Guest Post by Willis Eschenbach
A few months ago [2012] in the New York Times Green Blog they talked about “monetizing” the “social cost” of carbon. The article said:
In 2010, 12 government agencies working in conjunction with economists, lawyers and scientists, agreed to work out what they considered a coherent standard for establishing the social cost of carbon. The idea was that, in calculating the costs and benefits of pending policies and regulations, the Department of Transportation could not assume that a ton of emitted carbon dioxide imposed a $2 cost on society while the Environmental Protection Agency plugged 10 times that amount into its equations.
How does one “monetize” something, and what is a “social cost” when it is in its native habitat?
First, the easy one. A “social cost” is generally some estimated or inferred cost to society from something, in particular a cost that is not reflected in the price of the item itself. For example, alcohol has a social cost in the form of a variety of societal problems. That cost is not included in the raw ex-factory price of alcoholic beverages.
Next, to “monetize” a social cost means 1) to attach some monetary value to that social cost, and then 2) to attach that monetary value to the retail cost of the product in the form of an increased price. In the case of alcohol, that is usually done through government taxes. Sometimes, the revenue from these taxes is dedicated to ameliorating that social cost. In the case of alcohol, that might be in the form of alcohol dependence programs or clinics. Other times the income goes into the general fund.
This is generally not a problem as long as there is widespread agreement about the existence of the social costs. In the case of carbon emissions, however, no such agreement exists. There is no evidence of current costs or damages, only models of possible imagined future damages. Accordingly, even among those who agree that there is a social cost to carbon emissions, there is wide disagreement about the size of those costs.
However, despite the differences, and despite the lack of evidence of any demonstrable costs, the attempt to “monetize” the imagined future damages from carbon emissions continue apace. As you might imagine, I object to the whole process. Oddly, they didn’t listen to me, and the article in the NY Times say that they have settled on a value of $21 per tonne of carbon. The article said one government agency was using $2 a ton and another was using ten times that, or $20 a ton. So I guess they took the average of the two and used that average of $21 per ton for all government calculations … but again I digress.
Over-riding everything in this question is the unthinking, un-acknowledged destruction from jacking up energy prices. This always hits the poor hardest, as I have discussed elsewhere. Energy taxes, including carbon taxes and “monetizations” are the most regressive tax of all. But I digress … I was discussing monetization of carbon.
Let me recapitulate my two main objections to carbon monetization. The first is that for many issues, including carbon, there is no agreed upon way to establish the monetary values. In the case of CO2 there are questions about the very existence of such costs, much less their value. As the NYT article points out, there is great disagreement over the $21 figure even among those who agree that there is some social cost to CO2. Since there is no actual evidence of any actual costs, this is all merely claims and counterclaims, even between adherents. There is no objective way to settle the disagreements.
My second objection is that while people are often in a hurry to monetize the social costs of something, they rarely take the necessary other step. They rarely are in a hurry to monetize the social benefits of something. But if you do one, you have to do the other. After all, this is why it’s called a “cost/benefit” analysis …
I have even had someone seriously argue that there is no need to monetize the social benefits, because they were already included in the market price. After all, he argued, the reason we buy something is because of the perceived benefits. So they are already included in the price.
I find this argument singularly unconvincing. Some benefits are already included in the price, and some aren’t. Since a single counter-example will serve to disprove the general theorem, let me take a social benefit of CO2 as an example. This is the known effect of atmospheric CO2 levels on plants, which is that they increase their production with increasing atmospheric CO2. Obviously, nobody goes out and buys gasoline for their car in order to help the plants, so it is not included in the market price. However, increased plant growth is an undoubted social benefit, a huge one that affects the whole world. Therefore, it is an un-accounted for social benefit, one which does not get included in the price.
Accordingly, let’s take a look at monetizing this un-accounted social benefit. Curiously, the value of increased plant production is both easier and less contentious to calculate than are the claimed social costs of CO2. Why?
Well, it’s because the claimed costs of CO2 are future, imaginary costs that cannot be measured, where the increased plant production is both real and measurable. But I digress.
The folks over at CO2 Science have looked at the experimentally measured increase in plant biomass due to a 300 ppmv increase in atmospheric CO2. The figures are here, in Table 2. The changes are different for each plant, ranging from about 30% to 60%. So let’s be conservative and use the bottom end, an average 30% increase from a 300 ppmv increase. CO2 levels have gone up about 115 ppmv since pre-industrial times. This means that there has been on the order of a 10% increase in the annual production due to CO2.
