Tag Archives: social cost of carbon

The Myth of Price

Our society’s prevailing economic zeitgeist assumes that everything has a price, and that both costs and prices can be objectively calculated, or at least agreed upon by parties involved in the transaction.  There are some big problems with this proposition.

Externalized costs are involuntary transactions — those on the receiving end of the externalities have not agreed to the deal.  Putting a price on carbon can theoretically remedy this failure in the context of climate change.  In practice it’s much more complicated, because our energy markets are not particularly efficient (as we pointed out in our Colorado carbon fee proposal, and as the ACEEE has documented well), and because there are many subsidies (some explicit, others structural) that confound the integration of externalized costs into our energy prices.

The global pricing of energy and climate externalities is obviously a huge challenge that we need to address, and despite our ongoing failure to reduce emissions, there’s been a pretty robust discussion about externalities.  As our understanding of climate change and its potentially catastrophic economic consequences have matured, our estimates of these costs have been revised, usually upwards.  We acknowledge the fact that these costs exist, even if we’re politically unwilling to do much about them.

Unfortunately — and surprisingly to most people — it turns out that understanding how the climate is going to change and what the economic impacts of those changes will be is not enough information to calculate the social cost of carbon. Continue reading The Myth of Price

What Value Should We Place on Our Future?

Courtesy of the Old Marlovian
Courtesy of the Old Marlovian

By: Alexandra Czastkiewicz

October 2013

The social cost of carbon might not be a conversation that comes up at the dinner table, but realize it or not the implications of global climate change are far reaching and daunting. How important is the fate of the future generation? When your children grow up, what kind of world do you want them to experience? Putting a numeric value on the future is difficult, but it must be done if we are to change the direction of our energy future, and introduce cleaner energy technologies that produce less harmful pollution and emissions.

Coal is perceived as a more economic energy source then many renewable technologies. The Journal of Environmental Studies and Sciences recently published an article about the implications of modernizing our electricity systems. The US government needs an official cost estimate associated with the production of CO2 from fossil fuels. According to report, without counting pollution and carbon emissions, coal, on average, costs 3.0 cents/kWh versus wind energy (8.0 cents/kWh) or photovoltaics (13.3 cents/kWh) (Johnson et al. 2013). The government is now trying to take into account the environmental costs of using fossil fuels such as coal or natural gas. This includes adding a cost of potential damages caused by the emission of CO2 into the atmosphere. These potential and already realized costs include damages and deaths incurred from drought, floods, heat waves, hurricanes and other natural phenomenon that have been exacerbated given human induced climate change. Additionally, the social cost of carbon has serious public safety and health implications. Increased pollution has led to increases in asthma, water contamination, and rises in climate sensitive diseases. Every day our health and wellbeing are being compromised and if we do not change our current energy practices, and it will only continue to worsen for our futures. Continue reading What Value Should We Place on Our Future?