Komanoff: The Time Has Never Been More Right for a Carbon Tax (U.S. News)
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Komanoff asks: If efficiency hasn’t cut energy use, then what? (Grist)
Komanoff: Senate Bill Death = Win for Climate (The Nation)
Q&A: Charles Komanoff (Mother Jones)
(This post was researched and co-authored by CTC volunteer Diane Englander.)
A prominent Minnesota politician is hitching her candidacy for governor to a carbon dividend plan designed to reduce climate-damaging emissions and create jobs in clean energy.
State Auditor Rebecca Otto unveiled her Minnesota-Powered Clean Energy Plan on Sept. 20. The landing page of her gubernatorial campaign website depicts her on a rooftop driving home a solar inverter with a socket wrench. “Rebecca Otto walks the talk,” the page proclaims, urging voters to elect “a Governor who will actually do something about climate change.”
Otto’s plan is centered on a carbon charge that would begin at $40 per metric ton of CO2 and increase by 10% each year — a trajectory steep enough to cut carbon emissions by almost 30 percent (below 2005 levels) within a decade if applied nationally, according to CTC’s carbon tax model (Excel file), though not as much if applied only in a single state.
Three-fourths of the carbon revenues from Otto’s proposal would fund “Quarterly Clean Energy Cash Dividends” that Otto estimates will pay $600 a year to every Minnesota resident, with the dividend growing in tandem with the rising carbon price. The remaining 25% of the new revenue would fund “Clean Energy Refundable Tax Credits” for up to 30% of the cost of household energy-efficiency investments including electric cars, solar panels, triple-pane windows and insulation, and heat pumps.
The tax credits will “create tens of thousands of good-paying new private-sector jobs — often paying more than $80,000 per year — in every community across Minnesota,” Otto says, with “the work able to be financed with no money down” in many cases.
The 54-year-old Otto is one of six aspirants to the nomination of the state Democratic-Farmer-Labor Party, as the Minnesota Democratic Party organization has been known since the 1940s. Others include a U.S. Representative and the Mayor of St. Paul. Local newspapers suggest as many as a dozen Republicans may also contend to replace Gov. Mark Dayton, the two-term incumbent who is not seeking re-election. The race is viewed as “wide open” by Carleton College political scientist Steven Schier.
An Illinois native who now lives in the small town of Marine on St. Croix, northeast of the Twin Cities, Otto is serving her third consecutive four-term as state auditor. In 2006 she handily defeated the incumbent Republican, then won by a squeaker in 2010, becoming the only Democrat ever re-elected to the office. In her 2014 re-election she won by her widest margin to date, outpacing Gov. Dayton by six percentage points.
Otto’s plan is a variant of the fee and dividend approach espoused by the non-partisan Citizens’ Climate Lobby and, more recently, the Republican-leaning Climate Leadership Council. It charges fossil fuel providers a fee pegged to their fuels’ carbon content and returns revenues to households as equal “dividends.” Her 25% allocation to clean energy tax credits can be seen as a pragmatic concession to business and job concerns that invariably arise in state-level carbon tax campaigning.
Otto is arguably the highest-profile U.S. political candidate to attach a campaign to an explicit and transparent price on carbon. She says that her 11 years as state auditor have taught her that Minnesotans want economic opportunity along with solutions to pressing problems such as climate change. She also views her program as a counterweight to “fossil fuel interests [that] spend billions to control our democracy and sow doubt and confusion [to] protect their profits at the expense of Americans.”
Minnesota has a history of seeking to address climate change. In the 1990s, state activists including the St. Paul-based Institute for Local Self-Reliance mounted a campaign for a billion-dollar state “tax shift” to reduce income and property taxes by taxing energy and fuels. While their proposal didn’t make it into law, it laid the groundwork for later carbon tax efforts. Since 1993 the Minnesota legislature has required the state Public Utilities Commission to incorporate air pollution costs into decision-making on power plants. In July the PUC ordered this “shadow price” raised to a range of $9.05 to $43.06 per short ton of CO2 by 2020. (Utility Dive gives details and explains the wide range.)