Now, how much is this 10% increase in global plant production worth? Well, the marvelous FAO database called FAOSTAT puts the value of the annual plant production at ten trillion dollars annually, so lets assume a third of that, say $3.3 trillion dollars. Is $3.3 correct? There you have the problem with monetization … no way to know. But assuming that a 10% increase from some smaller value is due to increased CO2, that puts the annual value of this one single solitary social benefit of CO2 at over $300 billion dollars.
How does that compare to the proposed $21 per tonne social cost? Well, at present we’re emitting about 9.5 gigatonnes of carbon annually. That would mean that the total monetized social cost would be $21 times that number of tonnes emitted, which gives us about $200 billion dollars per year.
So here’s the balance—we have a verified, measurable social benefit to the planet of $300 billion annually, and an unverified, unmeasurable estimated social cost of $200 billion annually. Which leaves me with just one burning question …
When do I get my check for the social benefits I’m providing? The US has provided somewhere around a third of the CO2 responsible for that social benefit, that’s $100 billion per year in benefits … three hundred million Americans, that’s about $333 per American per year …
w.
PS—What’s that I hear you saying? You think I calculated the benefits wrong?
Well, certainly, perhaps I did. After all, it was just a rough cut. But all that does is bring us back to my first objection to “monetizing” CO2 … it’s very hard to get agreement on the actual values.
PPS—Note that I’ve only considered one single social benefit, the increase in plant production. Since their claimed costs relate to claimed future temperature rises, how about the benefit of increased ice-free days at the northern ports if temperatures do rise? And the longer growing seasons if temperatures increase? How much are they worth worldwide? They likely have included the extra costs from air-conditioning to fight the fabled future heat, but have they included the reduction in winter heating? I could go on, but I’m sure you get the point. The whole thing is an exercise in fantasy, shifting sands with no clear answers.
Discover more from Watts Up With That?
Subscribe to get the latest posts sent to your email.
Aren’t diamonds carbon? Maybe DeBeers and not “Big Oil” is the cause of CAGW? /sarc off
One thing I’ve noticed is that those who argue for CO2 causing CAGW tend to forget that “we” don’t want to commit our money or our lifestyles to solve a nonproblem.
The science isn’t there.
What are those promoting CAGW after? Some may be out to “save the planet” from the threat they’ve been convinced exist. The politics of it is that those now promoting the “convincing” are really out to consolidate authority. “Global Warming” or “Global Cooling”, they don’t care. They just want to be handed the keys to the planet.
@trafamadore
“trafamadore says:
January 12, 2013 at 11:04 am
Has anyone mentioned that CO2 is not the limiting factor in plant growth? If you follow the web page that Willis refers to (Table2), and then follow that (thru another web page or two) to the literature sources the term “well watered” is seen a lot. I suspect they are well fertilized as well. One thing for sure, 900 ppm CO2 wouldnt have helped the fields in the midwest last summer, and in the real world I suspect the situation where conversion of CO2 is the limiting factor is not that common.”
Yes and no, where other factors are limiting (such as cold or lack of sunlight), adding CO2 will not help. However: you have to look at overall production, not marginal situations here and there. Overall, it is very clear that our vegetation has increased since we put more CO2 in the air. You mention the most recent drought in the Midwest. There are two fallacies with the drought-argument:
a) global warming does not increase droughts.
b) increased atmospheric CO2 actually helps plants to become more drought resistant (with more CO2 available, plants can keep their breathing pores (stomata) less wide open, and thus they do not lose so much water from evaporation through stomata).
All in all, CO2 if anything has been helpful for food production. With a predicted 9 billion mouths to feed, I would not dare to reduce it.
Any increase in carbon-dioxide is bad news for the poor people of Africa and the Pacific Islands that derive most of their nutrition from cassava. We have already seen the protein levels drop and cyanide levels increase with the increase in carbon-dioxide levels so far experienced. Cassava will be useless as a food source at carbon-dioxide levels of 1,000 ppm. Unfortunately, there is no substitute crop (that why it is described as the saviour of Africa). The only conclusion that can be drawn is that poor people will suffer with increases in carbon-dioxide concentrations.
trafamadore says:
January 12, 2013 at 11:04 am
Has anyone mentioned that CO2 is not the limiting factor in plant growth?
=============================
On a recent thread that issue was addressed. It seems that last year’s drought in the midwest produced a surprise: the yields were much higher than the forecasts by agricultural production models.
The inference is that higher atm CO2 means fewer stomata which leads to less water loss through respiration, the water saved going into yield. As a consequence, the models are being revised. How about that wonderful CO2!
