Social Cost of Emissions: 'One of the Most Important Numbers That No One Has Ever Heard Of'

A new analysis shared with the Biden administration on behalf of the advocacy group Friends of the Earth highlights concerns about how the U.S. government will calculate the social cost of planet-heating emissions--official figures that can notably impact policy and spending decisions.

The comment (pdf) sent to the Office of Management and Budget--authored by experts at the Applied Economics Clinic (AEC), a Massachusetts-based nonprofit consulting group--comes as the administration seeks input on determining the social cost of greenhouse gases (SC-GHG).

"The social cost of greenhouse gases is one of the most important numbers that no one has ever heard of," said Karen Orenstein, director of the Climate and Energy Program at Friends of the Earth (FOE) U.S., in a statement Tuesday.

"If the U.S. were to assume its fair share of the global effort to limit global temperature rise to 1.5 degrees Celsius," she added, referencing the Paris agreement's more ambitious target, "the cost of one ton of GHG emissions would be so high that government support for climate-polluting investments would be a non-starter."

The U.S. government started considering the social cost of carbon dioxide (CO2) back in 2010, eventually also taking into account the costs of methane (CH4) and nitrous oxide (N2O).

As Undark detailed in March, "This seemingly obscure concept puts a number on how much damage a metric ton of carbon dioxide emitted today will do in the future, in order to show how much a given climate policy would benefit the economy in the long run."

"The current update to federal SC-GHG values is an important opportunity to address the United States' global responsibility to lead on aggressive action to stop climate change."
--Elizabeth Stanton, AEC

Tamma Carleton, an environmental economist at the University of California, Santa Barbara, told the outlet that "the social cost of carbon is incredibly important because it enables policymakers or other decision-makers to put the costs and benefits of any climate policy on a level playing field."

"It's not the environment versus the economy--climate change has measurable effects on the economy--so it's really about measuring what's best for society," while choosing smart policies, Carleton explained.

With an executive order on his first day in office, President Joe Biden reconvened the Interagency Working Group on the Social Cost of Greenhouse Gases that his predecessor had disbanded in 2017.

In line with Biden's order--over which Republican-led states filed suit--the working group released (pdf) interim estimates for the social costs of greenhouse gases the following month but is set to finalize its figures by January 2022 and the process for regularly revising those numbers by next June.

"The current update to federal SC-GHG values is an important opportunity to address the United States' global responsibility to lead on aggressive action to stop climate change," Elizabeth Stanton, director and senior economist at AEC, said Tuesday.

In their analysis for FOE, Stanton and her AEC colleagues found that the social cost of CO2 calculates to at least 15 times the Biden administration's current figure of $51 per ton.

AEC's comment emphasizes that "the social costs of climate change--destroyed livelihoods and homes, negative health impacts and lost lives, reduced access to food sources and clean water--are a crucial input into the policy analysis that determines both how much the U.S. federal government is willing to spend on our behalf to avoid these serious, irreversible impacts and how little it should spend subsidizing fossil fuels."

As the analysis explains:

The United States alone emits more than 6.5 billion metric tons of CO2 every year. The consequences for underestimating the climate damage of a single added ton of greenhouse gas emissions are dire. The lower this value is set, the less the U.S. federal government spends on climate change mitigation," AEC adds. "This translates into less urgency and ambition applied to addressing the climate crisis and consequently more devastating impacts on lives and livelihoods in the United States--especially in environmental justice communities--and around the world--especially in developing countries.

The Biden administration's temporary estimates, the comment says, "represent a marked improvement over the Trump administration's open attempt to reduce the SC-GHGs to as close to zero dollars per ton as possible, effectively arguing that greenhouse gases result in little or no damage to human society."

However, the working group "must account more effectively for intergenerational and interregional equity (both within the United States and internationally), reduce the devaluation of future climate damages, and ensure that SC-GHG values are based on targets for holding temperature increases below levels identified by scientists as crucial to the continuation of human civilization as we know it," the analysis adds.

AEC and FOE's specific suggestions to the Biden administration include:

• Estimate climate damages in a single model: Use one complex model, vetted in a public process, and including green investment as a boon to economic growth.
• Include climate damages around the world: Include worldwide climate damages in SC-GHG valuation.
• Value far future climate impacts: Use a discount rate of 1% (or lower) that shrinks over time to represent present generations' ethical obligation to future generations.
• Place equal value on all people, all families, and all communities: AEC and FOE recommend strongly against modeling practices that weigh a lost human life or other climate damages in proportion to local income or economic output.
• Set fair and effective emission reduction targets: Begin SC-GHG modeling with national levels of emissions reductions determined by scientific analysis, historical responsibility, and capacity to act to be consistent with a high likelihood of limiting global temperature rise to 1.5degCelsius.
• Have a clear process for updating the SC-GHGs over time: SC-GHG estimates should be updated every five years in a three-step process with a review of the underlying data, a comment period, and a review of the SC-GHG methodology, with inclusion of vulnerable communities in the comment process.

While recognizing that "a more complete update that follows the best science takes time," Heather Boushey, a member of Biden's Council of Economic Advisers, wrote on behalf of the working group co-chairs in February that "this administration will follow the science and listen to the experts."