Flooding in New Orleans after Hurricane Katrina (Credit: Pixabay)
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The $200 Billion Fossil Fuel Subsidy You've Never Heard Of
Amir Jina, Contributor
Now for an actual fact: The costs of climate change are real. Scientists and economists, myself included, may go back and forth on how high the actual cost is, but it is definitely greater than zero. This cost can be summarized by an important number called the Social Cost of Carbon—the cost to society of emitting an extra ton of carbon dioxide into the atmosphere. That cost reveals itself in different ways. For example, rising temperatures will lead to more heat-related deaths, and less time in the labor market (more on that in my previous Forbes post).
The U.S. emitted 5.4 billion tons of carbon dioxide in 2015, with a cost per ton of $36 (the current Social Cost of Carbon). That means the U.S. is paying $200 billion to cover the costs of all the emissions being burned. In effect, it’s a $200 billion hidden subsidy to the fossil fuel industry. This $200 billion is a cost in real money—in lost labor productivity, healthcare costs, increased energy expenditures, coastal damages—that is paid somewhere in the world for each ton of carbon dioxide that is emitted.
Regulations like the Clean Power Plan and the meager $15.4 billion the U.S. spends subsidizing clean energy are supposed to even out this playing field. But the simplest, most efficient, way for society to make sure it’s a fair game and decrease the damages caused by climate change would be to pay the price for those damages. Doing so would mean the fossil fuel industry would need to pay their fair share, and so would we if we keep using those fossil fuels. There would then be a greater incentive—without subsidies—to transition to clean energy. Emissions would decrease. And, the price we would have paid to adapt to climate change would get lower over time.
The National Academy of Sciences released a recommendation in January to update the process for forming the Social Cost of Carbon, pointing out ways that the newest science can transparently inform this important calculation. This is a crucial effort. Unfortunately, an anti-scientific manipulation of this recommendation would place it, and us, in an uncertain future.
The Social Cost of Carbon is the best scientific and policy tool to level the playing field and fix the current market failure where the fossil fuel industry pays zero. Without it, and a concerted effort to set it at the right price, the uneven playing field will only continue to widen. And, the Trump administration’s early actions to expand fossil fuels only exacerbate this. Not only do those actions not make sense economically, they are also anti-scientific and dangerous. The fact is, if we don’t pay the right price now, we’ll be paying a much greater price in future.
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