By Eric Roston

If prices for fossil fuels reflected their true cost to society—in deadly heat waves, water stress, disappearing crops—they’d be a lot higher than they are now. How much higher? Ask Michael Greenstone.

Greenstone is the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago. In the early years of the Obama administration, he and legal scholar Cass Sunstein co-led the team that developed what’s known as “the social cost of carbon.” Think of it as the baseline value of a viable future—or, as Greenstone puts it, “the benefit, in money terms, of reducing carbon emissions.”

The formula Greenstone and his team developed pegged the social cost of carbon dioxide emissions to more than $50 per ton last year. The way the thinking goes, agencies should factor in that cost whenever they’re pricing out a new policy. The Trump administration all but zeroed out the formula, but on Wednesday, President Joe Biden directed his agencies both to bring it back and more generally modernize regulatory rules to take into account health, growth, racial justice, and the environment. Not only that, he gave his staff 30 days to publish interim cost estimates for CO₂, nitrous oxide, and methane.

Before the inauguration, Bloomberg Green spoke with Greenstone about discount rates, inequality, and Milton Friedman.

Continue Reading at Bloomberg…

Areas of Focus: Energy Markets
Definition
Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Social Cost of Carbon
Definition
Social Cost of Carbon
The social cost of carbon is an essential tool for incorporating the cost of climate change into policy-making, corporate planning and investment decisionmaking in the United States and around the...
Updating the United States Government’s Social Cost of Carbon
Definition
Updating the United States Government’s Social Cost of Carbon
As the Biden administration updates the social cost of carbon, their thorough review should include using the latest climate modeling, applying new climate damage estimates, employing lower discount rates, and...
Updating the United States Government’s Social Cost of Carbon
Definition
Updating the United States Government’s Social Cost of Carbon
Policymakers could immediately return to the Obama Administration’s social cost of carbon approach paired with a more appropriate discount rate that together would produce a social cost of $125 per...
Updating the United States Government’s Social Cost of Carbon
Definition
Updating the United States Government’s Social Cost of Carbon
Policymakers could immediately return to the Obama Administration’s social cost of carbon approach paired with a more appropriate discount rate that together would produce a social cost of $125 per...