Otto’s plan would go much further, of course, embedding actual carbon costs in fuel and electricity prices and perhaps igniting a spark among the other 49 states. In an article this week for Scientific American, States Can Lead the Way on Climate Change, Otto wrote that “If other state leaders adopt similar proposals, the 2018 midterm elections could become a watershed moment when America seizes on a new state-level approach to tackling climate change and finally begins to steer the Titanic away from the iceberg.”
At a minimum, Otto’s campaign ensures that not just climate change but the idea of actually charging for carbon emissions will be front and center in next year’s Minnesota gubernatorial race. If she wins, however, her proposal still faces two potential hurdles: the state legislature and the Minnesota state constitution, whose Article 14, Section 10 could be interpreted as requiring that “excise taxes” on gasoline be paid into the state’s highway distribution fund (see discussion in CTC’s report, Opportunities for Carbon Taxing at the State Level, pp 91-92). However, if the carbon price is construed otherwise, e.g., as a fee, Otto’s proposal could be in the clear.
To view the latest census data on U.S. household incomes is to marvel at — and be appalled by — the unequal distribution of income in America.
In 2016, according to official data released last month, the lowest-earning one-third of U.S. households received just one-twelfth of total money income, which the Census Bureau defines as “the arithmetic sum of money wages and salaries, net income from self-employment, and income other than earnings.”
At the other end of the scale, the top 7 percent earning households — those with incomes of at least $200,000 — pulled in 27 percent of U.S. income last year. Note the symmetry: those at the top earn four times their pro rata share, while those in the broad bottom earn only one-fourth of theirs.
Stark as these figures are, they don’t capture the full extent of the wealth gaps — the one between the rich and the middle class, and the other between the middle and the poor. These gaps accumulate over generations, as the New York Times noted this week in its trenchant dive into the data, Bump in U.S. Incomes Doesn’t Erase 50 Years of Pain.
These disparities underlay Bernie Sanders’ “political revolution” campaign for the Democratic presidential nomination last year. And they added fuel to the sense of white grievance that energized Donald Trump’s successful run for the presidency. They also bolster the case for “carbon dividends” — the idea of distributing all or nearly all carbon tax revenues equally to U.S. households popularized as carbon fee and dividend by the non-partisan Citizens Climate Lobby (CCL), and more recently advanced by the Republican-led Climate Leadership Council (CLC) under the rubric of carbon dividends.
Using incomes as a proxy for carbon emissions — a rough approximation but a reasonable one, given income-based differences not only in using electricity, gasoline and heating and aviation fuels but also carbon embodied in making and shipping consumer goods — we’ve used the census data to estimate that if all carbon revenues are returned to the public, nearly two-thirds (66 percent) of U.S. households will take in as much or more money in the form of carbon dividends as they would pay out in higher fuel and goods prices due to carbon taxes.
Our figure jibes with the U.S. Treasury Department’s finding in its Jan. 2017 report, Methodology for Analyzing a Carbon Tax, that the lowest seven income deciles will be net beneficiaries of a carbon dividends plan (see Table 6) . Our estimate of the share of U.S. households that will be net beneficiaries under carbon diviends, 65.9 percent before rounding, is up slightly from our prior 65.1 percent “better off” finding based on 2012 incomes. Among those 65.9 percent, which encompass 83 million households, the average gain (carbon dividend netted by carbon tax expense) per $100 billion in total carbon revenue is $415 per year.
While that net gain may seem small — just $8 per week — the revenue amount on which it’s based corresponds to a very modest carbon tax, around $23 per ton of CO2. A robust carbon tax that climbed to a level several times higher would generate correspondingly larger net dividends for the benefiting households. Moreover, the more indigent the household, the greater its estimated net gain.
The breakeven household income point is a shade over $85,000, a level 45 percent greater than the 2016 median household income of $59.000; “typical” households will be net gainers if their income is less, and losers if more. Of course, if the share of carbon revenues dedicated to revenue return is reduced, the percentage of households kept whole under carbon fee and dividend shrinks as well. Our calculations suggest that around two-thirds of carbon revenues must be returned as dividends in order for half of households to have their carbon tax fully offset. (See line chart below.)
