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.

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.