on the United States.

As an empirical matter, the development of a domestic SC-GHG is greatly complicated by the relatively few region- or country-specific estimates of the SC-CO$2$ in the literature. At present, the only quantitative

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