Tralamadore, relax, everything is going to be fine.
davidmhoffer, it costs just as much whether you classify building sea walls as mitigation or adaptation. By these definitions, yes, adaptation is a better place to put the money in terms of cost-benefit. With no mitigation, adaptation is going to be more expensive and the effects more profound. I prefer the definition of mitigation as any kind of thinking ahead to reduce harm, but I see that in climate discussion it has a more narrow meaning in terms just reducing the amount of change.
Thanks for looking at Helvering, it was in my file and hadn’t been looked at since school. Believe nothing that you read or hear without verifying it yourself unless congruent to Weltanschauung.
None the less, imputed value is not a recent discovery. We may not rent the Commons.
Tralfamadore, Tralfamadorians are a fictional alien race mentioned in several novels by Kurt Vonnegut. Tralfamadore is their home planet. In the novel Slaughterhouse-Five, protagonist Billy Pilgrim reports that the Tralfamadorians look like upright toilet plungers with a hand on top, into which is set a single green eye:
Doug Huffman says: “Tralfamadore, Tralfamadorians are a fictional alien race mentioned in several novels by Kurt Vonnegut. Tralfamadore is their home planet.”
and trafamadore, without the “L” is me, unworldly but wrong.
@Caldermeade
“Caldermeade says:
January 12, 2013 at 2:06 pm
Any increase in carbon-dioxide is bad news for the poor people of Africa and the Pacific Islands that derive most of their nutrition from cassava. We have already seen the protein levels drop and cyanide levels increase with the increase in carbon-dioxide levels so far experienced. Cassava will be useless as a food source at carbon-dioxide levels of 1,000 ppm. Unfortunately, there is no substitute crop (that why it is described as the saviour of Africa). The only conclusion that can be drawn is that poor people will suffer with increases in carbon-dioxide concentrations.”
Caldermeade, your post about cassava is interesting, but where is the link? I googled the subject and immediately found several links disputing the findings you describe. It appears that the experiment you describe was done under unfavorable conditions for the plant, in the laboratory. A different experiment done in the field, under more realistic conditions, showed that increased CO2 increases cassava growth and does not make it toxic….
http://www.canadafreepress.com/index.php/article/30540
http://onlinelibrary.wiley.com/doi/10.1111/j.1365-2486.2012.02726.x/abstract
Jim D says:
January 12, 2013 at 2:16 pm
davidmhoffer, it costs just as much whether you classify building sea walls as mitigation or adaptation. By these definitions, yes, adaptation is a better place to put the money in terms of cost-benefit.
>>>>>>>>>>>>>>>>
Wonderful! What do you propose we adapt to?
The higher temperatures? They haven’t gone up in the last 16 years.
Rising sea levels? The measured change is so small we’re not even sure if it is changing or not.
Hurricanes? They’ve been decreasing for decades.
Droughts? No change in the drought index for decades.
Floods? No change in frequency or severity of flooding world wide for decades.
Ice free arctic? How, exactly, would you adapt to that? Sail through it for free?
Every time the CAGW crowd has made a prediction, they’ve fallen flat on their faces. I don’t know if it is on their lying faces or their incompetent faces, but on their faces they are. They got it wrong over, and over and over. Yet you STILL want to spend enormous amounts of money IN ADVANCE OF ANYTHING BAD ACTUALLY HAPPENING to adapt to things they are predicting MIGHT happen DESPITE the fact that everything they have predicted so far has been WRONG. In fact, it hasn’t JUST been wrong, it has been wrong by the standards that THEY THEMSELVES PROPOSED which is no warming for 15 years or more. Did these clown predict 50 below F in Siberia? Or the worst winter in 30 years in China? Or the worst blizzard in 20 years in the mid east? Why didn’t we adapt in advance to these things? We didn’t know they were going to happen, that’s why!
You know what the best defense against unknown future changes is? A strong economy. The stronger the economy, the greater our ability to adapt to unforeseen changes. Screw the economy now building adaptation measures that we don’t need, and we’ll be too broke to build the ones we do need when we find out what they heck they actually are if they exist at all.
trafamadore:
You end your post at January 12, 2013 at 2:33 pm saying
I write because it gives me great pleasure that for the first time you have said something which is clearly true, and I did not want it to go unnoticed.
Yes, indeed, each of your posts clearly shows you are “unworldly but wrong”.
Richard
trafamadore says:
January 12, 2013 at 2:33 pm
“and trafamadore, without the “L” is me, unworldly but wrong.”
