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Uncovering the Real Cost of Carbon

carbon costs

Last week, the Obama administration released new energy efficiency standards for microwaves, along with an update to the government’s official Social Cost of Carbon (SCC) figure. What do those two things have to do with each other? Well, the efficiency standards will help the planet by cutting the energy needs of microwaves, which will in turn save consumers money. And the new SCC numbers show just how expensive our addiction to fossil fuels has become.

The SCC is used to estimate the damages from carbon emissions (and the benefits from reducing those emissions) for the purposes of regulatory benefit-cost analyses. The central estimate for the SCC is now around $35 per ton of carbon dioxide pollution emitted today.

That’s the administration’s estimate of the damage—to human health, ecosystems, and the economy—caused by every ton of carbon dioxide emitted into the atmosphere. The average American emits about 20 tons each year.

The new cost of carbon figure is a welcome step forward, reflecting the latest versions of the underlying models. The bad news is that the increased number also shows that our lack of a comprehensive climate policy is becoming ever more costly.

Moreover, this updated SCC number underestimates the true costs of carbon emissions. For example, the current SCC quickly rises to $55 per ton under a lower discount rate (that is, an estimate that doesn’t “discount” harms to the wealth and health of future generations by quite as much as the administration did in reaching its $35 per ton figure).

The value of one ton of carbon dioxide would rise higher still with a declining discount rate, something that, in line with the general consensus among economists, would more closely reflect the true costs of climate change. And none of that includes the cost of extreme climate events.

Basing Policy on Science

The good news: the administration’s latest numbers show exactly how policy analysis should be done—rigorously and consistent with the latest advances in science and economics. For example, instead of using older versions of three main SCC models to calculate its official number, the administration now uses the most recent peer-reviewed versions of each. That simple but important step helps to bring the new official SCC more in line with the latest academic literature.

In short, the administration’s economics are slowly and carefully catching up with what we all can see outside our windows. While atmospheric carbon dioxide levels have just passed the 400 parts per million threshold for the first time in over 3 million years, the real costs of climate change keep piling on.

What the country really needs, of course, is for Congress to pass a comprehensive climate policy. Only then will Americans stop living in a world where their personal behavior leads to socialized costs of at least $35 for each of the 20 tons of carbon dioxide we emit every year. Until then, the Obama administration is right to at least include these costs in its own regulatory impact assessments.

 

(This post was co-authored by Thomas Sterner and appeared first on EDF Voices.)

Gernot Wagner's picture

Thank Gernot for the Post!

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Discussions

I K's picture
I K on June 5, 2013

its zero

Max Kennedy's picture
Max Kennedy on June 6, 2013

Would love to see the formulae from which the $35/ton is derived.  As hinted in the article I expect that it is significantly low relative to the real cost!  Doubt it takes into full account the costs to future generations, our impact will be felt for centuries, of the garbage we will be leaving them.

Paul Ebert's picture
Paul Ebert on June 6, 2013

It’s $10,000.

I K's picture
I K on June 6, 2013

I was being generous when I said it was zero. Its actually a negative number in that without burning fossil fuels we may have been hundreds of years less advanced. 

Economically its absurd to claim that fossil fuels have been anything other than a positive

Max Kennedy's picture
Max Kennedy on June 6, 2013

Environmentally it’s insane to claim fossil fuels have been anything but a disaster and if we don’t learn to be responsible the actual value will be more in the realm of $1,000,000/ton.

I K's picture
I K on June 7, 2013

In any way you care to measure it fossil fuels have been a blessing. The only reason you are able to spend idle time in front of your comouter day dreaming about such things is becuase of FF. Without them you would be fighting your brother to claim the bigger of the two rats you two just caught for supper

Paul O's picture
Paul O on June 7, 2013

If fossil fuels had never been discovered:

1) No forrests, Mankind would have cut down and burned our trees for fuel (ask the Europeans).

2) No Steel for Windmills and Energy Intensive  Photvoltaic cells except to cutdown trees for high temperature furnaces, and for steam power with which to turn dynamos, and hope to produce enough electricity.

3) No plastics. no Airplanes, Wind driven wooden sailling ships.

4) Reduce travel and No telecommunications, No mechanized farming, all these probably mean education and spread of Ideas would be curtailed.

5) No Space travel

6) And so on.

Paul Ebert's picture
Paul Ebert on June 8, 2013

Without them you would be fighting your brother to claim the bigger of the two rats you two just caught for supper

Sounds like the lives our great-grandchildren will be living if we don’t radically move beyond fossil fuels (and, if there are any great-grandchildren).

Humanity, if it continues to exist, will probably look back on fossil fuels as the thing that caused the human race to finally grow up to an understanding that nature places constraints on it that must be respected.

Of course, fossil fuels have been a “benefit”.  The point is that we’ve been ignoring their negative impacts.  Some of us still refuse to acknowledge them.  We’ve become addicted to these “benefits”.  Addiction is never a good thing.

Max Kennedy's picture
Max Kennedy on June 8, 2013

Yes, of course . Taking the absolute extreme to denigrate something makes perfect sense. There is of course no such thing as acting responsibly, everything is absolute good or absolute bad. But then that is the fossil mindset!

Max Kennedy's picture
Max Kennedy on June 8, 2013

Like almost anything if used responsibly it is a boon, used irresponsibly (as we have been doing) it’s a bane.  Our choice!

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