What You Need to Know About the Social Cost of Carbon

by Jason Schwartz

June 21, 2016

Scientists and economists have the tools to estimate the cost burning fossil fuels will have on our society due to climate change. The U.S. government even includes those costs in its policymaking. Here are some useful things to know when hanging out with your climate-denying uncle.

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It takes only a little bit of scientific literacy to understand how the weather is different from the climate.

While the weather is more of a conversation topic — OMG, it’s so hot right now, please pass the potato salad, etc. — climate can only be understood in a longer timeframe. Weather is like a snapshot. Climate is like life.

And like most people, you’ve probably noticed that your life is getting warmer. 

There are a lot of ways to imagine what everything being warmer implies for the future. You could consider the health effects of climate change, including increased risk of infection from insect-borne diseases, like malaria and dengue fever, or of, say, being hurt or dying in a heat wave that has been made more powerful by climate change.

On the other hand, you can look at threats to all the non-human species on the planet — already, our planet is undergoing a mass extinction event, largely of our making. Or you could also consider how climate change is affecting the engineered systems humans depend upon to survive, the ones bringing water to our cities, the agricultural systems we depend upon to feed us, and the built environment housing the world’s coastal communities. They’re all at risk.


Devastation in New York after 2012’s Hurricane Sandy.

Everything Costs Something

These issues may have been hypothetical once, when climate change seemed like a distant prospect. But now, in many parts of the world, they’re real.

Just ask people on the East Coast after Hurricane Sandy, in the West dealing with historic droughts, or in Alaska or the Gulf Coast, where coastal communities are seeing sea level rise threaten their homes and land.

But just in case you have frequent run-ins with some of the oddballs who deny climate change or, just as bad, try to make an economic case for ignoring it, it might help to learn this term: The social cost of carbon, or SCC.

All those climate impacts — human health, ecosystem and species loss, loss of property and food production, and more — come with big economic costs, as well. The recovery effort from Hurricane Sandy alone is running into the tens of billions of dollars, and it’s still incomplete. Along with the already high costs the drought in California has caused taxpayers, it poses some pretty interesting hypotheticals, like where will all the people go if the water runs out, or how will we replace the one-fourth of the U.S. food supply grown in the Central Valley?

You could go down some pretty dark (and expensive) rabbit holes if you let yourself get into it. And the federal government does. Sort of.

Its Interagency Working Group on Social Cost of Carbon tries to give all federal agencies guidance for how to incorporate future costs of climate change into cost-benefit analyses. It does that by giving a cost, to society, of each extra ton of carbon dioxide added to the economy. Predictably, the government’s estimate of SCC, $37 per ton of carbon dioxide, is pretty conservative.

Wishful Thinking

Many experts claim that the government’s low estimate is the result of its use of a low “discount rate,” which is essentially a way of measuring the value of a dollar today versus what it would be worth in the future. When it comes to something like climate change, a lower rate means that we “discount” the suffering, in monetary value, of future generations less.

Residents of Tacloban City await airlift after Typhoon Haiyan devastated their city.

Residents of Tacloban City await airlift after Typhoon Haiyan devastated their city.

Experts claim we should be using lower discount rates, from both a moral and practical perspective — the latter because most agree we need to change rapidly and ambitiously to avoid catastrophic climate change, and that would involve significant investments now. But also, the working group assumed predictable effects and impacts of climate change, disregarding the extreme ones, which, let’s face it, are already occurring.

U.K. economist Nicholas Stern, who wrote the famed Stern Report for the UK government, implies the SCC should be closer to $85 per ton. And correcting for climate change’s effects on national growth, one Stanford economist estimated an SCC of $220 per ton. It’s not just that there is a range, it’s that the figure our government agencies are using is way down at the lower end of that range.

Like, oh yeah, climate change? No big deal.

Another thing to keep in mind is that as climate change worsens, costs will rise, too. That is why each unit of greenhouse gas released now is more costly than the same unit yesterday. In ten years time, when the world is hotter and disasters more common, a unit of carbon dioxide will be that much more expensive than one today.

A recent Greenpeace report took on social cost of carbon head on, by analyzing the potential costs, over 50 years, of the oil and gas removed from U.S. offshore deposits. The results were staggering: between $58 billion and $179 billion. Imagine those costs being absorbed by the companies that cause them, instead of being picked up by folks like you and me.

We’d all be going solar in no time.

Jason Schwartz

By Jason Schwartz

Jason Schwartz is a media officer for Greenpeace USA based in New York City.

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