The economic toll of deadly heat waves, crop-killing droughts and rising seas that each additional ton of carbon dioxide levies on society is much higher than the U.S. government tallies when considering new regulations, according to a new analysis published Thursday.
The research team’s key finding: Each additional ton of carbon dioxide that cars, power plants and other sources add to the atmosphere costs society $185 — more than triple the federal government’s current figure.
The new study calculating climate change’s economic toll — known as the “social cost of carbon” — could renew pressure on President Biden to hike the federal government’s own estimate, a crucial number used by officials when assessing the potential costs and benefits of government regulations.
“The bottom line is that our results show that when you fully update the social cost of carbon methodology to the state of the science, it suggests that the existing estimates that are in use by the federal government are vastly underestimating the harm,” said Kevin Rennert, a research fellow at the think tank Resources for the Future and a co-author of the paper.
Here’s more about what it all means:
The social what of what?
With wildfires burning more ferociously, droughts lasting longer and hurricanes becoming more intense, scientists agree the monetary toll of climate change will be enormous. The social cost of carbon is an attempt to put a dollar figure on that destruction.
The idea for the metric came to fruition during President Barack Obama’s administration, which at one point settled on a cost of roughly $51 a ton when adjusted for inflation. With nations releasing billions of tons of carbon dioxide into the air every year, the toll adds up pretty quickly.
But many experts thought the Obama-era figure might be lowballing the actual costs. In early 2017, the National Academy of Sciences (NAS) recommended a major update to the metric to make the calculation more transparent and scientifically sound.
Donald Trump became president a week after the release of the NAS report, and his administration wasted little time in disbanding the interagency working group on the carbon price. By excluding damages of climate change abroad, the Trump team slashed the estimated cost of each ton of carbon pollution to between $1 and $7 per ton.
After Joe Biden took office, the White House reestablished the working group and told federal agencies to return to using the Obama-era price of $51 per ton — at least temporarily, promising to update the cost. In May, the Supreme Court allowed Biden’s deputies to continue using that higher interim estimate.
What are some of the big costs of climate change?
Temperature-related mortality extracts a particularly high cost, according to the research group led by experts at Resources for the Future and the University of California at Berkeley.
In the United States, extreme heat is the most fatal form of weather disaster, with hundreds of Americans losing their lives last summer. Any additional hospitalization or death as temperatures rise is, of course, a tragedy — but it’s also one to which economists are able to assign a dollar value.
Another major concern is crop failure. Altered yields of rice, soy, maize and wheat as weather patterns shift could upend global trade and have a far worse economic impact than previously thought, according to the team.
In Thursday’s analysis, researchers also lowered the “discount rate” — a method of measuring future costs and benefits — on the dangers of sea level rise and other effects of climate change. A lower discount rate implies a higher cost to inaction.
Whatever number policymakers use, the idea is to provide them a metric by which to tally the ongoing costs and benefits of a regulation or infrastructure project years or decades into the future. Ideally, the calculations offer a worthwhile road map of whether implementing certain policies will pay off down the road.
To make the dizzying set of calculations behind Thursday’s paper, the researchers gathered specialists — including climate scientists, economists and statisticians — from a dozen institutions to assess the latest science.
“When we started this project, we knew that we would only succeed by assembling a team of leading researchers in each discipline to contribute their expertise,” said David Anthoff, an environmental economist at UC-Berkeley and another study co-author.
The team emphasized there is still a wide range of uncertainty in their estimate. And there are plenty of negative impacts they did not assess, including the potential decline of ecosystems, loss of labor productivity and outbreak of war.
Is the social cost of carbon controversial?
For well over a decade, many elected officials and academics have debated how to properly quantify the economic costs of greenhouse gas emissions — and how much the government should rely on such estimates.
On one end of the spectrum are folks who reject the utility of such an approach altogether. When President Biden boosted the figure to $51, Sen. John Barrasso (R-Wyo.) called the move “a backdoor carbon tax.”
“Since the president can’t rationalize the crippling costs of his climate policies,” Barrasso said in a statement, “he needs to exaggerate the benefits.”
This summer, a group of conservative lawmakers on Capitol Hill introduced a bill that would prohibit the federal government from using the social cost of carbon in the rulemaking process.
Nick Loris, vice president of public policy at the Conservative Coalition for Climate Solutions, or C3 Solutions, has raised a more nuanced set of concerns.
“I do believe there’s a social cost of carbon and that increased carbon in the atmosphere increases costs to the economy and our ecology and the planet, and those damages will likely get worse in the future if we don’t mitigate emissions,” Loris said. He also said the team behind Thursday’s paper is rigorous and credible.
But the problem, he said, is that even peer-reviewed academic literature contains a range of different estimates for the true costs, depending on assumptions and methodologies and the possibilities of wild swings in policy between administration risks creating uncertainty among regulated industries.
It’s important to analyze the potential future economic damages posed by a warming planet and a worthwhile data point for policymakers and regulators, Loris said. But, he added, “it can’t be relied on as the singular number to justify a regulation or policy action.”
Why is the social cost of carbon important?
The value is an essential input in a lot of federal policymaking — whether to drill for oil, to boost the energy efficiency of appliances, to allow a power plant to continue burning coal. Setting the cost of carbon high would encourage clean energy projects, deter new coal leasing on federal acreage and influence the type of steel used in taxpayer-funded infrastructure.
“Getting the number right is critical,” Tamma Carleton said in an email. Carleton is an assistant professor of economics at the Bren School of Environmental Science and Management at the University of California at Santa Barbara.
“A value that is too low means that we face excessive climate change risks, but a value that is too high imposes unwarranted emissions mitigation costs on the economy.”
She said Thursday’s paper includes the most up-to-date science and “marks a substantial improvement” upon estimates previously developed by the U.S. government.
The Biden administration “remains committed to accounting for the costs of greenhouse gas emissions as accurately as possible,” said a spokeswoman for the White House’s Office of Management and Budget. But the office did not say when it would make an update to the figure.
Even as the Trump administration was drastically reducing the social cost of carbon, Democratic-leaning states have pressed ahead with their own policies.
In late 2020, for instance, New York adopted a “value of carbon guidance” ranging between $79 and $125 that it will apply to policies and programs going forward. And other states, such as Illinois, Colorado, Washington and Minnesota, use the metric for various types of policy analysis or implementation, including in the electricity sector.
The city of Minneapolis also voted to impose a $42 per ton estimate for the costs of climate change several years back, though as Mayor Jacob Frey told The Washington Post in an interview last year, “Carbon does not respect borders.”
The emissions that come from Phoenix or Baltimore or Texas, he said, impact life in Minneapolis and other places. That is why a federal standard that factors in the true costs of climate change is essential, he said.
“It really should be baked into every decision.”
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