Vox - Umair Irfan
The US is second only to India when it comes to the economic cost of global warming.
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The United States stands to pay the second-highest social cost of carbon in the world. Shutterstock |
All efforts to fight climate change face the money test:
Are the benefits of stopping global warming — and avoiding sea level
rise, heat waves, and wildfires — greater than the costs?
The dollar balance we arrive at should be one of the
biggest factors in deciding what we’re willing to do to tackle the
problem, whether that’s shuttering all coal plants or building thousands
of nuclear reactors.
Some groups have taken a stab at calculating what climate
change will cost the world, or conversely, how much humanity would save
by becoming more sustainable. Earlier this month, the
Global Commission on the Economy and Climate tallied the number at a truly massive $26 trillion in savings by 2030.
Getting a slice of those savings requires figuring out
which actors stand to lose the most as the climate changes, whether
that’s countries, companies, or even individuals.
And this is where the idea of the
social cost of carbon
comes in. It’s a policy tool that attaches a price tag to the long-term
economic damage caused by one ton of carbon dioxide, hence the cost to
society. It’s related to a carbon tax (more on that below), and it
serves as a way to distill the vast global consequences of climate
change down to a practical metric.
Critically, it’s also the foundation of US climate policies, including the
Clean Power Plan. Revising this number down has been a key part of the Trump administration’s strategy to
roll back environmental rules. Under Obama, the
social cost of carbon was set at
$45 per ton of carbon dioxide; under Trump, it’s as little as $1.
A new study published Monday in the journal
Nature Climate Change
calculates the social cost of carbon down to individual countries. This
adds an important bit of nuance because climate change is going to cost
some countries more than others, a fact that’s lost when you try to
tabulate a global average.
The
team found a global social cost of carbon vastly higher than many
previous estimates, drawing on more recent climate projections and more
robust macroeconomic models. The results also highlighted the
fundamental injustice of climate change: Many of those who contributed
the least to the problem stand to suffer the most. And the study has a
stark message for the United States: The economy stands to pay one of
the highest prices in the world for its emissions.
We’re drastically underestimating how much climate change will cost the global economy
Even if you’ve just skimmed climate policy discussions in recent years, you’ve likely come across the idea of a
carbon tax.
In short, a carbon tax helps attach the consequences of climate change
to the greenhouse gas sources that are driving it. Ideally, it would
push economies toward sustainability by making dirtier energy sources
and industries more costly relative to their alternatives.
Though a tax is just one way to price emissions, most
economists and scientists agree that pricing in some form is the sine
qua non of fighting climate change. (My colleague David Roberts has
written extensively about the limits of a
carbon tax and the recent
Republican carbon tax proposals.)
How high you set your carbon tax is a function of how
aggressively you want to clean up your act and how much damage you’re
expecting if you don’t. The former is an objective that’s set by
policymakers, but the latter, in theory, has an empirical value. This is
the social cost of carbon.
The lead author of the
Nature Climate Change
study, Katharine Ricke, an assistant professor at the Scripps
Institution of Oceanography at the University of California San Diego,
explained that calculating the social cost of carbon requires
coordinating several variables.
“You need to make assumptions about socioeconomic
progress and changes in the world that are going to happen out a century
in the future,” she said. “You need to contend with uncertainty about
how climate change is going to look.”
The social cost of carbon is an imperfect measure: It
focuses on broad changes in the economy rather than abrupt shifts from
extreme weather or disasters. It also requires making many arguable
assumptions. However, it’s still a useful tool in estimating the costs
and benefits of different ways to fight climate change.
To account for this variability, Ricke and her team
looked at a range of greenhouse gas emission scenarios, as well as
several different economic damage models and multiple
social discount rates.
The results showed that the world has been drastically
undervaluing the potential economic damages from climate change. The
median global social cost of carbon came out to $417 per ton, an order
of magnitude more than prior estimates of
$40 per ton.
India is poised to pay the highest social cost of carbon. Russia may not pay one at all.
Drilling down into individual countries, the researchers spotted disparities in the economic consequences of climate change.
