On President Joe Biden’s first day in office, he ordered a review of an obscure but important number: the social cost of carbon. According to climate economist Gernot Wagner, this is “the single most important number that nobody has ever heard of. It’s one of the most important questions in public policy that will define life on this planet.”
Everybody knows that transitioning the entire world to run on sustainable energy will cost a lot of money. But the social cost of carbon is what it will cost for us not to make these important changes. If we keep destroying the planet’s habitability with rising temperatures and seas, extreme weather that decimates crops, and pollution that ruins the air and water, eventually humans will pay much more.
Former President Barack Obama assembled a working group to figure the social cost of carbon after a 2007 Supreme Court decision allowing the EPA to regulate greenhouse gases. In 2010, the group calculated its initial range of estimates. When Obama left office, the estimated social cost of carbon was $52 per ton in 2020 dollars.
But in one of Trump’s many reversals of Obama policies, he axed the working group. His administration came up with its own way to calculate the social cost of carbon involving only the U.S. instead of taking a global view. By the time the Trump administration’s experts had finished massaging the numbers, the social cost of carbon was down to somewhere between $1-7 per ton. This allowed for many of Trump’s regulatory rollbacks to make economic sense.
Biden has called for a new working group to set an interim social cost of carbon within 30 days and a final figure by the beginning of next year. Some experts say the number could shoot up as high as $125 per ton.
“The social cost of carbon in the United States has already influenced other countries,” said Tamma Carleton, an environmental economist at the University of California, Santa Barbara. “I’m confident that if we put in the time and energy to update that number and bring it closer to the frontier of science and economics, that other countries will do the same.”
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