What is The Social Cost of Carbon? The Runaway Consequences of Global Warming We Don’t Notice

TheHill.com ran an article last Monday summarizing the political jockeying surrounding the Obama administration’s use of the term “social cost of carbon.” This is not a new concept, but its role in developing greenhouse gas control policy at the national level certainly is. Firms like Koch Industries who are strong opponents of environmental regulations are throwing their weight against the use of the social cost of carbon in estimating costs associated with global warming.

What is the social cost of carbon, anyway? The EPA is glad you asked.  In short, it is a dollar estimate of the damages inflicted by emitting a single metric ton of CO2. As the EPA page says, the social cost of carbon attempts to unify the multitude of effects caused by CO2 emission. I personally think this is a great first step toward building workable global warming mitigation techniques. However, I also agree with the Intergovernmental Panel on Climate Change notes that it almost certainly underestimates the real costs. This is because many effects of global warming are not yet easily quantified- their severity, duration, and time until onset are subject to debate. The mind-numbing complexity of all the factors at work create a substantial risk, and risk is commonly quantified for economic purposes (think of how insurance companies work). Because the stakes are so high, the high uncertainty of future global warming consequences combined with the estimated costs already calculated by the EPA make their social cost of carbon numbers far too low. The real costs are incalculable, but this should do anything but discourage action. Global warming will not just make the climate different, but it will also affect economics, politics, warfare, and every other facet of human civilization, in both rich countries and among the poor. Poor countries will feel it more, but that’s a topic for another blog.

The EPA specifically mentions natural disasters due to global warming as a factor driving up the social cost of carbon. It is difficult to peg natural disasters to global warming in the short term, but a good place to start is to look at the number of anomalous weather events in any given period of time. What we find is that even just in North America’s past 12 months, there have been lots of them. It’s tempting to point to any given heat wave and say “see? It’s hotter out! That’s global warming!” Instead, a methodical study of weather extremes versus weather norms will indicate whether the climate is changing—Climate is an average of what it usually does, weather is what it’s doing right now. Nevertheless, many of these events are surprising in their severity—Colorado received nearly a year’s worth of rainfall in four days. A “year’s worth” of rain falling in a little over 1% of a year’s time warrants some serious investigation. And for those affected by any of these events (and the hundreds in other countries we barely hear about), it’s too late to hear whether it was caused by global warming. They are paying the costs anyway.

For another example, we know that global warming will create rising temperatures and fewer freezes in places like the American South, but one possible effect this will have is an increase in vector borne diseases, since freezes normally control the insect population. If this does occur, increased West Nile Virus, Dengue Fever, and even Malaria cases may strike in places not normally associated with tropical diseases. Global warming never seems to stop with simple problems. In a hotter—and consequently more humid—world, diseases will also strike agricultural assets more severely. Again, the effects are difficult to predict, because a sudden die-off of crops or animals will cause shortages, price spikes, and subsequent social conflict.

The message I take away from the arguments over the social cost of carbon is that our current “business as usual” system is extremely poor at dealing with costs. Economists refer to undesirable consequences of actions that affect others as externalities. The incentives in capitalism encourage maximizing individual profit and minimizing individual cost, and the easiest way to do this is to turn your costs into externalities, such as pollution. In my view, almost all societal ills are traceable to this system. A coal power plant provides cheap electricity, in monetary terms, for those who buy the electricity from it. But those who breathe its air pollution for a lifetime pay by an increased incidence of lung cancer, or asthma amongst their children. The air pollution doesn’t factor into the price tag of the electricity, and it doesn’t care if the people breathing it are benefitting from the electricity being generated. But if you live miles away, this is a good deal, because the air pollution might blow in a different direction, but you still get cheap power.

Most of the outputs we generate in our daily lives are masterfully hidden from view. When you take the trash out every week, it might seem to a time-traveler from the Stone Age that it simply disappears by the next morning. With a simple, thoughtful observation however, we can attempt to tally all of the costs associated with this action. Not only is the garbage taken away by an investment of labor on the part of the sanitation workers, but the truck that takes it to its final destination also runs on fossil fuels. And the truck itself required energy to produce. And the roads it drives on are made partly from fly ash, a byproduct of the combustion of coal. And so on and so forth. And have you ever tried to find out exactly where your garbage goes? How about where your local water treatment and sewage treatment plants are?

Our brains aren’t wired very well to deal with hidden costs such as these. If we don’t see costs in concrete terms directly in front of us (I used to have 5 dollars, I spent it on something and now that bill is gone), we tend to ignore them. Monetized loss is the easiest for the business community to understand, and it seems to me that carbon-emitting industries such as those mentioned in the TheHill.com article do not take kindly to seeing their externalities of CO2 emissions given a dollar pricetag. Educating ourselves in topics such as systems theory, ecology, economics, resource management, and environmental sciences is what empowers us to realize the full consequences of even what seem to be the simplest of our actions. The social cost of carbon is a fantastic first step in recognizing the hidden costs associated with global warming which are shared by every human and nonhuman alike on the planet. Be they monetary, social, ecological, or health consequences, the more we know about the present, the greater the number of future risks we can uncover. That very uncertainty itself- the Pandora ’s Box of future ills that climate inaction enables- should be a big enough cost to motivate serious, proactive change.


As a footnote, the first half of Bill McKibben’s book Eaarth: Making a Life on a Tough New Planet does a brilliant job convincing the reader of the interconnected risks and consequences of global warming. I highly recommend it for anyone who wants to read a more thorough account of how insurance companies, disaster relief organizations, and governments are processing global warming-related costs.


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