A conundrum for the climate movement
The ability of carbon dividends to lift incomes of the bottom half or more of U.S. households creates a conundrum for the climate movement, especially now that Republicans, who traditionally align with capital and wealth, are beginning to sign up for carbon dividend proposals.
The progenitors of CLC’s carbon dividend plan, James Baker and George Shultz, are “exemplars of the outcast center-right GOP establishment,” as I described them recently in the Washington Spectator. At least as impressively, 28 current GOP U.S. House members have joined CCL’s Climate Solutions Caucus and thus signaled their possible openness to a carbon fee that reserves carbon revenues for dividends instead of applying them to cut corporate income taxes.
Yet many on the left are insisting that carbon revenues, or at least a large share of them, be invested in government-administered or financed clean-energy development and transportation infrastructure, especially in so-called frontline communities. Because each dollar of carbon revenue can’t be spent twice, the competing demands of carbon dividends vs. “just transition” proposals threaten to divide the climate movement — as they already did in last fall’s divisive I-732 carbon-tax referendum in Washington state, which I reported this past winter in The Nation magazine.
Ironically, it’s possible (indeed, I believe it’s likely) that allocating carbon revenues to dividends would more reliably benefit low-income families more than would spending the revenues on sustainable energy and transportation. Considering further that revenue-neutral dividend approaches might eventually garner meaningful support from some Republicans, it seems self-defeating for left-leaning or other climate advocates to reject them out of hand.
For our part, CTC supports any viable carbon tax proposal, revenue-neutral or not, provided it would not demonstrably exacerbate economic inequality or other social injustice. Thus far we have refrained from endorsing the American Opportunity Carbon Fee Act introduced in July by U.S. Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI), pending analysis of the regressive aspects of its proposed tax swap to reduce the corporate tax rate to 29 percent, from 35 percent, among other provisions.
That said, crunch time is coming for carbon dividend apostles. If the late summer hurricanes that have ravaged southeast Texas, Caribbean nations and much of Florida won’t induce Republican office-holders to spurn their party’s denialist orthodoxy and embrace revenue-neutral carbon taxing, it’s fair to ask if they’ll ever push for genuine climate solutions.
Note: This post was originally headlined “Worsening Economic Inequality Should Broaden Support for Carbon Dividends.”
Here we cross-post my article published in The Washington Spectator magazine yesterday, under the headline, A Carbon Tax With Legs. Except for a handful of line edits below, the two versions are the same.
For years, carbon tax advocates scoffed at the notion that Exxon-Mobil would back a tax on climate-damaging carbon pollution. We saw through the vague hypotheticals in which the oil giant cloaked its occasional expressions of support. Rather than invest political muscle in carbon tax legislation, Exxon for decades funded a network of deception that blocked meaningful action on climate.
So why are we taking notice that this past June Exxon formally endorsed a so-called Republican carbon tax plan? And why am I not up in arms that the plan entails granting Exxon and other fossil fuel owners immunity from legal damages for the climate havoc caused by extracting and burning these fuels?
It comes down to two reasons. First, there’s little chance that oil, coal, and gas companies could ever be made to pay more than token amounts for the ruin their products cause. Second, though bankrupting big oil may seem appetizing, it’s a distraction from the real goal of “demand destruction” — shrinking and eliminating the use of carbon-based fuels. The fastest path to that goal is through a robust carbon tax that manifests the harms caused by those fuels in the prices the marketplace sets for oil, coal, and gas, as the new proposal would do.
The carbon tax plan is dubbed “Republican” because its public faces are those of George Shultz and James Baker, exemplars of the outcast center-right GOP establishment. Two factors set this plan apart from current Republican orthodoxy.
First, the Shultz-Baker tax is no slouch. It would start at $40 per ton of carbon dioxide and rise from there, putting it miles above anything floated by oil companies or Republican officeholders. The price is high enough not only to nail the coffin on coal, by far the dirtiest fossil fuel, but also to put a serious dent in oil usage.
