The United States is underestimating the true economic cost of carbon emissions by as much as 83%, according to a new study that suggests governments should be moving faster and more drastically to curb the level of greenhouse gases released into the atmosphere.
The findings are based on the Stanford University researchers’ recalculation of the “social cost of carbon,” an estimate of the economic damages caused by each additional metric ton of carbon dioxide emitted in a year. The social cost is meant to encompass the impact that emissions have on agriculture, human health, and property damages from increased flood risk, among other costs.
The US government, which uses the measure for its energy regulation, today values the social cost of carbon at $37 per metric ton (pdf). But the Stanford research, published this week in the journal Nature Climate Change, argues that the figure could be closer to $220—or as much as six times higher than the current estimate.
A study in 2014 by several environmental groups showed the many areas overlooked in the research used to establish the social cost of carbon, including wildfires, erosion, health issues such as Lyme disease, and decreased labor productivity in extreme weather, all of which have been linked to climate change. The US Environmental Protection Agency acknowledges that the metric, which was increased in 2013 from $24 to $37 per ton, is not comprehensive.
These higher-than-expected costs will take their toll on global GDP, hurting poor countries more than rich ones. This chart compares this two-track impact (“DICE-2R”) and that projection modified by climate change’s effect on productivity (“gro-DICE”) to an estimate that excludes any resulting damage (“Reference”):
The study’s authors concede that stricter measures to bring emissions under control would “not necessarily be economically optimal.” But they argue that this should not prevent rapid reform.
“Because carbon emissions are so harmful to society, even costly means of reducing emissions would be worthwhile,” Delavane Diaz, a PhD candidate in the department of management science and engineering at Stanford, said in a statement.
Diaz and her co-author Frances Moore, a PhD candidate in Stanford’s school of earth sciences, modified an existing model used to assess the costs and benefits of reducing emissions, updating it with newer research into how climate change could slow economic growth rates, especially in developing countries. (Disclaimer: as the researchers note, their model “does not factor in the potential for mitigation efforts to also impact growth,” and does not account for “the fact that low-carbon technologies take time to develop and deploy.”)
“For 20 years now, the models have assumed that climate change can’t affect the basic growth-rate of the economy,” Moore said. But the new research suggests this may not be true. ”If climate change affects not only a country’s economic output, but also its growth, then that has a permanent effect that accumulates over time, leading to a much higher social cost of carbon.”