A calculation that could solve — and pay for — the climate crisis

Killeen Daily Herald
By Jessica Wolfrom | Examiner staff writer
October 3, 2022

Some consider it the most important number you’ve never heard of. But the social cost of carbon has become something of an obsession among policy wonks and climate nerds alike.

That’s because it’s a figure that tries to account for the true price of a warming world. In essence, the social cost of carbon seeks to quantify in dollars the long-term damage wrought by one ton of carbon dioxide over its lifetime. It’s a proximate price tag for the hard-to-quantify impacts of climate change on our health and ecosystems.

And now, experts say we’ve set that price far too low. New research published in the journal Nature estimates that the social cost of carbon is more than three times what we’ve previously accounted for.

That could be a problem, given that the social cost of carbon, or SCC, undergirds a whole slew of policies that set emissions standards, regulate air pollution and determine the harms imposed by future power plants.

“It's really quite crucial,” said David Anthoff, an associate professor at UC Berkeley and co-author author of the study. “If you use a number that's too low, then regulations that reduce greenhouse gas emissions will look less good in economic terms.”

The SCC should be priced at $185 per ton, researchers found, 3.6 times higher than the current value of $51. And that’s likely a conservative estimate, experts said, given that this new study didn’t account for the additional damage to sectors like biodiversity, labor productivity, conflict and climate migration — all of which are already being affected by a warming world.

“Since basically, every human activity causes some greenhouse gas emissions, the damage a ton of CO2 does is key,” Maximillian Auffhammer, an economist at UC Berkeley’s Energy Institute, wrote recently.

The social cost of carbon is not a tax, but a way to estimate the degree of harm posed by carbon emissions. It can help answer questions like: What will it cost to rebuild after a ferocious wildfire or devastating hurricane? What’s the price of adapting to sea level rise? How do sweltering temperatures affect energy use?

“The definition is actually relatively simple,” said Anthoff, but “how you compute it is not.” Getting to the $185 figure was no small feat, he said, because it required researchers to collide colossal data sets and the latest research from climate science, demography and economics.

But the basics of the problem, he noted, is that the carbon we emit by driving a car or hopping on a flight will idle in the atmosphere long after we have reached our final destination, causing planetary and health harms that extend far beyond our backyards.

“So even in 200, 300 years, there will still be a share of that one ton. Not all of it, but a pretty sizable fraction of that will just linger around in the atmosphere and will cause an increase in temperature over a very long time horizon,” said Anthoff. “We want to express that in dollars. We simply want to be able to say: You put up a ton of CO2 into the atmosphere, and our best estimate for that is that you are causing harm in terms of loss in agricultural productivity, increased health impacts, you know, all the things that we think are impacted by climate change.”

The social cost of carbon is an idea that’s been floating around Washington since the Reagan years. Still, it wasn’t fully implemented at the federal level until the early 2000s, when the Obama administration sought to formalize it, applying the first estimated social cost of carbon of $43 to several policies, including fuel economy standards.

“The Obama administration determined that, although fuel economy standards might be costly to enact, the benefits to society were greater than the costs,” said Stanford economist Marshall Burke in a Q&A.

Though this kind of accounting was largely dismissed by the Trump administration, which slashed it to $3-$5 per ton, President Biden reinstated a slightly updated SCC of $51 per ton during his first week in office. Biden also asked economists to update the number, taking into account suggestions from the National Academies of Science and Engineering, noted Auffhammer.

Though some 60 policies today incorporate a social cost of carbon, it remains to be seen whether the federal government will apply this new higher SCC to new or current regulations as it passes some of the most ambitious climate laws and infrastructure investments in history. This includes the Inflation Reduction Act, which aims to invest in domestic energy production, and manufacturing and reduce carbon emissions by roughly 40 percent by 2030.

A higher SCC also means that the benefits of keeping greenhouse gasses out of the atmosphere have been underestimated. This could be a boon to policymakers as they work to decarbonize the energy sector and the economy.

“For a long time, people always said, oh, you know, we cannot reduce CO2 emissions. That would wreck the economy,” said Anthoff. “That is actually not true. If you properly account for the benefits of reducing emissions, then emission reductions can look very beneficial.”

Lawrence Goulder, an economist at Stanford, noted that by indicating how much society benefits from reducing CO2 emissions, "it shows that climate policies will pay for themselves as long as the economic sacrifices involved don’t exceed the social cost of carbon.”

And while the social cost of carbon is not yet a household name, our everyday actions play a part in its calculation. “What we do now has very long-term consequences,” said Anthoff.