==================================
“unworldly but wrong”
well, yes.
And, talking about adaptation or mitigation: if cassava were a true problem, it would not be very hard to task a team of agricultural scientists to come up with a strain of cassava that does not produce cyanide and thrives in higher CO2 levels. This could be done either by bioengineering or through old fashioned breeding. In either case, the money spent would be very modest.
Caldermeade says: January 12, 2013 at 2:06 pm
============================
Caldermeade, this is typical of the sort of rubbish that is spouted by alarmists.
Just a few minutes reading internet sources on cassava reveals that 1) protein content of cassava is 1-2%, hence cassava cannot be regarded as a significant source of protein for those who depend on the crop 2) cyanogenic glucosides in cassava vary by a factor of 50, depending on the variety, and all varieties are consumed. In fact, some growers prefer the more toxic variety because of their insect resistance.
Thank you for the opportunity to expose, once again, the hollowness of the CAGW alarms.
davidmhoffer, there are plenty of adaptations that can be predicted apart from sea walls. The US has 6 million people living within 4 feet of sea level. A one meter rise means some expensive adaptation are needed. The western croplands increasingly rely on depleting the underground aquifer, which is half gone since the 50’s. This irrigation prevented another dust bowl, but where to when this water has gone. Planning might be in order. Drought problems are increasing in frequency and will pose an increasing obstacle to maintaining food production, despite Willis’s optimism. Somebody needs to study that. A good economy would have some contingency fund for such things, but I don’t see that happening in this political climate which is opposed to the government having any funds at all, let alone building up an escrow account with a carbon tax. The US is not on a good path.
I see that quite a few posts have come in since I went to bed. I can’t respond to them all so I will try and address the main issues people have.
The first thing is that someone wondered why I thought Willis’ post was absurd. There are a number of reasons, some of which I have already provided and won’t repeat. Here goes:
The 10% is almost certainly inaccurate. It is inaccurate because it does not take into account of, or ignores:
(1) a time frame
(2) changes to food production and crop productivity arising from AGW. It is somewhat ironic that as I write our house is shrouded in smoke from burnt out pasturelands. The productivity loss there is 100%.
(3) other critical limiting factors on food production including notably global phosphorous supplies over the coming century
(4) the impact on food availability caused by chemical changes in the oceans, for example, the possible collapse of Southern Ocean fisheries based on pterapods.
In other words, the post is based on enough oversimplification, ignoring other variables and a general lack of framework to make it absurd.
There are other issues with the post. It ignores commercial reality. CO2 pollution costs are already being monetised, mainly through insurance premiums but also through the cost of risk capital. But that is on the other side of the ledger and the post in general fails because it only takes into account one side of the ledger.
Some folk are wondering about my reference to a time frame, threshold events and the non-linear nature of AGW.
The reason time frames are important is that they provide a necessary context for discussions about AGW and the economic benefits. No-one invests in an IPO without a very firm notion of the likely degree and timing of ROI. The same ought to be case when discussing the economic impacts of AGW. Any such discussion which omits a time frame is, therefore, an obvious absurdity.
As an example of why time frames are critical for making sense of someone’s position, almost the entire set of posts above about sea walls is invalid (and inherently irrational) because it lacks an investment time frame. Bankers would laugh at the posts.
Discussion of the economic impacts of AGW which lack a reference to threshold events is also obviously a clear fail. Possible threshold events: changes to environmental parameters such that insect pests, fungal diseases of crops, feral animals and weeds cut lose. This sort of stuff happens all the time. Ignoring it invalidates any rational assessment of AGW adaptation costs.
The non-linear nature of climate behaviour is, I believe, reasonably well accepted. Assessing AGW adaptation costs therefore not only needs a time frame, it needs provision for non-linearity.
A couple of people have accused me of being a troll. I don’t mind if some or many of you disagree with what I write. If everyone here agreed with what I post, I wouldn’t post. The sound of one hand clapping so common in blog strings is utterly boring.
But I will not be calling you a troll because you disagree with me.
Some people also called me some other things but I guess that since I called that EMSmith poster a fool, I have to expect to take a bit of personal flak.
Jim D says: build seawalls, etc.
=============================
Not to worry, sea level rise is no threat at present and global wwarming is no more.
Concerning the Agallala Aquifer, the best way to recharge that is by rainfall. The good thing about about a warmer world is that rainfall increases. A cooler world means less rainfall. Did you not know this? That means all of this scare talk about increasing drought can be ignored, unless the globe starts to cool. That’s the good news.
