The Social Cost of Carbon

While I’m trying to get my ducks in a row regarding RCP 8.5, I want to discuss the social cost of carbon (SCC).

Although the immediate trigger for this post is Pat Michaels’ testimony to Congress (found through Watts Up With That), I have been wondering about SCC for some time. Here is Pat Michaels’ testimony:

I have no doubt that those most worried about climate change and the social cost of carbon will ignore Michaels’ testimony, hoping it disappears from public view.

The EPA fact sheet on the Social Cost of Carbon (which of course they have to rename as SC-CO2) is here. They write, “The SC-CO2 is meant to be a comprehensive estimate of climate change damages and includes, among other things, changes in net agricultural productivity, human health, property damages from increased flood risk and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. However, it does not currently include all important damages. The IPCC Fifth Assessment report observed that SC-CO2 estimates omit various impacts that would likely increase damages. The models used to develop SC-CO2 estimates do not currently include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature because of a lack of precise information on the nature of damages and because the science incorporated into these models naturally lags behind the most recent research. Nonetheless, the SC-CO2 is a useful measure to assess the benefits of CO2 reductions.”

There is a social cost of carbon. It includes money we spend now and will spend in the future on repairing damage caused by floods, heatwaves, sea level rise, etc. that are worse than they would have been due to climate change.

As the World Resources Institute writes, “In the case of climate change, the government calculates the cost imposed on society globally by each additional tonne of carbon dioxide (CO2), the main greenhouse gas. These include health impacts, economic dislocation, agricultural changes, and other effects that climate change can impose on humanity. The benefit to society of avoiding those costs is summed up in the social cost of carbon.

In 2009 an interagency team of U.S. government specialists, tasked to estimate the SCC, reported a range of values from $5 to $65 per tonne of carbon dioxide. The choice of a final figure (or range of figures) is, in itself, a major policy decision, since it sets a likely ceiling for the cost per tonne that any federal regulation could impose on the economy to curb CO2. At $5 a tonne, government could do very little to regulate CO2; at $65, it could do significantly more. Higher SCC numbers, such as the United Kingdom’s range of $41–$124 per tonne of CO2 with a central value of $83, would justify, from an economics perspective, even more rigorous regulation.”

These current and potential impacts are studied diligently and are calculated frequently, always with different results. Skeptics who don’t think that climate change will be significant or severe therefore tend to ignore the discussion or laugh at the imprecise and contradictory results. They shouldn’t.

I don’t want to replicate or even discuss in detail the factors that are covered by high powered think tanks and academia. I don’t want to debate the wide range or optimum value of SCC. I think it’s a political game where activists come up with high values and skeptics come up with low values and I don’t believe either set.

I want to discuss two things. First, the social cost of carbon is already high and getting higher, despite the lack of impacts of climate change on our real world. This is because we are spending large sums of money studying anthropogenic climate change, creating communities of professionals charged with advocating mitigation or preparing for adaptation, launching satellites to monitor climate change, lobbying politicians, sending messages to a largely indifferent public, etc. This costs a lot of money. It continues today and will almost certainly increase.

The point is that money spent in this way is part of the Social Cost of Carbon, even if there is no climate change.

The obvious related point is that I don’t ever see included in these calculations the opportunity costs related to climate change. We have spent many billions of dollars on dealing with climate change. If we were not spending this money on it we could either spend it on something else or put it back in our wallets.

featured-opportunity-cost

I find it somewhat distressing that of the billions (actually that could read hundreds of billions, depending on how you categorize certain expenses) spent on climate change, very little of it has been spent on building sea walls, relocating roads or towns at risk of sea level rise or floods, funding research into drought resistant crops or pilot studies of geoengineering–any of the concrete steps we will end up taking if climate change is as urgent a problem as the activists suggest. Instead we are spending it on conferences and television commercials.