After a decade, according to my modeling, U.S. carbon emissions would be 27 percent less than last year and 36 percent less than in 2005, the standard baseline year in climate analysis.
Second is the equitable distribution of the carbon tax proceeds. They would be disbursed to American families as “dividends,” with equal revenue slices for all. This approach is not only income-progressive, making it a black swan among Republican policy ideas; it also buys support for raising the tax level over time, since the dividends would rise in tandem.
The Shultz-Baker tax may actually have political legs. While the current White House and Congress are tribally bound to vilify anything smacking of Al Gore or Barack Obama, the 2018 midterms and the 2020 presidential election could bring a reckoning on climate policy. With a majority of Americans in a recent poll calling climate change “extremely or very important” to them personally, Republicans may soon be seeking an escape hatch.
Three attributes in the Shultz-Baker proposal meant to win over the center-right are anathema to progressive elements in the climate movement. We can call them: no investment, no regulation, and no litigation.
“No investment” means dedicating the carbon revenues to the dividend checks, leaving none for government to construct carbon-free energy and transportation systems or to remediate the “frontline” communities most ravaged by fossil fuel infrastructure. Yet economists are convinced that the price-pull of the carbon tax will bring about this transition.
“No regulation” means rescinding EPA climate rules, principally the Obama-era Clean Power Plan prized by environmental powerhouses like the Sierra Club. But the Clean Power Plan is nearly “mission accomplished”: its target is already four-fifths met (and rising) as coal-fired electricity production is eaten away by natural gas, rising wind and solar power, and energy efficiency.
Finally, “no litigation” means letting carbon corporations and shareholders off the hook for producing and promoting their climate-ruining products — a bitter pill for the broad and insistent fossil fuel divestment and “Exxon knew” movement spearheaded so effectively by Bill McKibben. Yet would that be a grievous loss? Not according to Michael B. Gerrard, who directs the Sabin Center for Climate Change Law at Columbia Law School: “No lawsuits anywhere in the world seeking to hold fossil fuel companies liable for climate change have succeeded,” Gerrard told me recently via email. “Losing the ability to sue these companies for climate change would not be giving up a huge amount if it were in exchange for a large enough carbon tax.”
So is the promised carbon tax large (and solid) enough to justify dealing away the triad of litigation, investment, and regulation? My colleagues and I at the Carbon Tax Center believe it is.
The proposal is gathering steam. Not just Exxon but a dozen other corporations, including General Motors, Procter & Gamble, Unilever, Pepsico, and three other oil companies (Shell, BP, and Total) formally endorsed the plan in June, along with the Nature Conservancy and the World Resources Institute. The political path for the Shultz-Baker carbon tax, not much wider than a human hair when it was launched last winter, is broadening rapidly.
Charles Komanoff, an economist, directs the Carbon Tax Center in New York City.
We’ve just posted the 2017 update to the Carbon Tax Center’s spreadsheet model of U.S. CO2 emissions. That’s our powerful but easy-to-use tool for predicting future emissions and revenues from possible U.S. carbon taxes. The model, which runs in Excel, accepts any carbon tax trajectory you feed it and spits out estimated economy-wide emission reductions and revenue generation, year by year.
Here’s what’s new:
1. A year of new data: The most obvious update is that we’ve incorporated 2016 baseline data on energy use, CO2 emissions and emission intensity into each of the model’s seven sectors.
2. Oil refining is now allocated to usage sectors: Last year we pulled oil refinery emissions out of “Other Petroleum Products” and into its own category, which accounted for an estimated 6.4% of U.S. CO2 emissions in 2015. We’ve now taken the logical next step and allocated those emissions into the economic sectors that require refining crude into product in the first place: autos (principally gasoline), freight (largely diesel), air travel (jet fuel) and the catch-all “other petroleum” encompassing home heating oil, propane, kerosene and residual oil used by industry. The lion’s share of Refineries’ 6.4% slice of CO2 emissions is now within autos; not only is gasoline by far the largest-volume petroleum product, it also consumes the most energy per unit among the major petroleum products. Although our model is again down to seven sectors, from eight, the change promises a more accurate prediction process by tying demand more closely to emissions.
