Is the Social Cost of Carbon Determinable?

by Emil Morhardt

The Social Cost of Carbon (SCC) release into the atmosphere is what you need to know if you want to make a case for reducing its output. Down the road sometime, there may be social consequences [costs] that will cause us to regret not doing something to reduce our current carbon output, but if it would cost less to do something about it then then to to make the investment now, we might as well wait. So there are two basic questions to ask: What will the social costs of our carbon emissions, if any, be? And how much more or less will it cost to mitigate them when we experience them than it would to avoid them in the first place by cutting carbon emissions? Pizer et al. (2014), writing in Nature, discuss the impact of different estimates of the SCC and the importance, if difficulty, of getting a correct estimate, observing the contrast between the estimate made by the US government in 2008 which suggested that we might as well wait, versus the one made in 2013 which showed the costs of waiting are triple those of doing something now. They also note that above all, the assumed discount rate in the economic models is crucial to the calculations, concluding that it would be ideal if both social costs and discount rates were routinely recalculated on a 5-year basis by multiple government agencies and reviewed by the National Research Council. Their goal is to use the best possible social and natural science and economics, free of political input.

Most of us would like all policy made this way. The authors are particularly keen on more aggressive research into the translation of the physical impacts of carbon dioxide into the social ones (they are, after all, social scientists, who are routinely on the short end of climate change research funding.) They are especially interested in estimating damage from extreme climate change—the sort resulting from reaching a tipping point. I would certainly support this—the social costs could be staggering and they have not been very well examined or publicized yet. A proper understanding of them might be far more instrumental in causing politicians to take climate change seriously than the current prevailing apparent belief in the US Congress that Americans will be able to solve whatever problems occur, and since it is not certain that any large ones will, we should do nothing.

Pizer, W., Adler, M., Aldy, J., Anthoff, D., Cropper, M., Gillingham, K., Greenstone, M., Murray, B., Newell, R., Richels, R., 2014. Using and improving the social cost of carbon. Science 346, 1189-1190.

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