The Social Cost of Carbon
Yesterday’s New York Times published my op-ed under the somewhat provocative heading “Going Green but Getting Nowhere.” The point, of course, is not to give up, but instead to look for policy solutions that channel market forces in the right direction. Not because the market should be king, but because it all too often is.
One of the key figures in it is the cost of $20 per ton of carbon dioxide. [Note: The figure has since been updated to $40 per ton of carbon dioxide.] That comes from an immensely important appendix to an obscure government document. Table 1 summarizes the results of painstaking research, trying to tally the full cost of carbon pollution in the atmosphere. (The exact number is $21.4, of course with lots of uncertainties around it.) [Note: the exact figure, as of November 2013, is $37 in 2007 US$, or around $40 in 2013 US$.]
That number is a consensus estimate of sorts. As such, it ignores several important factors that haven’t yet found their way into standard models like the risks from low-probability, high-impact events—the truly scary climate scenarios that typically dwarf all else once included. (By one estimate, the number could be as high as $900 a ton.)
The point, of course, is that in the United States right now, carbon has a price of close to $0. That’s the price each of us pays individually for the tons we emit, while society pays the full $20 [$40] or more. The term of art often used to describe the cost to society is “social cost of carbon.” I prefer “socialized cost.”
That’s what it is: privatized benefits, socialized costs. It’s what caused the financial crisis, and it’s what’s causing the planetary crisis as well.
It’s also the sole origin of the phrase “planetary socialism.”
Amazingly, some of the most thoughtful responses I received in reaction to my op-ed seemed to be treatises on the benefits of socialism. So just to be clear: Yes, I realize that “socialism” has many other meanings. Yes, I do like single-payer healthcare systems as much as the next Austro-American who has experienced both. No, I don’t have anything against the exemplary Scandinavians who always seem to be doing the right thing, even if it’s not in their self-interest.
Sweden, it turns out, has had a carbon tax for quite a while—one that’s much too small and leaky, but a carbon tax nonetheless. Leave it to socialist economic systems to privatize the cost of carbon pollution.