NEW YORK—If climate change solutions are going to cross boardroom tables and pass through government chambers, the environmental issue must be translated into dollars and cents.
How much will it cost to do something about climate change? How much will it cost to NOT do something about climate change? Is damage control a worthless investment because the world is already past repair? What should be subsidized? What should be taxed?
Frank Ackerman of The Stockholm Environmental Institute (SEI) estimates that it would cost $150-$500 to clean up each ton of carbon dioxide (CO2) in the atmosphere using any of the methods widely discussed in the scientific community.
At a Bottom Line on Climate Change conference at the New School for Social Research in New York City on Friday, Ackerman compared the cost of cleanup to the “social cost of carbon”—the cost of NOT cleaning up or preventing further carbon emissions.
The U.S. government estimates the social cost of one ton of CO2 to be $21. Ackerman says this figure is at the lowest end of the spectrum of social cost estimates. Depending on the method used to derive the social cost of carbon, it can range from $6 to $893 per ton.
The $6 figure, Ackerman argues, is based on a model that includes a critical algebra mistake. This model is one of the three models the government used to come up with its $21 average. Ackerman says $28 is really as low as the cost could reasonably go.
At the heart of these vastly varying figures is a philosophical debate among economists.
To determine future economic values, some abstract factors are built into the equation—such as whether or not future generations are treated as equally important as the current generation. Economist William Nordhaus of Yale University explains this factor:
“The first parameter is the time discount rate … which refers to the discount on future ‘utility’ or welfare (not on future goods, like the return on capital). It measures the relative importance in societal decisions of the welfare of future generations relative to that of the current generation,” writes Nordhaus.
Estimates closer to the $893 end of the spectrum treat the welfare of future generations as equally important as that of the current generation. Estimates closer to $28 count the welfare of the current generation as more important.
Nordhaus writes, however, that rates and figures used to arrive at the higher cost estimate differ greatly from actual market data and are “vaguely justified by estimates of the probability of the extinction of the human race.”
Economists who estimate the social cost of carbon to be high have a greater sense of urgency about acting against climate change.
On the Edge
“There’s a fundamental disconnect here,” said Ackerman. “Climate science, as we’ve heard this morning, says that we need to respond immediately to the threats that we face. … Peer-reviewed economics of climate change says that we have a desperate need for cost-benefit analysis and it’s important to avoid spending too much.”
Friday morning, professor of geosciences at Penn State University Klaus Keller described a tipping point that scientists will likely be unable to detect until it is too late. He thus suggested immediate action.
Keller used a water jug on the table to illustrate his point. As he pushed it along the table, he said it was like human action creating climate change. The effects are gradual, slow, and steady. But, once the jug gets to the edge of the table, an immediate and irreversible crash will follow.
Professor of earth and environmental sciences at Columbia University Peter Schlosser admitted that it is hard to tell whether we have already knocked the jug off the table.
In his study of Arctic Sea ice, he observed the ice slowly melting over more than a decade. Little did he realize what could happen with the trigger of one especially warm summer. In 2007, “We watched in disbelief how the ice cover really shrank to such a low extent that it almost reached the North Pole.”
“It may not be that visible in some cases,” warned Schlosser.
Taxes and Subsidies
To instill a sense of urgency where the threats of environmental impact do not, prominent climate change researcher and Director of NASA Goddard Institute for Space Sciences James E. Hansen, suggests a “simple carbon tax.”
Sweden enacted a carbon emissions tax in 1991, which is currently $150 per ton of carbon. The tax does not apply to fuels used to generate electricity or renewable resources, and has been quite successful, according to European Union Commissioner Artur Runge-Metzger, who directs an Internal and Climate Strategy.
In Europe, carbon tax is not widespread, but gasoline is heavily taxed. Runge-Metzger asked his colleagues in Brussels what the price of gas was there on Friday. It was $8.60 dollars per gallon.
Hansen railed against what he says is the artificially low cost of fossil fuels in the United States.
“In some cases they’re [fossil fuel companies] even subsidized, and indirect subsidies are enormous!” declared Hansen. He listed some of the “indirect subsidies” as military costs to protect supply lines and health care costs for the millions who get sick and die of pollution related to fossil fuels every year.
Hansen benefited from subsidies that helped him install solar paneling on his Pennsylvania home. He noted, however, that the tens of thousands of dollars he got for his panels on the taxpayer’s buck could not be handed out en masse.
“As long as it’s 1 percent of people doing this, it’s great for that 1 percent, but if everyone wants to do it … the costs have to go on each individual and it’s not economically sensible,” said Hansen.
