By Sigal Samuel
More than a dozen Republican-led states are suing President Joe Biden over a number: 51.
Back in January, Biden signed an executive order that tasked a working group with determining a social cost of carbon (SCC) — a measure, in dollars, of how much economic damage results from emitting 1 ton of carbon dioxide. For now, the working group decided to go with $51 per ton, the same SCC the Obama administration used, until it can study the matter in depth and release its final determination early next year.
Being able to discuss the damage in terms of a precise dollar amount is important because it allows scientists and policymakers to show when the benefits of averting global warming are greater than the costs. At some point it just becomes cheaper to switch to sustainable systems rather than coping with all the wildfires, floods, droughts, and heat waves that result from unsustainable systems.
The SCC has underpinned a lot of US climate policy for years. But new data is always coming to light, which means successive administrations have had to redetermine a social cost of carbon that’s updated to the latest science. That’s where things get tricky.
Although the Obama administration had set the SCC at $51 per ton, the Trump administration put it as low as $1, in part because of a decision to factor in only domestic, not global, impacts of emissions.
Compared to $1, the $51 price tag the Biden administration reverted to is high — and the coalitions of red states that have brought lawsuits against Biden, one in Missouri and another in Louisiana, are not happy with it. (A federal judge just scrapped the suit filed in Missouri, but the red states plan to appeal; the Louisiana suit is still pending.)
But according to some top environmental economists, we have good reason to believe the true cost of emitting carbon is actually a lot higher than that price tag suggests.
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Other experts likewise believe the US has been using an overly high discount rate and thus underestimating the SCC. Economists Tamma Carleton and Michael Greenstone, for example, argued in a paper published in January that the discount rate should be no higher than 2 percent. When they plugged in that rate, it resulted in a SCC of $125.
Carleton said the need for a lower discount rate is justifiable on purely economic grounds. “As you might have noticed if you’ve tried to buy a house recently (among lots of other things), interest rates look very different. Capital markets have changed, and interest rates are lower,” she told me.