Yesterday Nature published a new analysis estimating the social cost of carbon in the United States at $185/ton, more than triple the current estimate used by the federal government in calculating the monetary impact of greenhouse gas emissions (and therefore of policies that would reduce or increase those emissions).
The U.S. fair share of international mitigation finance would be $9.8 trillion through 2030 based on this new estimate. Don’t take this number at face value though; rather, it’s an indication of the general scale that we need to be thinking about. Read on for the details.
Almost two years ago, we published the US Fair Share model showing that the U.S. fair share of global climate action would be equivalent to reducing emissions by 195% by 2030, from 2005 levels. In practice, that would mean reducing actual emissions by at least 70%, then covering the difference by financing emissions reductions in developing countries that would be the equivalent of the remaining 125%.
That 125% international responsibility is about 53 gigatonnes (billion metric tons) of emissions reductions over the period 2021-2030. If we multiply that number by the $185/ton estimate, the cost of financing those reductions comes to about $9.8 trillion, or $980 billion per year.
This estimate derives from a deeply imperfect methodology, for these reasons and more:
- The social cost of carbon estimates the damage done by emissions, not the cost of avoiding those emissions.
- The $185/tonne is a U.S.-centric estimate. A 2018 paper estimated global median social costs of carbon to be much higher, at $417/tonne. For calculating international climate finance, this is arguably the more relevant figure.
- The social cost of carbon estimate cannot, by definition, take into account non-economic losses due to climate change, e.g. loss of culture.
But despite all this, the estimate gives an appropriate indication of scale. In the Fair Shares NDC we called for $800 billion in climate finance from 2021-2030, as a “down payment” on our actual fair share, which we know to be much larger, potentially by a full order of magnitude or more. This estimate is merely another confirmation that even the most ambitious calls for climate finance are only a starting point.
Nearly a trillion dollars per year sounds like a lot, but as always, it’s important to put it into context. This is financing for resolving one of the great global crises of our time – supporting countries to transform entire economies in some cases, while ensuring no one is left behind in the transition.
Moreover, we are used to spending this kind of public money, even if the numbers seem wildly big. In 2021, the U.S. government mobilized $1.9 trillion in the American Rescue Plan to respond to the COVID-19 crisis. Later that year, it mobilized over $1 trillion in infrastructure investments. More outrageously, U.S. defense spending at this point is around $800 billion per year.
As we have always said: the money is there, we just have to decide the climate crisis is a big enough problem that we’ll spend it. This new social cost of carbon paper merely gives us another way of showing the true scale of the response we need to the crisis.