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The social cost of carbon for individual countries in dollars per ton of carbon dioxide emissions. Nature Climate Change |
Countries at northern latitudes, like Russia, face a
negative
social cost of carbon. This implies that the warming wrought by climate
change will actually boost the economies of these countries. Warming
can improve agriculture or reduce heating demands in the far north, for
example. However, Ricke cautioned that these costs were calculated based
on macroeconomic factors within countries; they don’t account for
things like international trade, which may suffer in a warming world.
The model also doesn’t account for direct consequences of
climate change, like sea level rise flooding coastal areas or thawing
permafrost causing roads to buckle. In fact, northern latitudes are
among the
fastest warming regions in the world.
These effects will impact the economies of northern countries, but they
aren’t baked into the economic model used in this study.
“We recommend taking the negative social cost of carbon
values with a grain of salt,” Ricke said. “These estimates likely
represent a lower bound.”
On the other hand, the findings are especially alarming
for India. It has the highest social cost of carbon in the world, at $86
per ton. Coming in second is the United States at $48 per ton.
“The thing that drives the high social cost of carbon in
the US to a great extent is the fact that we just have such a big
economy, so we have a lot to lose,” Ricke said. This value
coincidentally aligns with the number the Obama administration came up
with, but there’s a crucial difference. Ricke explained that the
government’s numbers included social costs to the rest of the world from
US emissions; the number Ricke calculated does not. If the team were to
include everything in the Obama formula, then the social cost of carbon
for the United States would be even higher.
As journalist David Wallace-Wells pointed out on Twitter,
this shows that fighting climate change makes sense for the United
States, even for purely selfish reasons:
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Calculating the social cost of carbon is merely the starting point for climate policy
Suppose every country in the world suddenly wakes up
tomorrow in ecstatic cahoots on climate change and decides to implement a
carbon tax at the level of their respective social costs of carbon.
Will that solve climate change?
Not even remotely.
“If countries were to price their own carbon emissions at
their own [country-level social cost of carbon], approximately 5
[percent], a small amount, of the global climate externality would be
internalized,” the researchers wrote.
That’s because there are some countries that emit very
little and will be hit hard by climate change, while others emit a lot
and won’t see as many damages. So for a country to set a meaningful
carbon tax, or any other price on carbon, it has to include damages
caused to other countries, as former Obama adviser Jason Bordoff wrote
in the
Wall Street Journal:
Unlike other regulated pollutants that have
almost entirely domestic consequences, CO2 impacts are global, and
climate change is a “tragedy of the commons” problem. A ton of CO2
contributes equally to climate change regardless of where it comes from.
If all nations looked only at the impact of a ton of CO2 on their own
nations, the collective response would be vastly inadequate to address
the true damages from climate change.
This wonky chart (bear with me) from Ricke’s study explains the dilemma:
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A figure comparing the social cost of carbon within a country to its share of global emissions. Nature Climate Change |
The chart compares a country’s social cost of carbon to
its share of global emissions. The radiating lines show the ratios of a
country’s share of global emissions to its share of the damages.
The United States is almost balanced, with its high
social cost of carbon roughly proportional to how much carbon dioxide it
emits. But India pumps out just 6 percent of global greenhouse gases
and will bear more than 20 percent of the global economic burden from
climate change. In other words, India faces almost quadruple the damages
of global warming compared to its contribution to the problem. Zoom in
further and you’ll notice that many of the wealthiest countries in the
world stand to bear the lowest costs of climate change.
This is part of why the global social cost of carbon,
$417 per ton, is so much higher than it is for any individual country.
The costs of climate change are greater than the sum of their parts. Yet
it also shows that many of the wealthiest countries, which contributed
the most greenhouse gases, stand to be the best insulated from its
costs.
That makes climate change a global justice concern. In
limiting global warming, wealthy countries face a moral imperative to
look beyond their borders and GDPs, pushing even harder to cut their own
emissions. The social costs of carbon also show why climate change
really has to be tackled as a global problem rather than by individual
nations. But as long as countries like Russia, the United Kingdom, and
Germany face little financial fallout, that policy case becomes much
harder to make.
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