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General · 11th June 2013
Barry Saxifrage
The United States federal government has increased its estimates for the “social cost of carbon” (SCC) by more than 50 per cent.

It sounds geeky, but packs a wallop. Its main use is to decide whether a particular climate policy will benefit society. But it can also be an invaluable tool to identify hidden carbon risks in the economy.

Below I'll show how applying this new data to Canada's economy and the Alberta oilsands industry reveals some unsettling risks. But first, a Q&A will help set the stage.

Q: What exactly is the "social cost of carbon"?

A: The SCC estimates the "monetized damages" to society caused by the release of one tonne of CO2 (tCO2).

Q: Who determined these new SCC values?

A: Eleven US federal agencies - only two of which are "environmental" - shared their expertise and worked together to make these estimates:

Council of Economic Advisers
Council on Environmental Quality
Department of Agriculture
Department of Commerce
Department of Energy
Department of Transportation
Environmental Protection Agency
National Economic Council
Office of Management and Budget
Office of Science and Technology Policy
Department of the Treasury

Q: Do other groups calculate the "social cost of carbon"?

A: Definitely. It is an active field of research. A 2011 survey published by the Canadian think tank Sustainable Prosperity looked at over two hundred estimates of the Social Cost of Carbon by economists worldwide. It said the previous US SCC:

"… is very low because the working group opted for the most conservative parameters to calculate it."

However, the US numbers carry a lot of weight because of the expertise the government can bring to the calculations and the fact that America is the world's second largest climate polluter today and the largest overall in cumulative emissions.

Q: What are the new SCC dollar values?

A: The new calculations (overview pdf) estimate that every tonne of CO2 emitted this year causes around $36 of "monetized damages" to society. Estimated CO2 damage increases about a dollar a year. For example, a tonne of CO2 released in 2020 is estimated to cause $43 in damage to society. Here is a table and chart I made of the "central values" the US calculated for different years:

Q: Why will releasing a tonne of CO2 in the future create more damage than it does now?

A: The US government report explains why future CO2 will inflict greater costs on society:

"…the SCC increases over time because future emissions are expected to produce larger incremental damages as physical and economic systems become more stressed in response to greater climatic change."

In other words, the current symptoms of a destabilizing climate system (deeper droughts, longer heat waves, more crop losses, record flooding, collapsing forests and coral reefs, freak weather, arctic collapse, missing spring snow cover, megastorms, growing wildfires) will worsen on our current fossil fuel path.

Q: Why did the government decide to increase the SCC?

A: The law requires that the government recalculate the values periodically to ensure the latest and best information is used to inform policy decisions. This increase reflects a better scientific understanding of how some aspects of the climate are changing and the damages that can be expected as a result - especially from accelerating sea level rise and increased crop losses.

Q: Will the government increase the SCC again?

A: I think it is very likely that as the science continues to improve the damage estimates will need to rise as well. As I understand it, the SCC values are conservative because they include only the aspects of climate change that science understands well enough to quantify. These are the "known knowns".

But there are a number of "known unknowns" that could have dramatic costs to society. For example, our fossil fuel pollution is weakening our polar jet stream. The measured weakening and stretching of the jet stream is apparently leading to a dramatic increase in extreme weather events already. This possibility of a permanent shift to more frequent and more intense extreme weather events as a result is not incorporated in this latest SCC estimates because it hasn't been quantified. Another example might be the US military's increasing concern that climate changes in poor nations will significantly increase international conflict and wars.

On top of that there are the "unknown unknowns". Past climate surprises include the now "known" threats of ocean acidification on coral reefs and the marine food chain; explosive outbreaks of forest killing insects; amplified heat waves; extreme rainfall events and, as stated above, a weakened jet stream causing "stuck" extreme weather patterns. Are there more "unknowns" lurking in the future? If so the SCC will likely need to rise with each one.

Q: How does the SCC affect climate policy?

A: The SCC is used throughout the US government to assess the cost-benefit ratio of climate regulations and policies. For example, the social benefit of a regulation to reduce CO2 is calculated by multiplying the tonnes of CO2 reduced by the SCC. The resulting benefit gets compared to the cost to comply with the regulation and difference determines if there is a net benefit - or net cost - to society. Understanding that CO2 causes 50 percent more "social costs" than previous thought means society will benefit even if it spends 50 percent more to reduce that CO2.

Hidden risks for Canada and the Alberta oilsands

Now that we've cover the basics, let's see what these new "social costs of carbon" values tell us about some Canadian carbon sources. I've created the chart below to show the CO2 damage trends for Canada's emissions and the Alberta oilsands industry... (continued)

(note: this is just an excerpt from my full article published on the Vancouver Observer. Please click the link below to read the full article.)

Click here to read the rest of this article.