What's the cost of climate change? Pick a number

A histogram of recent findings shows a wide range of estimates, in price per ton of carbon dioxide emissions, of the cost of climate change. The federal values, in orange, lie on the left side of the curve, suggesting the numbers are low. Created by Nicole Heller/ClimateCentral.org. Find an interactive version of this graph here.

January 27, 2011

UPDATED January 30, 2011

Cost estimates for the damages wrought by climate change run a wide gamut, from $-9 to $3,243 per ton of carbon dioxide emissions, based on a review of scientific estimates. Within that universe, the federal estimates look low.

The cost of climate change

Jan. 27: New data suggest feds understate climate costs

Jan. 28: Ethical dilemma sways economics

By Nicole Heller and Douglas Fischer

Climate Central and Daily Climate

Predicting the economic impact of climate change is not an easy endeavor. Climate models trying to assess the future impact of global-warming greenhouse gases are already enormously complex. Throwing the economic impacts of the myriad physical changes taxes the processing power of even the most advanced computers.

Scientists work around this by merging simplified versions of physical and economic models into what's known in the trade as "integrated assessment models." Three versions are widely used and account for the bulk of the research on the topic. But other researchers have developed other models and approaches, and the field remains in flux.

Values are generally represented as a price per ton of carbon dioxide emitted. The higher the price, the greater the perceived impact of carbon emissions on society. The histogram here shows the central range of values (standardized to 2007 dollars) obtained by recent studies. 

Most come from peer-reviewed research. All vary by approach, and estimates vary widely: Some employ different models, others make different assumptions about the increasing value of money over time - the so-called "discount rate." Many have wildly differing views on damage estimates and the risk of catastrophe. The values range from $-9 per ton of carbon dioxide emissions - meaning society benefits from global warming - to $3,243 a ton - a princely sum, given the United States sends some 6 billion tons of carbon dioxide into the atmosphere annually.

In general, estimates on the tail on the right side of the graph show a high economic impact from climate change reflecting 1) low discount rates, suggesting strong ethical stances toward the rights of future generations and/or 2) greater sensitivity to damages and catastrophe. 

Numbers that fall on the left side of the curve showing a low or even negative value suggest that a warmer planet represents either a minimal risk to society or even a net benefit. These estimates are driven largely by 1) high discount rates, suggesting an assumption that future generations will be better equipped to handle the challenges associated with climate change, 2) little sensitivity to climate damages, and/or 3) an assumption that adapting to climate change will be minimally disruptive.

The federal government's high-, mid- and low estimates ($34, $21, $5, in orange) all fall on the left side of the curve. Even the government's "worst-case" value of $65 per ton of carbon dioxide falls well to the left, suggesting the federal assessment [pdf] is biased toward low climate change impact.

UPDATE: Michael Greenstone, the Massachusetts Institute of Technology economics professor who spearheaded the federal Interagency Working Group, takes issue with such a conclusion. The group, he said in an interview, conducted a similar exercise but was confronted with a confounding array of variables and assumptions. 

"There's a tremendous spread, but we couldn't tell what was responsible for the spread," he noted. When the group held the assumptions constant, the picture changed dramatically, and the federal numbers fell more evenly throughout the histogram, he said.

Nicole Heller is a research scientist at ClimateCentral.org, a nonprofit, nonpartisan media organization comprising earth scientists and science journalists.

Douglas Fischer is editor of DailyClimate.org, a nonprofit news service covering climate change.

Histogram information

Each box corresponds to the social cost of carbon (SCC) estimated from an individual study. Included are 258 estimates from 48 studies from 1982 - 2010. For visualization purposes, the most extreme estimates on the high-end (three values spanning approximately $1,000 - 3,300) and the low-end (eight values between $-1 and -10) are not included. The 2010 US federal estimates are indicated in orange (highlighted by searching for "US fed" in the Search>>). Scroll over the boxes to see the value and the study. 

Data for histogram comes from the following sources: 

1. Tol R.S.J. (2008) The Social Cost of Carbon: Trends, Outliers and Catastrophes, Economics 2: 2008 - 2025. (This meta-analysis includes 211 estimates from 47 studies)

2. Hope C. (2008) Discount rates, equity weights and the social cost of carbon, Energy Economics 30 (2008) 1011-1019.

3. Johnson L. (2010) Revisiting the SCC estimates developed by the US Government:  The effects of intergenerational discounting methods and regional equity weights. Draft paper.

4. Guo J., Hepburn C.J., Tol R.S.J., and Anthoff D. (2010) Discounting and the social cost of carbon: a closer look at uncertainty. Environmental Science & Policy 9, pp 205 - 216.

5. Interagency Working Group (2010) Technical support document: Social cost of carbon for regulatory impact analysis under Executive Order 12866.

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