The Biden Administration Weighs the Social Cost of Carbon

Here’s how costs and benefits work on paper: Suppose the Department of Energy proposes new regulations for air conditioners at an estimated cost of $ 40 million, and economists speculate that the regulation will result in carbon emissions Will cut by 1 million tons at the rate of $ 51 million. Ton. This would mean a profit of about $ 51 million, $ 11 million more than the cost, meaning that it would save in the long run because of its role in preventing costly climate damage in the future. On the other hand, lower social costs of carbon, such as those imposed during the Trump era, would result in lower projected savings, suggesting that the cost of the proposed regulation would outweigh the benefits.

Over the years, it has become clear that ignoring climate change will eventually lead to major economic impacts in the future. Now, for example, scientists could more easily be responsible for the loss of California’s agriculture as a result of the drought, or the public health effects of the heat wave in Chicago, Carlton said. This means that environmental economists have learned to better assess how increasing energy efficiency will reduce these disadvantages and add a clear benefit.

Since Biden was last in the White House, research on climate economics has advanced in other ways. Because of that, the Biden administration should go beyond the Obama-era assessment, said Myles Allen, a climate scientist at the University of Oxford, and consider the full range of possible climate scenarios. These include factoring in the possibility of crossing some environmental tipping points — such as the widespread melting of polar ice sheets that will raise sea levels more quickly — and predict potential losses.

Alan collaborated on a report with other experts in 2017 National Academies of Science, Engineering and Medicine, Which cites Biden’s executive order. The report estimates the social cost of carbon at $ 42 per ton, in line with a gradual increase in costs. Under obama. Adjusted for inflation, this translates to $ 51 in 2020 dollars – the same value currently adopted by the Biden administration’s group. But other researchers have come up with higher numbers: Last month, The Economist Nicholas Stern and Joseph Stieglitz Suggested price around $ 100 per ton by 2030; Carlton And a colleague set it at around $ 125 per tonne of carbon in a paper published in January; And Francis MooreAn environmental economist at the University of California at Davis, has estimated that a coworker he produced in 2015 and a coworker is $ 220 per tonne.

There are several reasons for the detailed estimates. To detect this, researchers use at least three Various models, Each of which requires assumptions such as how trends in economic development react to climate change, how trends in oil prices change while it is still widely consumed, and from fires and floods The cost of adapting to climate change, including rebuilding or relocating people. Prone area. If, say, economists project widespread recession, climate adaptation costs, and higher emissions, they will calculate a higher carbon cost.

“You have to track carbon dioxide through the climate system and its impact around the world – what are these climate harms on everyone in all areas in future centuries?” Moore said. “This is fundamentally a very difficult problem.”

Another ongoing debate Center on how society values ​​future costs and benefits, which economists call a discount rate. “In all economic analyzes, you have trade-ups between money right now, or the losses you feel now, and which you may realize later,” said Kevin Reinert, the Carbon Initiative on Resources for the Future Director of Cost, A. Nonprofit Research Institute in Washington, DC. “And the same applies to climate change.” A lower rate means that it is much higher today to harm generations to come, while a higher rate means that they allow more burdens to bear. Most scientists consider a discount rate of 2 or 3 percent, while Trump administration policies used rates as high as 7 percent.