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In most of the world, it is absolutely illegal to go to the bathroom in your neighbor’s yard. Instead, people are legally required to do such things in special places (bathrooms, loos, water closets, toilets, or whatever you want to call them), and pay for sewer or septic services to assure safe disposal. Similarly, most people are required to pay someone to haul away household trash (just under 1000 pounds or 500 kilos per person per year in the US), and businesses are required to pay to dispose of their wastes. Dumping your waste in your neighbor’s yard is strictly forbidden.
If your wind turbines or solar cells break and you can’t fix them, you must pay to recycle or dispose of them. But, the roughly 20 tons of CO2 per person per year from the US economy are dumped into the air with no cost at all to the people or businesses that produce CO2. The same is true for much of the world, although some places have used policy actions to place taxes or fees on CO2 emissions, but still generally less than the damages caused (see below). And, we have high confidence that the CO2 does hurt other people.
The ability to use discounting to estimate the present value of future events means that the costs or benefits associated with emitting CO2 can be estimated. CO2 does fertilize plants, and in especially cold places warming may be economically beneficial, but the costs come to dominate. The cost today of the damages caused by emitting CO2 is called the social cost of carbon.
The 2007 IPCC (Working Group 2, ch. 20 and Summary for Policymakers) reported on more than 100 estimates of this social cost of carbon, running from $-2 per ton of CO2 (very slight benefit) to $86 per ton of CO2 (moderately large cost). For comparison, burning just over 100 gallons of gasoline will release 1 ton of CO2. Recently in the US, this has been about $300-$400 in gasoline. A car getting 25 miles per gallon and driven 10,000 miles per year would make 4 tons of CO2 per year, costing the driver about $1500 for gasoline and costing society perhaps 10% of that, if you take the average of the high and low values just above. (The numbers here are all in 2000-pound short tons of CO2. You will see different numbers if you go look at the IPCC report because they were quoted in 1000-kg metric tons, and were for tons of carbon instead of tons of CO2; we have made the conversions for you.)
Additional estimates noted by the IPCC were as high as almost $400/ton for the social cost of releasing CO2. Many factors contributed to this large range; again, the discount rate is often the most important control. In 2013, the US government reevaluated the cost of carbon used in calculations, and found that the cost of emissions in 2020 (not that far in the future) would be $12/ton for a 5% discount rate, $43 for 3%, and $65 for 2.5% (in 2007 dollars) and rising for emissions further in the future. The government also checked what would happen if the parameters in the calculation are near their most-expensive end rather than in the middle of the possible range, and found with the 3% discount rate a cost of $129 per ton.
Video: Social Cost of Carbon Graph (1:44)
PRESENTER: This figure from the US Government in 2013 shows the estimates of the social cost of carbon, how much damage is caused to society by emitting a ton of CO2 to the atmosphere. It's done with various uncertain parameters, and so they did a range of simulations of possible outcomes. And so you get a distribution in the number of simulations, they give a different number as shown here.
If we start out with the blue one, which is the discount rate of 5%, which is the future doesn't matter much, so you're basically just concerned about now, then what you end up with is a very low social cost of carbon, which you might actually be zero, but probably is a little bit above zero. However, as you go through the green into the red, which is, essentially, that the future matters a lot, what do you end up with is a much higher social cost of carbon. You estimate that when you emit carbon to the air, it costs society a whole lot.
There's a very slight chance that it's low, but there's also a larger chance that it's actually really high. And it could be very, very high. This sort of distribution-- there's a best estimate it could be a little less, a little more, or a lot more-- is very common in these. But it's clear that when we emit carbon to the atmosphere, we are causing damage to society. And allowing that carbon to be emitted to the atmosphere without paying for it is a sort of subsidy for fossil fuels.
The IPCC also noted that it is likely that all of these estimates of the cost of carbon are too low (which would probably shift the slight benefit estimates to being costly as well), because many of the damages of CO2 are not “monetized”. Suppose, for example, that climate change from rising CO2 causes the extinction of species that are not being used commercially. Some of those species may have had economic value that had not yet been realized, and many people may have valued those species for other reasons. But, if those species are not contributing to the economy now, their loss is not a cost of global warming in these studies. Other issues, such as the possibility of long-term catastrophic events (making the tropics uninhabitable for unprotected large animals, for example) are also not included in the costs of global warming. The IPCC notes that the calculated costs are based on only “a subset of impacts for which complete estimates might be calculated” (ch. 20, WGII, p. 823, 2007).
Video: 10 Pikas (3:22)
RICHARD ALLEY: (VOICEOVER) American Pika's live in though Western US and Canada, and except in very special circumstances, they have to live in cold places. They're related to other pikas, and to rabbits and hares. They're lagomorphs.
Pikas don't hibernate despite living in cold places. They spend the summer making hay. They run around gathering up flowers and leaves, grasses, and what they can, and they stow them in a space under a rock. And then they can hide in this hay and stay warm during the winter and eat it, and they're having a very good time there.
Many people think pikas are really cute. On one of our early family vacations, finding a pica was a goal, and we went out of our way looking for pikas, and we found them and we had a ball doing it.
Because pikas like cold climates, many populations are being placed in danger by a warming climate. This figure shows in the bluish areas the suitable habitat for pikas recently in the US. And then the little red areas in the centers there show the habitats that are expected to remain around the year 2090-- one human lifetime from now-- if we follow a high CO2 emissions path.
Some populations of pikas out in the Great Basin are already endangered or have disappeared. We looked at the economic analyses of global warming, which compare cost of reducing climate change to the cost of the damages if we allow change to continue. And which show that we will be better off if we take some actions now to reduce warming.
But in general, such economic analyses do not include pikas. Loss of populations of pikas, even extinction of the pika has little or no economic value. We personally spent money on tourism that involved pikas. But we probably would have gone to see something else if pikas hadn't been there.
Pikas aren't really monetized. They haven't been turned into their monetary value. And so the loss of pikas isn't monetized either in these calculations, nor would be loss of polar bears or many, many other species.
If you believe that pikas are valued, that if you pay a little money to save pikas, or if you believe we have an ethical or religious obligation to preserve creation, including pikas, then the optimum path for you would involve doing more now to slow global warming.
If you don't believe pikas are a value, the economic still says that we should do something to slow global warming if we want to be better.
The social cost of carbon, if it is not offset by a tax or other fee on emitting the carbon, is essentially a subsidy from society for fossil-fuel use. We will return to this topic when we consider policy options in the next module.