3. Slimmed-down graphics: We’ve weeded out extraneous graphics so you can focus on what’s key: comparing emission reductions between the Climate Leadership Council’s carbon tax, a carbon tax pegged to the “social cost of carbon,” and future emissions absent carbon pricing. Other graphics break down emissions by sector (see graphic above), depict reductions in oil consumption and show carbon-tax revenues nationally and by household. Most importantly, you can input your own starting tax level and growth path and see how fast (or slowly) emissions fall. That’s still done in the spreadsheet’s “Summary” tab, which we’ve cleaned up to make it easier to navigate.
And don’t overlook these two features we added in 2015:
1. Smoothing the uptake of the carbon tax: The model now captures lags in households’ and businesses’ adaptation to more-expensive fossil fuels. You, the user, set the adaptation “ceiling” rate; the model automatically carries over any excess to future years. This feature is helpful for trajectories like the Whitehouse-Schatz bill, which kicks off with a bang at $45 per metric ton of carbon dioxide but then rises only slowly. Under our default setting, in which the economy in any year is assumed to be able to process only tax increments up to $12.50 per ton of CO2, the reductions from that initial $45/ton charge are spread over four years rather than, unrealistically, assigned to the first year.
2. Demand impacts vs. Supply side impacts: At the bottom of the Summary page is a new section comparing the projected CO2 reductions from changes in fuels’ carbon intensities (“supply side”) versus reductions from reduced energy usage (“demand side,” e.g., lower electricity purchases, less driving or flying). Under our default carbon tax — the one proposed by former Rep. Jim McDermott — an estimated 58% of projected CO2 reductions are on the supply side (i.e., due to decarbonization); a large minority, 42%, come about through reduced demand, illustrating that subsidies-only policies miss out on huge CO2 reductions. Indeed, clean-energy subsidies undercut decarbonization by stimulating energy usage through lowered energy prices, as we pointed out in our 2014 comments to the Senate Finance Committee.
Please download the spreadsheet — here’s the link again — and run it in Excel. See for yourself the relative efficacy of a carbon tax trajectory that increases by a fixed amount each year, as does the McDermott tax, vs. one like Whitehouse-Schatz that starts high but rises only by small, percentage-driven amounts. See also how much more quickly emissions decline under these and most other carbon tax scenarios, compared to the emission reductions from the Obama administration’s Clean Power Plan.
As you work (play?) with the model, jot down your thoughts so you can tell us what works and what needs improving. Especially the latter, as we just wrapped the update an hour ago and there are bound to be glitches. Thanks.
Yesterday I biked to Grand Central Station and boarded a commuter train to the Hudson River village of Tarrytown to participate in a forum on carbon taxes. (For readers not from the area, Westchester is the suburban county immediately north of New York City.) My co-panelists were climate organizer Iona Lutey and economist Sara Hsu.
Sara, a professor of economics at the State University of New York, outlined her research and legislative advocacy for a NY State carbon tax, while Iona delivered Citizens’ Climate Lobby’s hopeful message that persistent but collegial citizen engagement can build political will for the group’s “carbon fee and dividend” proposal, even among Republicans. I had a subtle pitch: emissions are falling in the U.S. and flattening in China without the benefit of carbon emissions pricing, yet carbon taxing is essential to accelerate and broaden progress.
I usually make that point with modeling results, but last night I brought something new: a Powerpoint page (shown below) listing a dozen complementary pathways for reducing use of fossil fuels that need the price signal from a carbon tax to. (Download my PPT here.)
All three presentations seemed to hit home with our audience of 40 or so folks, most of whom haled from nearby towns and villages. (The local paper Hudson Independent has a fine summary.) The Q&A was unusually lively. A resident of nearby Croton-on-Hudson had perhaps the most provocative question of all: why trade away the right to sue the fossil fuel purveyors and extractors, as the Climate Leadership Council is proposing in its Republican-branded carbon tax deal, when successful litigation could deliver a double-barreled victory: bankrupting the carbon barons while providing financing for the energy transition to efficiency and renewables?
