Americans emit 6 gigatons of CO2 each year, about 20 tons1 per person. Most of that is from the energy industry, which accounts for about $1 trillion a year, or about 5% of GDP. If we spent just 20% of that amount, $200 billion a year, for carbon emission reduction, would that be acceptable? Would the average person pay $625 per year?
$625 per year would be $31.25 per year per ton of CO2. That value is roughly in the middle of most carbon taxes and carbon offset programs. Cap and trade2 numbers come in a bit lower.
In terms of gasoline, that $31.25/ton would be about 28 cents per gallon. Not very much, not enough to make people stop driving. But what it could do is generate revenue to fund carbon emission projects like wind and solar farms, subsidize hybrid and electric vehicles, and cut costs of energy efficient products.
The social cost of carbon (SCC), the additional cost to the economy of an extra ton of CO2 in the atmosphere if the "business as usual" (BAU) path is followed, is another measure of the price of carbon. One estimate in 2015 put the cost at $31.20/tCO2. Another study, in 2019, put the average cost of multiple studies at $54.70. The idea behind SCC is that it is better to spend the money to avoid warming than to build a pool of money to pay for damages. Naturally, it does not include the incalculable costs of the loss of human life, lower quality of life, and the extinction of species.
Of course, how that dollar amount per ton is spent toward abatement, that is what it goes toward, determines the true cost for a given ton. In other words, not all tons are equal. For example, replacing regular light bulbs with LED bulbs saves the consumer money over the life of the bulb -- the emissions reduction has a negative cost. On the other hand, carbon capture and sequestration (CSS) schemes are very expensive. The chart below shows the marginal cost of many of the actions to reduce emissions, sorted by price. Width of individual bars shows total gigatons saved.
Source: McKinsey & Company
Notice in the chart that the "no brainer" measures total less than 20 Gt of CO2. One can expect this low hanging fruit to be among the first actions to be taken. As 2030 comes and we proceed further, the focus will turn to the more expensive abatement efforts, ones that come with fewer options. We can hope that the global warming science will be more convincing by then and the political will to spend money will come easier.
We've briefly explored what is a reasonably painless expenditure, the cost of doing business as usual, and the actual cost of various emission mitigation measures. We could dig deeper to come up with a definitive single value for the carbon price tag, but the many uncertainties and estimations would still leave large room for error.
So how do we use a number like $32.50 per ton of CO2 emitted to the atmosphere? How can we apply it to our personal expenditures and societies expenditures in the fight against global warming? Here's the best answer I can come up with, from the World Bank:
The World Bank Group, together with the OECD and with input from the IMF, set up the FASTER Principles. The FASTER principles are: F for fairness, A for alignment of policies and objectives, S for stability and predictability, T for transparency, E for efficiency and cost-effectiveness, and R for reliability and environmental integrity. The research draws on over a decade of experiences with carbon pricing initiatives around the world. It points to what has been learned to date: a well-designed carbon pricing initiative is a powerful and flexible tool that can cut GHG emissions, and if adequately designed and implemented, it can play a key role in enhancing innovation and smoothing the transition to a prosperous, low-carbon global economy. -- link
I will continue to explore the cost of carbon in future posts. The economics of preventing global warming is the heart of the debate. It's not a fixed cost or one easily determined. There will much disagreement on both sides. Coming to a compromise on the price to be paid is the essence of the politics of global warming.
(1) In my posts "ton" is a "metric ton" or "tonne" which equal to 1,000 kg. A metric ton is 2204.62 lbs, almost exactly an American "long ton" of 2,200 lbs. For casual reading, the usual "short ton" of 2,000 lbs could be mentally substituted without a huge loss of accuracy. The numbers are usually more roughly defined and one only needs to know "it's a big number!"
(2) Cap and trade is also known as emissions trading. Cap and trade comes in many permutations. In a sense it is a relative of carbon offsets, but instead of being voluntary it is built upon regulatory caps and market forces.
Links for more research:
Carbon Pricing Dashboard - The Word Bank
https://carbonpricingdashboard.worldbank.org/what-carbon-pricing
The Social Cost of Carbon -- Public Health Post
https://www.publichealthpost.org/research/social-cost-carbon/
The True Cost of Carbon Pollution -- Environmental Defense Fund
https://www.edf.org/true-cost-carbon-pollution
Some may be puzzled by the GHG Abatement Cost Curve. It's really a bar chart with variable bar widths, with the bars lined up by order of their values on the Y axis. This graphic shows how to read these kinds of charts.
How to read an abatement cost curve
No comments:
Post a Comment