Many initiatives have the potential to reduce carbon dioxide emissions and decrease global warming. Some are expected to cost governments and taxpayers trillions of dollars. However, if society does not do enough to address climate change, it will pay a price. According to a new survey, if we do not act quickly, climate change would cost the globe $1.7 trillion per year by 2025, rising to $30 trillion per year by 2075.
The Biden administration is revising the social cost of carbon (SCC), a cost-benefit metric that has been used for a decade to influence climate policy by putting a monetary value on the consequences of climate change. In a newly published analysis, a team of researchers lists a series of measures the administration should consider in recalculating the SCC.
The Biden administration is revising the social cost of carbon (SCC), a cost-benefit metric that has been used for a decade to influence climate policy by putting a monetary value on the consequences of climate change. A team of researchers lists a variety of parameters the administration should examine while recalculating the SCC in a recent study published in the journal Nature.
Economic analysis is at the heart of the regulatory process in the United States, and will thus play a crucial role in shaping and guiding the new administration’s ambitious climate goals. Our ideas provide a road map for how this might be done in a scientifically rigorous and open manner.David Anthoff
“President Biden signed a Day One executive order to create an interim SCC within a month and set up a process to produce a final, updated SCC within a year,” explains Gernot Wagner, the paper’s lead author and a climate economist at New York University’s Department of Environmental Studies and NYU’s Robert F. Wagner Graduate School of Public Service. “Our paper illustrates how the administration might employ the most recent research in ways that account for storms, wildfires, and other occurrences that are more destructive today than they were when the SCC was established.”
“Economic analysis is at the heart of the regulatory process in the United States, and will thus play a crucial role in shaping and guiding the new administration’s ambitious climate goals,” says David Anthoff, co-author and assistant professor of Energy and Resources at UC Berkeley. “Our ideas provide a road map for how this might be done in a scientifically rigorous and open manner.”
“The destruction and loss of life caused by the catastrophic weather in Texas is merely the most recent example of how climate change can upend our well-being in ways that we could not have envisioned only ten years ago,” Wagner adds.
The Interagency Working Group (IWG) of the federal government, which includes the Council of Economic Advisors, the Office of Management and Budget, and the Office of Science and Technology Policy, will design the new SCC.
The authors, who also include researchers from the University of Maryland, the London School of Economics and Political Science, Yale University, the University of Exeter, the University of Wisconsin-Madison, and Harvard University, list several recommendations for the IWG to consider in developing the new SCC in the Nature “Comment.” The following are a few examples:
- Restoring the projected economic cost of CO2 emissions to $50 per ton, after the Trump administration reduced it to $1-7 per ton.
- Updating the damage functions that account for how climate change affects human welfare, such as agricultural losses and the impact of heat on student learning and workplace productivity.
- Taking into account the inequitable effects of climate change both within and across countries
- Examining discount rates (the methods by which the cost of future climate-related disasters is valued in today’s dollars) to better inform current budgetary procedures.
- Updating estimates for both economic and population growth, which affect predictions of emissions and their environmental impact.
The authors state, “Climate science and economics have advanced since 2010.” “Storms and wildfires are becoming more common, and the expenses are rising. Scientists can now directly correlate many more extreme weather occurrences to climate change, and new econometric tools aid in quantifying economic implications.”
Because both approaches include economic risk, it’s critical to determine which policies targeted at mitigating climate change make sense from a cost-benefit standpoint. The social cost of carbon (SCC) is a monetary assessment of all economic damage caused by emitting one ton of carbon dioxide into the atmosphere. It signifies how much it is worth to us today in order to avert the future damage.
The social cost of carbon is used to assist policymakers in determining whether the costs and benefits of a particular climate change program are justified. A higher SCC generally indicates that the advantages of a certain climate strategy to reduce CO2 outweigh the costs; a low SCC indicates that a policy appears to cost more than the benefits it ultimately delivers. In theory, the SCC should rise over time as physical and economic systems become increasingly stressed as the effects of climate change accrue.