by Kevin Dayaratna, David Kreutzer
The Heritage Foundation
April 29, 2014
Backgrounder
The Environmental Protection Agency (EPA) calls upon three statistical models, known as integrated assessment models, to estimate the value of the social cost of carbon, defined as the economic damage that one ton of CO2 emitted today will cause over the next 300 years. In 2013, the Heritage Foundation’s Center for Data Analysis (CDA) rigorously examined one of these models—the DICE model—and found it to be “flawed beyond use for policymaking.” This study examines another model the EPA uses—the FUND model. As with the DICE model, the CDA finds the FUND model to be extremely sensitive to assumptions. In fact, the FUND model is so sensitive to assumptions that at times it even suggests net economic benefits to CO2 emissions. Consequently, the CDA researchers believe that both models are fundamentally unsound as a basis for justifying significant regulations of the American economy.



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