The Climbing Cost Of Carbon

David Roberts calls our attention to “a fairly significant move on climate change” recently made by the Obama administration

How much damage does a ton of carbon emissions do? That dollar figure is known as the “social cost of carbon” and it is, as economist Frank Ackerman put it a few yeas ago, “the most important number you’ve never heard of.” Why does it matter? Because the U.S. government uses it to assess the costs and benefits of regulatory action. The higher the social cost of carbon, the more action can be economically justified. …

The federal government just bumped up the cost of carbon by 60 percent. This will, all things being equal, increase by 60 percent the amount of carbon mitigation that can be economically justified. That’s a big deal, especially in light of the fact that EPA regulations are going to make (or break) Obama’s second-term climate legacy. It won’t alter the politics of those regulations, and sadly, political considerations generally count for more than cost-benefit analysis. So this may not have any big short-term impacts. Nonetheless, if this number stays on the books — and if the government continues to update it based on the latest science — it will eventually worm its way deep into the regulatory apparatus and do something that no amount of argument and advocacy have been able to do: force the federal government to properly value the climate.

Though the US has yet to put an actual price on carbon emissions, a recent report [pdf] from the World Bank reviews the state of carbon pricing legislation in the rest of the world, finding that “over 40 national and 20 sub-national government jurisdictions have either implemented or are considering carbon pricing mechanisms”. Silvio Marcacci has the details:

As of 2013, the countries with functioning systems or carbon pricing mechanisms scheduled to start within the next few years collectively emit 10 gigatons of CO2 per year – equal to about 20% of global emissions, or the combined annual emissions of the US and EU. The Bank report highlights cap and trade systems in the EU, California, Kazakhstan, New Zealand, Quebec, the Regional Greenhouse Gas Initiative, and regional markets in Japan, as well as South Korea’s developing system. In addition, carbon taxes are cited in Australia, British Columbia, Denmark, Finland, Ireland, Norway, South Africa, Sweden, Switzerland, and the United Kingdom.

Brad Plumer caveats:

[T]he World Bank concludes that there hasn’t been nearly enough progress to avoid the worst effects of global warming. “The current level of action puts us on a pathway towards a 3.5–4°C warmer world by the end of this century, [which] would threaten our current economic model with unprecedented and unpredictable impacts on human life and ecosystems in the long term.”

What’s more, many of these pricing programs could prove fleeting. In Australia, for instance, Liberal leader Tony Abbott has promised to dismantle the country’s carbon law if his party gains power in the September elections (which is looking likely). So carbon pricing could just as easily shrink as expand in the years ahead.

Along the same lines, it turns out the “bombshell” reports announcing a Chinese cap-and-trade market in the next few years were duds:

China’s Chief Climate Negotiator Su Wei reaffirmed his nation’s commitment to lower emissions relative to economic output while dismissing reports that it will adopt an absolute cap on greenhouse gases.

The Financial Times and Independent newspapers both said last month that China is looking to introduce a cap in 2016. The Independent cited a proposal by the National Development and Reform Commission, the economic planning agency where Su works. The FT cited Jiang Kejun, an NDRC carbon-policy researcher. “The paper quoted an expert,” Su said today in an interview in Bonn, where two weeks of climate talks began yesterday. “It’s not necessarily presenting the view of the government or the NDRC. The NDRC would reaffirm that we have committed to a carbon-intensity target by 2020.”