Gov't Panel Estimates Cost of C02 pollution: $21/t and rising

An inter-agency panel estimated this week that each additional (metric) tonne of CO2 emitted into Earth’s atmosphere inflicts at least $21 in damage to agricultural productivity, human health, property damage from flooding, and the value of ecosystem services lost due to climate change.  (According to EPA,  the U.S. emitted 5.6 billion tons of CO2 in 2008.)  The panel, representing the consensus of 12 federal agencies, provided its climate damage analysis for use in cost/benefit calculations assessing major federal actions, including regulatory changes.

The panel applied “conservative” assumptions: a relatively high (3%) discount rate which tends to downplay the present value of future damage, they excluded large categories of costs such as military intervention or humanitarian assistance to failed states, and gave only minimal consideration to potential catastrophic climate tipping points.  Even with those assumptions holding damage figures down, their mid-range assessment supports a $21/t initial CO2 price rising by 2050 to $45 in low-risk scenarios and to $136 in their high-risk scenario.   The analysis can be seen as a low-end “benchmark” that will only go up as we learn more about (and can better quantify) climate damage.   And it clearly underlines the need for a carbon tax of at least $21/t and rising, to reflect more of the true cost of CO2 pollution and create economy-wide incentives to minimize climate damage.

Last modified: June 3, 2010