WASHINGTON, D.C.--An Obama administration panel that tried to assign a dollar amount to benefits derived from cutting carbon dioxide emissions set a far too conservative figure because it significantly underestimated the societal benefits of carbon reductions, according to a study published Sept. 17.
President Obama formed the Interagency Working Group on the Social Cost of Carbon in 2009 to get a consensus on assigning a dollar value to the social cost of carbon dioxide in the hopes of using a consistent figure in regulatory impact analyses used by agencies, including the Environmental Protection Agency.
The interagency panel’s report, published by EPA in February 2010, provided a range of figures in 2007 dollars, including $5, $21, $35, and $65 for each metric ton of carbon dioxide avoided, but it essentially settled on $21 per ton as its best, or “central,” estimate. At $21 per ton, only regulations implemented below that cost would be considered economically beneficial (136 WCCR, 7/13/11).
The new study, published Sept. 17 in the Journal of Environmental Studies and Sciences, concluded that those ranges “significantly understate potential benefits of climate mitigation.” The federal panel did not take into account the economic damages that climate change will impose on future generations, according to the study, “The Social Cost of Carbon in U.S. Regulatory Impact Analyses.”
Study authors Laurie Johnson of the Natural Resources Defense Council and Chris Hope of the United Kingdom's University of Cambridge Judge Business School put the social cost of carbon, or SCC, at a low ofabout $55 per ton, or 2.6 times the $21.36 per ton “central” estimated offered by the interagency panel. On the higher range, the authors wrote, that figure could be as much as 12.45 times the $21.36 per ton figure, or $266 per metric ton.
The study’s higher estimated social cost of carbon could have a significant effect on policies that encourage renewable energy, according to the Natural Resources Defense Council, which highlighted the study in a Sept. 17 press release. For example, it would mean traditionally more expensive energy sources such as wind and solar may actually be less expensive than fossil fuels, including natural gas, when the full social costs imposed by carbon are taken into account.
The higher values assigned by the authors “show, after incorporating the economic costs of carbon and other pollutants from fossil fuel generation, [that] building new generation using wind and solar power would be more cost effective than either natural gas or coal,” NRDC said.