The question was in response to the support I voiced for the Climate Leadership Council’s deal in my talk and in my previous post here. My primary answer then and now was that there seems to be little chance that oil, coal and gas companies could ever be made to pay more than token amounts for the ruin their products cause. But the question deserves further thought, which I kicked off this morning with this thought experiment:
What if we took all U.S. CO2 from burning fossil fuels over the past century and split “responsibility” for it 50-50, with half of the costs written off as the “fault” of consumers (who weren’t entirely innocent buyers and burners of all that gasoline and fuel-based electricity), and the other half charged to the fossil fuel producers? What magnitude of damages and reparations would that entail?
A molecule of carbon dioxide remains in the atmosphere for roughly a century, so we need to consider 100 years of fossil fuel combustion. The historical magnitude of U.S. CO2 is more or less known, but for this exploratory calculation we might rough-estimate the century’s total as 60 years worth of last year’s emissions of roughly 5 billion metric tons. To each metric ton we now apply a $50 “social cost of carbon,” though that’s almost certainly far too low, as I wrote here recently.
With these rough assumptions, the producers’ “debt” is then one-half of 60 years x 5 billion metric tons x $50 per ton, which equals $7.5 trillion. Paying that out as damages over, say 20 years implies an annual charge to the producers of $350-$400 billion. Interestingly, that’s the same as the annual revenue from a $75/ton carbon tax.
Let’s now say, improbably but hypothetically, that Congress enacted, and the courts approved, award of those damages to Americans (setting aside, for now, damage claims from the other 7 billion of the world’s people). Where would the money come from? It seems implausible that it could be clawed back from shareholders of the fossil fuel corporations. Could it come from raising the prices of the fuels over the next several decades, in which case it could function as a de facto carbon tax? But if so, why not just enact a carbon tax in the first place?
As you can see, I’m trying to wrestle with this issue. I welcome comments and suggestions.
Meanwhile, Sustainable Westchester and Westchester Power, organizers of last night’s forum, are hosting two more evening panels: Wednesday, July 19 in New Rochelle, and Wednesday, July 26 in Bedford Hills. Details here. I’ll be speaking at both.
I’m tempted to call it the decade’s most important paper on the costs of climate damage. The paper, just published in the peer-reviewed journal, Environmental and Resource Economics, upends the long-prevailing approach for estimating the social cost of carbon, potentially laying the ground for putting the SCC (in dollars per metric ton of CO2) into triple digits, from the $44 figure stipulated in rule-making by the Obama White House.
Not only that, the paper presents a trio of climate-damage functions relative to the temperature rise, that let us calculate the estimated global cost to humanity from each global warming increment. The functions vary depending on whether they include so-called “catastrophic damages” from climate change as well as estimates of climate change’s potential drag on future growth in economic productivity. Each function expresses that cost as the percent of future GDP lost per additional centigrade-degree in global-average temperature relative to the pre-industrial level. (Graph at left, with equation in bold, is the most conservative, i.e., slowest-growing, of the three graphs in the paper. All three are shown in the next graphic.)
The new paper, Few and Not So Far Between: A Meta-analysis of Climate Damage Estimates, is by Peter Howard, economics director at NYU Law School’s Institute for Policy Integrity; and Thomas Sterner, professor of environmental economics at the University of Gothenburg in Sweden. (Disclosure: Thomas and I have shared a warm personal friendship since the 1980s.) As the somewhat unwieldy title suggests, the paper combines data and results of prior analyses that sought to place a cost on future damages from climate change. In those analyses, “damages” are expressed as a percentage of future global economic product — a somewhat cold-blooded metric that nevertheless allows policy-makers to compare the impacts of climate change on human well-being to the costs of mitigation and adaptation.
