Economists Warn against Setting Price for Carbon Too
Low
PORTLAND, Ore., Apr 01, 2010 -- BUSINESS WIRE
In its first attempts to regulate carbon emissions, the U.S. government
is hindering its own efforts by using flawed economic models that
grossly underestimate the impact of carbon dioxide (CO2) on the climate
and on our economic future, says a new report issued today by America's
largest network of independent climate economists.
The report, from the Economics for Equity and the Environment Network
(E3 Network), an organization of more than 200 economists, shows how a
little-known federal task force has estimated the so-called "social cost
of carbon" -- the economic impact of each ton of CO2 emissions -- at a
"central value" of $21 per ton, which would translate to about 20 cents
per gallon of gasoline.
Federal agencies will use the SCC as part of cost-benefit analyses to
weigh the expected cost of regulations against the anticipated savings
and avoided damages: The higher the SCC, the stricter the standards will
be for fuel efficiency in vehicles, energy efficiency in appliances, and
more. The number is crucial in the Environmental Protection Agency's
effort to fulfill its mandate from the U.S. Supreme Court to regulate
carbon, and for many other agencies as well. It could also find its way
into climate legislation being developed in Congress, causing even
greater harm if it's used to set low carbon permit prices or to justify
lax emissions standards.
"The danger is that this will lead to ineffectual regulations that
don't make a dent in the climate problem," said Dr. Frank Ackerman, lead
author of the report, a senior economist at the Stockholm Environment
Institute's U.S. Center and a co-founder of the E3 Network. "We know
that the higher the carbon price, the more it will reduce carbon
emissions; that's the whole point of a market incentive. If it's this
low, it will have hardly any effect."
In the United Kingdom, by contrast, the government's latest carbon price
estimates range from $41 to $124 per ton of CO2, with a central case of
$83; the report argues for at least exploring prices in this range for
the U.S. The report also notes the urgency of setting a price on carbon
in the U.S. Already, atmospheric carbon dioxide concentrations are about
385 parts per million, up from 280 ppm before the Industrial Revolution,
and if current trends continue, they are expected to reach 560 ppm
within this century. At that level, scientists estimate that the average
global temperature would rise by at least 3degC (5.4degF), and more
recent studies suggest increases of up to 6degC (11degF).
The full report is available at www.e3network.org,
www.sei-us.org , or
www.ecotrust.org .
About Economics for Equity and the Environment
Economics for Equity and the Environment (E3 Network) seeks to combat
misleading junk economics popularized by climate skeptics. E3 Network
organizes the expertise of economists from institutions across the U.S.
who are developing and applying new economic arguments for active
protection of human health, community prosperity and the natural
environment. The E3 Network is sponsored by Ecotrust. More on the Web at
www.e3network.org.
About the authors
The Social Value of Carbon report is by Dr. Frank Ackerman and Dr.
Elizabeth A. Stanton, senior economists at the Stockholm Environment
Institute's U.S. Center, at Tufts University in Somerville, Mass. For
more on their work, see
www.sei-us.org/ClimateEconomics .
SOURCE: Economics for Equity and the Environment
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