The badnews is that, according to some climatologists, the globe has already started cooling, and this trend can be expected for several decades.
Climate says:
January 12, 2013 at 3:48 pm
================================
You post reveals that you are too far gone to be saved, but for the benefit of others I wish to point out your errors:
Concerning food production- a warmer world means more food production
Concerning the so-called acidification of the oceans- the oceans are alkaline and will remain so for the next one billion years or so.
CO2 is not pollution, but entirely beneficial; it is a plant fertilizer and the basis of all life. Without atmospheric CO2, there would be no life on this planet.
Vague talk about time frame, threshold events, non-linear nature, etc. is just pseudo-scientific gobbledegoop that reveals a “warming -on-the-brain” syndrome. It is the inevitable consequence of being indoctrinated instead of educated.
mpainter
S. Meyer says: “There are two fallacies with the drought-argument:
a) global warming does not increase droughts.”
Let’s see the published ref on this, cuz I think you are full of it.
trafamadore says:
January 12, 2013 at 4:28 pm
S. Meyer says: “There are two fallacies with the drought-argument:
a) global warming does not increase droughts.”
Let’s see the published ref on this, cuz I think you are full of it.
>>>>>>>>>>>>>>>
http://wattsupwiththat.com/2012/11/16/global-warming-to-drought-links-shot-down/
You may also want to check out the recent SREX report from the World Meteorological Organization and the multiple references on the matter in the IPCC AR5 SOD.
Climate;
Possible threshold events: changes to environmental parameters such that insect pests, fungal diseases of crops, feral animals and weeds cut lose. This sort of stuff happens all the time.
>>>>>>>>>>>>>>>
You bet it does. Has for centuries. Episodes in the past have wiped out entire civilizations. Of course that was before CAGW. Hmmmm, maybe they aren’t even caused by CAGW? Well never mind that, point is they don’t have the same devastating impacts they had in the past. Ya know why?
‘cuz us pesky humans invented pesticides, fungicides, animal traps and herbicides.
Climate;
The non-linear nature of climate behaviour is, I believe, reasonably well accepted.
>>>>>>>>>>>>>>>>>
Yes it is. CO2’s effects are logarithmic and the cooling response of the planet is exponential. As a consequence the earth’s temperature varies within a very narrow range as confirmed by the geological record which includes time periods with CO2 levels in the thousands of ppm. Thanks for bringing this important point to everyone’s attention.
Jim D says:
January 12, 2013 at 3:46 pm
davidmhoffer, there are plenty of adaptations that can be predicted apart from sea walls. The US has 6 million people living within 4 feet of sea level
>>>>>>>>>>>>>>>>>>
Jim, seriously, stop.
@trafamadore
A Michigan girl accusing someone of being ‘full of it’ is just silly as the anagram of your pseudo-moniker is:
“Farted Aroma.”
mpainter
Concerning food production- a warmer world means more food production
How much warmer?
Concerning the so-called acidification of the oceans- the oceans are alkaline and will remain so for the next one billion years or so.
Who said anything about acidification? Not me. Stop pretending that I did.
CO2 is not pollution, but entirely beneficial; it is a plant fertilizer and the basis of all life. Without atmospheric CO2, there would be no life on this planet.
Many pollutants (as well as poisons) are beneficial within certain parameters. It is once they get beyond these parameters that they become pollutants (or become deadly). The notion that substances must necessarily be one or the other is a classic BAU booster strawman.
Vague talk about time frame, threshold events, non-linear nature, etc. is just pseudo-scientific gobbledegoop that reveals a “warming -on-the-brain” syndrome. It is the inevitable consequence of being indoctrinated instead of educated.
I see that you are avoiding the issues of threshold events, non-linearity and the lack of a time frame for economic discussions.
BTW, I notice that you ignored the fact that the Coalition has as a policy the spending of $10 billion of taxpayers’s funds to reduce Australia’s CO2 emissions by 5% by 2020.
SMeyer
And, talking about adaptation or mitigation: if cassava were a true problem, it would not be very hard to task a team of agricultural scientists to come up with a strain of cassava that does not produce cyanide and thrives in higher CO2 levels. This could be done either by bioengineering or through old fashioned breeding. In either case, the money spent would be very modest.
Technically, using GMOs, should be entirely doable. I guess there isn’t a buck in it for the plant breeding companies?
By the way, ‘mitigation’ is a bit confusing IMHO. I prefer ‘prevention’ of AGW.