The linchpin of the Obama Administration’s so-called “Clean Power Plan” (CPP) is something called the “social cost of carbon,” which is a calculation of the net present value of future climate damages from greenhouse-gas caused global warming. The “official” figure the Obama EPA came up with in their regulatory analysis—about $40 a ton—was necessary for the Clean Power Plan to pass a cost-benefit test.
This calculation is tricky to do, and involved the crucial step of picking a discount rate against projected costs in the distant future. The scandal of the EPA’s calculation is that the conventional discount rates that the government (and private industry) typically uses for such forward-looking calculations all came in with climate cost numbers so low that the Clean Power Plan couldn’t be justified. So the EPA cheated, and used an artificially low discount rate far outside the range of standard practice. (The Trump EPA is currently reviewing the social cost of carbon mischief, and may well reverse it as part of their unraveling of the CPP.)
But even if you accept both the catastrophic temperature predictions of the climatistas and their phony social cost of carbon estimate, there is still the question: what are the economic benefits of cheap fossil fuel energy use? No one ever bothers to offer an estimate of how much better our lives are for the development and diffusion of large scale energy over the last 150 years. (Start with, oh I don’t know—how about longer life spans because of all the material improvements energy has made possible?)
Until now, that is. Richard Tol, one of the world’s pre-eminent environmental economists, has produced a working paper entitled “The Private Benefit of Carbon and Its Social Cost.” Here’s the dynamite abstract:
The private benefit of carbon is the value, at the margin, of the energy services provided by the use of fossil fuels. It is the weighted average of the price of energy times the carbon dioxide emission coefficient, with energy used as weights. The private benefits is here estimated, for the first time, at $411/tCO2. The private benefit is lowest for coal use in industry and highest for residential electricity; it is lowest in Kazakhstan and highest in Norway. The private benefit of carbon is much higher than the social cost of carbon.
Yes, I’d say that $411 > $40. Let that sink in: the benefit of using fossil fuels, even accounting for all damages from pollution and prospective climate change, are one order of magnitude higher than the cost of climate change, even using the EPA’s self-serving calculation.
The conclusion of Tol’s paper make the matter clearer and more direct:
The private benefit of carbon is large and, in most cases, much larger than the social cost of carbon. But while the social cost of carbon is tied to carbon dioxide emissions and their impact on the climate, the private benefit of carbon is not tied to fossil fuels. The private benefits of carbon are, really, the benefits of abundant and reliable energy – or rather, the benefits of the services provided by energy, such as warm homes, cooked food, travel and transport, information and communication, and so on.
This is the fundamental reason why the world is not giving up fossil fuels, but is going along with charades such as the Paris Climate Accord.
P.S. For an example of the “emperor’s new clothes” aspect of the world’s climate pantomime, take in this story:
By Michael Bastasch
A major Indian corporation approved a $4 billion plan for what will be Australia’s biggest coal mine just one day after a top Indian minister said the country joined the Paris climate accord “due to our commitment to protecting the environment.”
Adani Corporation gave final approval to build “what would be Australia’s biggest coal mine,” Reuters reported Tuesday. Adani is also hopeful they will get a $900 million loan from the government — the same government backing the Paris accord.
Adani’s comments came the same day as External Affairs Minister Sushma Swaraj rebuffed criticism from President Donald Trump that India only joined the Paris agreement because they were promised “billions and billions and billions of dollars in foreign aid from other nations.”
Heh. Here’s me and the author, Professor Tol, from a couple years back: