What Is The Social Cost Of Reducing Carbon?

The World Bank and both the United States and the United Kingdom have chosen not to help developing countries build fossil fuel plants to generate the electricity these countries need to move ahead.

This refusal is designed to reduce emissions of CO2. But there is a social cost associated with it. If the people who otherwise would have had access to electricity are forced to continue burning dung and firewood, many will die from the attendant pollution caused by those much dirtier fuels. The conventional pollution and deforestation may not only harm human health but the surrounding environment as well.

Climate activists make the case that fossil fuel companies should not be subsidized. I happen to agree with them. However, subsidizing green energy sources is different, they claim. New industries with the potential to revolutionize our energy infrastructure deserve government support.

And again I agree with them. I think green energy should receive modest levels of subsidy, as should innovative efforts to improve storage and distribution.

But I at least am aware that there is a social cost to doing what I favor doing. That money might be better spent on vaccines, micronutrients, access to fresh water and more. So far it seems that those other worthy causes are receiving adequate funding, in no small part thanks to private charities. Yanking money away from research into new energy seems a bit like eating the seed corn. But there is a social cost to this spending.

Because they keep good statistics, this is perhaps clearest in the United Kingdom, where government support for green energy in large part consists of allowing utility companies to charge customers more to cover the costs of investing in green energy. The number of English people suffering from fuel poverty has risen every year since this support started and thousands die every winter as they cannot afford the cost of heating their homes.

There of course is a social cost of carbon. It is a negative externality. Sea level rise and increased flooding may cause harm to our grandchildren and their children. It may be appropriate for us to spend money and utilize resources to minimize this threat.

But there is a social cost to reducing carbon. Anyone who goes on (and on) about tackling the social cost of carbon without acknowledging that the sacrifices involved are very real and will be selectively paid, not by those calling for this sacrifice, but by the poorest of those in the emerging countries as well as the more developed nations is engaged in bombastic propaganda.

If you want to discuss the issue, I’m happy to. But the issue has two sides–at least.

If you want to say the future looks like this:

Tesla Powerwall

It is incumbent upon you to acknowledge that it means many more years of this in the developing world:

Woman burning dung

And this closer to home:

Fuel poverty UK

11 responses to “What Is The Social Cost Of Reducing Carbon?

  1. You know, it just hit me that the social cost of carbon isn’t a linear function. I feel stupid. The cost to avoid the emission of one ton of co2 is fairly low. It can be achieved by placing a tax on coal equal to 0.000000000001 x sales price. To avoid energy poverty the tax collected is used to reduce taxes and/or increase social transfers by the same amount.

    But by the time this is applied to the 100 millionth ton it starts to distort the economy. And I’m not sure there’s a way to understand the impact.

    So why not run an experiment and use a $10 per ton CO2 carbon tax? And implement those tax rebates?

    • I have always said that we should set it at $12/ton and re-evaluate every 10 years…

    • The chances of a single nation actually implementing a “carbon tax” and simply passing through to some social transfer or rebate over a ten year period of time is nil. The revenue stream will be eaten up by admin costs, diverted to more “pressing” uses, or simply lapped up as rightfully the government’s.
      And that tax will make zero, zip, nada difference to the “climate” outcome.

      • I’m not sure. $10 per ton is pretty low, and it starts fixing my real boogaboo, I’m afraid we are going to run out of fossil fuels before we develop something better. The key is to avoid hurting poor people.

        As for the tax itself, I would impose it using a bit of brute force to keep it simple. Tax them at the point of sale using a simple correlation based on the stuff’s properties and eventual use. I wouldn’t tax asphalt, but I would tax cement based on the emissions it causes when it’s made.

      • A tax, even one that was actually implemented as you and others outline- returned to tax payers, would do nothing much to replace fossil fuels.
        But since we are not going to run out for many, many decades to come, I am not sure that the best solution is to let prices increase until some clever engineer works out algal based hydrocarbons or nuke energy that finally silences the reactionary “greens”.
        The climate impact will be zip.

  2. ” Sea level rise and increased flooding may cause harm….”

    Strange how the potential increase in habitats for marine life is never, ever, considered as a positive externality.

    • In the pre-climate obsession days swamps and marshes were considered flooded farm land living space, waiting to be unflooded. San Francisco is among the cities that exists as they are because of filling in tidal and marsh lands areas.
      One of the tells of the climate kooks is their steadfast refusal to consider anything but their CO2 doom.

  3. Tom, Mr. Obama is in Kenya selling Kenyans solar panels in some great and good subsidy for his solar panel pals. The Kenyans live in the shadow of the existing power grid a few yards away in many cases. Obama has the callous arrogance to tell then that little solar panels on their roofs is a better deal for them than hooking up to that grid.
    What a cruel imperialism the climate obsessed practice.
    The Climate kook’s burden, as it were.

    • I wouldn’t brag about the Kenyan power grid reliability. Obama is a bit goofy because he has a dummy scientific advisor teaching him about the Kenyan energy industry. He needs an engineer who knows about economics, an economist who knows about project management, and a project planner who knows a bit about Kenya before he starts mouthing off. I used to work in Kenya, and that country is pretty complicated. What works in one area won’t work 200 km away, and son on. Where I used to work solar panels would do ok to pump water and charge cell phones during the day, but they need to hire a bunch of guards to make sure they don’t get stolen, keep them washed, etc.

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

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