The Howard-Sterner paper identifies several sources of bias in previous meta-studies of the temperature-damage relationship. There’s “duplicate bias,” by which early climate-damage models tended to be overly conservative but, because of their primacy, came to be cited multiple times, thus biasing downward the temperature-damage relationships in meta-studies. Moreover, methodological choices or constraints kept some analyses from accounting for non-market climate impacts such as reduced biodiversity or for so-called catastrophic impacts such as collapses of regional or global agriculture.
Earlier analyses also failed “to control for whether market impact estimates [of climate damages] included potential impacts on economic productivity,” write Howard and Sterner. Though it may appear bizarre, until recently many attempts to estimate the temperature-damage function deliberately excluded the prospect that climate change will erode societies’ ability to generate new wealth by inhibiting the accumulation of technological and intellectual capital, which are key drivers of economic productivity and growth. In recent years, renowned climate economist William Nordhaus, whose Dynamic Integrated Climate-Economy (DICE) model and long-time intellectual leadership have been integral to estimating the social cost of carbon, has come under criticism for excluding non-market, productivity and catastrophic climate impacts from his modeling.
As we wrote last Friday, in 2015 the Interagency Working Group (IWG) on the Social Cost of Carbon created by President Obama directed federal agencies to use a “social cost of carbon” equivalent to $37/ton in 2007 dollars. (Note that the official link to the IWG was scrubbed away by the Trump White House, in 2017.) That figure, which equates to $44/ton in 2017 dollars, was drawn in part from the “2013R” version of DICE.
In their paper’s conclusion, Howard and Sterner point out that updating DICE as per their findings “would increase the resulting SCC of the Interagency Working Group by between one-and-a-half to twofold.” While that’s true arithmetically, it’s an understatement of sorts, insofar as their conclusion states clearly that “Using the preferred [model] specification, we find that the 2015 SCC increases by approximately three- to four-fold depending on the treatment of productivity.” However, that increase is attenuated by the IWG’s decision to derive their SCC not only via DICE but with two other temperature-damage models, neither of which are addressed in the Howard-Sterner paper.
Thus, while the authors’ analysis would raise the estimate of the SCC derived solely from DICE by an estimated 209 percent, the need to average the increases for the DICE figures with the unchanged figures from the other models leads the overall increase to be considerably less, though a still substantial 63 percent. Even that lower rise boosts the social cost per ton of CO2 to $72, from the Obama administration’s $44 (both figures in 2017 dollars).
That change is important since it warrants recalibrating the panoply of cost-benefit and other calculations that carbon tax advocates, corporate carbon-cutters and others have been basing on the social cost of carbon during recent years. But there’s more, and here we return to the equation we highlighted (and graphed) in the chart at the top.
In their paper, Howard and Sterner tested various curve shapes to distill the set of temperature-damage relationships they sifted in their meta-analysis. Their most robust functional form was a simple quadratic, by which the total damage to global well-being (expressed as the lost percentage of global economic output) rises by the square of the temperature deviation from pre-industrial levels.
Quadratic curves start slowly and gather steam — much as, when an object is dropped from some height, the distance from its point of release increases more with each passing second. And so it appears with the Howard-Sterner climate-damage function, by which the additional societal damage from each new temperature increment is greater than the damage from the previous increment. (See table directly above.) In fact, the additional damage is a linear function of the temperature rise (as you calculus jocks will have noticed, since the first derivative of any quadratic function is a linear one).
The implications are obvious but nonetheless profound. Arresting climate change isn’t binary, whereby we either stop global warming in its tracks or we don’t. It is, literally, a question of degree, with the importance of reducing and stopping warming intensifying as global temperatures rise. While that appears obvious, experientially — discomfort rises more when the mercury climbs to 100F from 95F than from 90F to 95F; and what goes for heat effects should go for drowned coasts, extreme weather, ecosystem stress, and so forth — now there’s an equation to codify it.
Howard’s and Sterner’s quantification of the accelerating harm as global temperatures increasingly diverge from pre-industrial levels obliges humanity — all of us — to redouble our efforts to tax and eliminate fossil fuels and other greenhouse gas emitters at the fastest imaginable rate.