Causing sea-level rise, melting Arctic ice affects coastal economies world-wide. Photo: US Coast Guard

How much economic damage is done by one ton of carbon dioxide emissions? A group of economists argues that the government’s estimate of $21 per gallon omits risks associated with climate change and downplays the impact of current emissions on future generations.

The analysis offered by E-3, a 200-member network of economists, considers these factors and significantly raises the social cost of carbon – the estimated price of economic damage caused by carbon dioxide emissions into the atmosphere. The network’s analysis identified four major uncertainties that the government’s estimate failed to adequately consider:

• the sensitivity of the climate system to greenhouse gases
• the level of economic damages expected at low temperatures during the early stages of global warming
• the level of damages expected under higher temperature or catastrophic climate change scenarios
• the appropriate way to value future costs and benefits of climate change

Potential consequences of these climatic uncertainties include sea-level rise, increased frequency and intensity of weather events, changes in agricultural productivity and the availability of fresh water, all of which have economic impacts.

Using DICE, the best known of the models used by the government’s working group, E-3 incorporated these uncertainties, developed 16 possible scenarios and projected the social cost of carbon to be between $28 and $893 per ton.

An accurate assessment of the social cost of carbon is necessary for reliable cost-benefit analyses on which policy and regulations are based.

E-3 (Economics for Equity & Environment) is a national network of economists developing and applying economic arguments for active protection of human health and the natural environment.