SBC: Social Benefits of Carbon

 

Recently I posted on the Social Cost of Carbon: Origin and Prospects, which has become a focus for the Trump transition team. An article from Bloomberg provided a good historical context and overview of that policy instrument. The discussion noted major issues with how the damages are estimated and focused on how the calculation depends greatly upon the arbitrary choice of discount rate.

Several commenters raised a quite separate problem, namely that SCC is biased by addressing only estimated damages from CO2 and not the social benefits. That is not surprising since the entire purpose of the SCC is to get a large enough dollar figure to justify imposing expensive regulations, supposedly to avoid the damages by reductions in CO2 emissions. The framers had no interest or incentive to reduce damage estimates by considering benefits.

However a normal cost/benefit analysis would only project damages net of the expected benefits, which is clearly not the case here. Let’s consider three categories of Social Benefits of Carbon which properly must be included, rather than ignored.

Social Benefits from the Energy

Climate advocates assume that burning fossil fuels provide immediate benefits, such as electrical power or horsepower, which are paid for in the purchase of the fuels and realized by the consumers. Thus the social costs pertain only to future damages not covered by the fuel market prices. This view is achieved by wearing blinders to many obvious future social benefits attributable to the reliable and affordable energy from fossil fuels.

Alex Epstein (here) is among those who demonstrate from public information sources comparisons between societies who use carbon fuels extensively and those who do not. The contrast is remarkable: Societies with fossil fuels have citizens who are healthier, live longer, have higher standards of living, and enjoy cleaner air and drinking water, to boot. Not only do healthier, more mobile people create social wealth and prosperity, carbon-based energy is heavily taxed by every society that uses it.  Those added government revenues go (at least some of it) into the social welfare of the citizenry. By almost any measure, carbon-based energy makes the difference between developed and underdeveloped populations.

Social Benefits from CO2 Fertilization

SCC excludes any consideration of the positive effects upon the biosphere from higher concentrations of CO2 in the atmosphere. It has been proven by numerous studies that plants thrive when more than 400ppm of CO2 are in the air, and greenhouse operators routinely add CO2 to double or triple the amount inside their facilities.

Yet climatists are at pains to discredit the benefits of more CO2.

A few years ago a scientist analyzed satellite imagery and discovered that the planet is greening (adding plant coverage) at a higher rate most likely due to more CO2 in the air. Climate activists are putting pressure upon these researchers to recant their findings.

A recent post Researchers Against CO2 revealed how activist scientists are trying to overturn the extensive biological evidence that plants love CO2. Field experiments are conducted claiming that plants don’t always grow bigger and faster with more CO2 when there are other limiting factors such as moisture, sunlight or soil nutrients. Their logic fails since more CO2 doesn’t cause the lack of other growth factors, and reducing CO2 will not improve those circumstances.

 

Another attack on CO2 benefits is the claim of ocean acidification, and I would not be surprised if SCC includes damage estimates from this source. Facts on the ground (or in this case, the oceans) do not support the claims, as reported in this post on Basics of Ocean Acidification.

Even crabs love CO2.

Social Benefits from Global Warming

Here we face the full force of billions of dollars of research studies on the damaging impacts from a few degrees of temperature increase. Over the years, everything has been shown to suffer from global warming, from A to Z. From Acne to Zika virus, and every letter in between: Bees, Civil wars, Diseases, Extinctions, Fish, etc.

Here’s the thing: Social Cost of Carbon is actually an attempt to estimate the benefits of preventing all those A to Z damages. But where are the estimates of benefits by preventing damages from global cooling?

A few researchers such as Richard Tol have looked objectively at warming scenarios, and identified clear social benefits. One study (here) concluded that an additional degree Celsius of warming by 2040 would likely result in 800,000 fewer deaths each year. Is that not a benefit to be reckoned?  Reasonable people conclude that the last 1°C of warming was a boon to civilization, and the next 1°C is likely to also be a blessing.

There are problems with this category. How do you put dollar values on saving human lives, or projected reductions in crops due to colder weather? These are the same problems bedeviling the SCC calculations.

Further, many are wary of accepting the premise that carbon-based fuels do in fact cause temperatures to rise. Certainly the poor correlation between fuel consumption and global mean temperatures (GMT) does not convince (more here). Still, the argument can be made that even if you believe in man made global warming, policy analysis must also consider the benefits from a warmer world.