I actually consider that insane. At least the EPA is spending money (well, forcing companies to spend their money) on actually reducing the amount of CO2 put into the atmosphere.  At least government bodies that approve subsidies for solar or wind are spending their money on reducing emissions. Love ’em or hate ’em, they are just about the only ones that are doing something concrete.  Everybody else is just blowing smoke.

Coincidentally, the EPA and subsidizing bodies are the ones getting the most hate mail and negative coverage.

17 responses to “The Social Cost of Carbon

  1. CO2 obsession is the perfect solvent: It dissolves all responsibility and accountability from policy makers.
    CO2 obsession is the perfect excuse: it explains away all failures of planning and preparation by those responsible for planning and preparation.
    Tom, this is one of your best essays yet.
    It really deserves a wider audience.

  2. The idiots who prognosticate on ‘SC-CO2’ should start from first principles. The fact that they exist, and have a life expectancy >80. They should factor-in, the taxes they are able to pay during their lifespan.

  3. Tom,
    You are welcome. I will tell some friends.
    Now analyze the actual amount of CO2 allegedly offset by silly things like Mr. Obama’s African solar initiative, or our domestic EPA policies and at what cost. It will become clear that the non-opportunity costs are significant as well.

  4. As far as I can tell the social cost of co2 emissions is estimated using the difference between two emissions profiles and concentrations?

    What do they use for these two profiles?

    What’s the assumed transient climate response?

    Are they using the IPCC AR5?

  5. Lukewarmer,

    You wrote: “I find it somewhat distressing that of the billions (actually that could read hundreds of billions, depending on how you categorize certain expenses) spent on climate change … I actually consider that insane. At least the EPA is spending money (well, forcing companies to spend their money) on actually reducing the amount of CO2 put into the atmosphere.”

    It appears that you have not done your sums. Let’s say that we are spending $5 billion a year on climate change. Annual emissions are about 35 billion tons of CO2. So the “social cost” is about 15 cents a ton. EPA wants to force people to spend at least 100 times that.

    You also wrote: “very little of it has been spent on building sea walls, relocating roads or towns at risk of sea level rise or floods, funding research …”

    That is a much more cogent criticism (setting aside the fact that you are saying, in part, that rather than funding research they should be funding research). That would be spending money on things that are useful anyway. Pretty much any place that will need a seawall at doubled CO2, needs a seawall now. What is insane is spending far larger sums trying to avoid something that might be net beneficial.

    • I don’t support building sea walls until eastern New Orleans has been returned to nature. The federal government wastes a huge amount of money on useless sea defenses. When Bush committed to rebuild all the dikes around New Orleans I had a fit. Bush Jr. sure knew how to waste money and run up the debt.

  6. Mike M,
    I praised this essay because Tom makes the valid point that much of the spending on so-called climate change is a complete waste.
    Is it a comprehensive analysis of the dysfunction of the climate obsession? No.
    At the least we need to count the actual benefits of CO2/carbon to the world and not simply permit the ill-informed badly motivated climate extremists to unilaterally set the terms of discussion.

    • Hunter,

      You wrote: “I praised this essay because Tom makes the valid point that much of the spending on so-called climate change is a complete waste.”
      Fair enough. And I criticized it because he seems to endorse spending 100 times as much on an even bigger waste. Not a good trade.

      • Hiya Mike M., it’s a relative thing. I prefer spending on sea walls to spending on messaging.

      • Tom,
        Yet infrastructure spending on water management, etc. has ground to a near halt in the US and elsewhere,
        And President Obama’s silly solar panels-for-Africans is a silly gesture- if not insult- to Africans.

      • I also approve of spending on infrastructure that is useful anyway. I object to spending a fortune on small reductions in CO2 that may be of little benefit

      • Hi MikeM,

        Most of what I’d like to see in the way of infrastructure build-out would consist of addressing current threats and building in a safety margin for potential sea level rise or increased flooding.

  7. Pingback: Airbrushing Sensitivity Out of the Climate Debate | The Lukewarmer's Way

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