The US DOE Critical Review of the Impacts of Greenhouse gas Emissions on the U.S. Climate -a simplified version of Ken Gregory’s comments

Contributed by Robert Lyman © 2025. Robert Lyman’s bio can be read here.

Ken Gregory’s full comments on the draft DOE climate report can be read here.

Issue _Urbanization Influence on Temperature Trends

There is a longstanding controversy about how much of the ground-based measurement of temperature trends in the world is biased by the fact that the meter stations are located in areas whose temperature tends over time have risen largely due to the “heat-island effect” of development. Gregory argues that two scientific studies of this show that the global “urban heat island effect” added a large 50% component to the observed warming over land and was not simulated by climate models. The United Nations AR4 report concluded that the correlation existed but claimed it wasn’t caused by the UHIE. The report falsely claimed the correlation was caused by unspecified natural “atmospheric circulation changes” and that the correlation of warming with urban development “ceases to be statistically significant”. Gregory argued that the correlations were not due to “natural atmospheric circulations” and therefore are statistically significant.

Climate Sensitivity to Carbon Dioxide Forcing

Much effort is devoted to calculating the upper and lower bounds (i.e. the range) of the Equilibrium Climate Sensitivity (ECS).  The ECS is the global mean surface temperature (GMST) change caused by a hypothetical doubling of carbon dioxide (CO₂) after allowing the oceans to reach temperature equilibrium. A recent study, Lewis (2022), estimates the median value of ECS at 2.16 degrees C with a likely uncertainty range of 1.75−2.7 degrees C. This estimate is based on combining information from process understanding, paleoclimate data and historical temperature evidence. The DOE climate report adopted this estimate of ECS. Page 25 of the DOE report stated that “evidence since AR6 finds the lower bound of the likely range to be around 1.8 degrees C.”

Scientists studying the ECS from historical temperature measurement data have used an “energy balance equation” that depends on the temperature difference between two periods: 1861-1880 and 2006-2018. Two influential studies used 0.94 degrees C as the change in the global mean surface temperature (GMST) between the two periods. However, a significant portion of the warming over land was caused by the urban heat island effect (previously discussed). In addition, it is now acknowledged that the change to total solar irradiance (solar activity) from the Little Ice Age to the Modern Maximum in the 1990s, which is part of a millennium cycle, has also affected temperature changes.

With these two adjustments, the total reduction of the historical temperature gain is 0.24 degrees C. This reduces the temperature gain globally to 0.70 degrees C. This has the effect of lowering the historical median ECS due to the energy equation from 2.16 degrees C. to 1.61 degrees C. The revised ECS estimate is substantially less than the 3.0 degrees C median estimate given in the United Nations AR6 report.

Climate Change and Economic Growth

The social cost of carbon (SCC) is a dollar value representing the estimated global economic damages from emitting one additional tonne of CO₂ into the atmosphere at any one point in time. It serves as a tool in cost-benefit analyses to gauge the economic impacts of climate change and to inform policy decisions, such as evaluating the costs of regulations or the benefits of climate action.

Cost-benefit integrated assessment models (IAMs) are the main tools for calculating the marginal social cost of emitting one more tonne of CO₂ into the atmosphere at any point in time. 

This type of modelling is carried out to find the total cost of climate impacts, which most of the analyses published to date has considered a negative externality, meaning that it imposes costs on the global economy. The SCC is highly sensitive to the discount rate used; the discount rate, also known as the cost of capital, is used to determine the present value of future cash flows by accounting for the time value of money and risk. It reflects the opportunity cost of investing in a project versus other available opportunities. A higher discount rate implies greater risk and a higher potential return, while a lower rate signifies lower risk. A lower discount rate tends to increase the SCC and a higher discount rate to decrease it.

Gregory has written previously about IAMs, two of the most prominent of which are the DICE model and the FUND model. Nick Lewis, another well known climate analyst, has criticized the DICE model and argued that it significantly over-estimates temperatures from the mid-21^st century on, and hence overestimates the SCC. The DICE model in effect gives SCC values that are 40% too high due to its faulty climate module.

FUND’s climate module also gives a too high temperature profile. After replacing FUND’s climate module with one that is tuned to match climate models at a given ECS and assuming an ECS of 2.0 degrees C, FUND calculates the SCC for emissions in 2025 as US$0.50 per tonne CO₂ at 3% discount rate and as US-$0.68 per tonne CO₂ at 5% discount rate. (NB: The negative sign means the social benefits are greater than the costs).

A recent paper by Dayaratna, McKitrick and Michaels estimates that the beneficial effects of CO₂ fertilization used in FUND should be increased by 30%.

Fund Energy Consumption Impact Component

The FUND model projects a negative economic impact of global warming mostly due to one impact sector – energy. The increased energy use by 2100 equates to -1.9% of global GDP by then. Gregory argues that this negative impact is contradicted by the empirical data. The empirical data, drawn from US sources, indicates that energy expenditures decrease as temperatures increase, suggesting that global warming may reduce expenditures and thereby have a positive impact on economic growth. The US states from which the data was drawn span the latitudes where 82% of the world’s GDP was produced in 2010, so one can reasonably extend these effects to most of the world’s economies.

Revisions to the FUND Social Cost of Carbon

Ken Gregory replaced the default components in FUND for estimating the cost of energy due to warming with empirical components. (i.e. those showing that energy expenditures decline as temperatures increase) and increased the default CO₂ fertilization effect by 30%. Using an ECS of 2.0 degrees C, and a 3% discount rate, the SCC is about US-$10.38 per tonne CO₂. With a 5% discount rate, the SCC is about US-$5.92 per tonne CO₂. In both cases, CO₂ emissions are beneficial for the world. When the ECS is set to 1.6 degrees C to account for the UHIE and the millennium cycle, and retaining the previous changes, the SCC is calculated by FUND to be about US-$13.07 per tonne CO₂ at a 3% discount rate and about US-$7.28 per tonne CO₂ at a 5% discount rate. That is, CO₂ emissions are currently quite net beneficial. This finding is significantly different from the estimates used by Environment and Climate Change Canada (ECCC) and calls into question virtually all of the expenditures made by governments and industry in Canada to reduce emissions.

Summary

Gregory challenges both the data and the methodology used by past analyses of the economic effects of increased greenhouse gas emissions and by that proposed to be used in the United States Department of Energy Critical Review. Gregory estimates that the SCC is likely in the range of -$13 to -$7 per tonne of CO₂ emissions in 2025 in U.S. dollars, depending on the discount rate, meaning that CO₂ emissions are net beneficial. There is no justification for carbon taxes, carbon capture expenditures and anti-fossil-fuel regulation. If his comments are accepted as valid, it would significantly change the US and Canadian assessment of the value of climate mitigation measures.