Summary

Calculating future costs and benefits from using carbon-based fuels is much like going down Alice’s rabbit hole.  Things get distorted, turned upside down and sideways.  Or to change the metaphor:  Beware: this swamp has alligators.

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6 comments

  1. Hifast · January 3

    Reblogged this on Climate Collections.

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  2. manicbeancounter · January 3

    There are a few good points made. By far the most important is the impact of fossil fuels on economic growth rates. Take China – the most extreme example in history, at least for major economies, According to the UNFCCC country brief produced for COP21 Paris, economic growth in China average 10.3% pa from 1990-2012. In the same period CO2 emissions increased by 6.1% pa. It meant GDP per capita (with 19% population growth) was 7.25 times higher in 2012 than 1990, and emissions per capita were over 3 times higher.
    How much of the economic growth would have happened without the huge investment in cheap energy sources – principally coal? If economic growth would have averaged a mere 7%, GDP per capita would have 3.7 times higher in 2012 than 1990, This is why people in China are willing to suffer the terrible, acrid, pollution that engulfs many major cities.
    http://newsroom.unfccc.int/media/303962/profile-china.pdf

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    • manicbeancounter · January 3

      I should add that the compound effect on economic growth of cheap fossil fuels is far greater than the estimates of the projected harms of climate catastrophe. There was an article on a Manhattan Institute Report which said the costs of global warming could reach $15trn by 2100 – or 2.5% of output. Reducing economic growth by 0.03% would have the same effect on output, though people would accept a much bigger reduction in growth to avoid 2.5% costs of catastrophes.

      This leads to a bigger issue, that it not discussed. Suppose an economy like Canada with 1.5% of global emissions, unilaterally imposed a policy from January 1st 2017 guaranteed to reduce emissions by 90% by 2100. Without the policy global emissions would be double 2016 levels in 2100. With the policy they will be 1.9865 times higher.
      Let us also assume that
      (1) 2100 costs of climate change are 2.50% of GDP globally and for Canada, without Canada’s policy.
      (2) 2100 costs of climate change are 2.45% of GDP globally and for Canada, with Canada’s policy.
      (3) The only cost of this policy is to reduce long-term growth rates from 2.00% to 1.99%
      (4) All outcomes and calculations are certain.

      Even then, the the descendants in 2100 Canada would still not thank the current generation, as output would be 8% lower, to save costs of just 0.05% of GDP. If current GDP is C$1600bn, with 2% growth GDP in 2100 will be C$8443bn. At 2.5% costs of climate change will be $211bn. Reduce that to 2.45% reduces costs by just over $4bn. But GDP with 1.99% growth GDP will be 8% or $668bn lower.
      Even if all countries reduced emissions by 90% (and thus reduced costs of climate change to effectively zero) mitigation policy would may not make sense on these “heroic” assumptions. You would exchange $210bn of random catastrophic costs for $668bn of certain costs. But that would be only if the costs were totally random.
      But the reality is much closer to Canada acting unilaterally; there are significant policy costs; and the impact on growth is far greater.

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  3. Pingback: Carbon emissions – social benefits from enhanced growth | ManicBeancounter
  4. manicbeancounter · January 4

    I have put the two comments above into a blog post, and extended the argument.

    Key Points

    1. Cheap fossil fuels were undoubtedly a major element in China’s very high levels of economic growth.

    2. If Canada were to unilaterally cut its emissions, the impact on global emissions would be tiny.

    3. A reduction in economic growth of 0.01% from now to 2100 would have a larger value in 2100 than the projected monetary costs of catastrophic climate change in 2100.

    4. Developing nations with up to two-thirds of global emissions, are excluded from any obligation to constrain emissions under the Rio Declaration.

    5. Climate mitigation increases unit energy costs, creating a comparative disadvantage for policy countries.

    6. If non-policy developing countries were later to adopt mitigation policies, they would not only have higher energy costs, but would lose the comparative advantage of being a non-policy country. A few countries pursuing climate mitigation policies increases the marginal cost of other countries adopting similar policies.

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  5. Craig Austin · January 7

    The environmental groups are trying ro save the lives of your financially burdened great grandchildren, that they don’t want to exist. Population control is their answer for everything, as long as they are the controllers not the controlled.

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