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  September 20, 2013

What is the Social Cost of Carbon Emissions? Pt.1

James Boyce: Cost-benefit analysis of carbon emissions has shortcomings
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James K. Boyce is a Professor at University of Massachusetts, Amherst. He is the Director of the Program on Development, Peacebuilding, and the Environment at Political Economy Research Institute (PERI).


JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I'm Jaisal Noor in Baltimore. And welcome to this latest edition of The PERI Report.

Carbon dioxide is one of the most critical gases in relation to climate change emitted due to human activities. It can remain in the atmosphere for many thousands of years.

In an attempt to deal with this issue, the U.S. government has formed a task force called the Interagency Working Group on Social Cost of Carbon. In May of this year, the working group released new estimates that put the social cost of carbon--the value of preventing a ton of carbon emissions--at somewhere between $11 and $221 per ton. In other words, that's what we should be prepared to spend to prevent carbon emissions and to save the planet from global warming.

Here to talk with me about this issue is James Boyce. He's the director of the Program on Development, Peace Building, and the Environment at the PERI Institute. He's also a professor of economics at UMass Amherst.

Thank you for joining us today.


NOOR: So what is this cost-benefit analysis?

BOYCE: Well, as the name suggests, it's a way of weighing up the trade-offs that we face as individuals or as a society, the trade-offs between costs of doing something or not doing something and the benefits that come with it. So in the case of these estimates of the so-called social cost of carbon, the idea is to figure out how much should we be willing to spend to prevent global warming given the costs that are associated with an unstable climate future for our planet.

So in certain ways this is an exercise that might seem to make sense. I mean, as a society, we do have to make choices, and it seems like weighing up cost and benefits is a reasonable way to go about it, and in principle these are costs and benefits to the whole society, present and future generations, not just to specific individuals. So this is sometimes described as being all about efficiency.

There are two main problems with cost-benefit analysis, however. One is that everything has to be reduced to dollars and cents. Everything has to be put into that money measure. So that's problematic. And then the second set of problems has to do with the methods that are used to pin dollar values on things like having a stable climate in the future on planet Earth.

NOOR: Now, is this the same as cost effectiveness?

BOYCE: That's a really good question. They're not exactly the same thing. When people talk about efficiency, sometimes they mean cost-benefit analysis, sometimes they mean cost effectiveness.

The difference is that cost effectiveness is about how we reach a goal in the most efficient manner, in the lowest-cost manner. But the goal would be set on some other basis than cost-benefit analysis. It might be based on public health, for example, or on a responsibility for the well-being of future generations, also sometimes called sustainability. So in the case of global warming, we might say that our objective is to return the carbon dioxide content of the Earth's atmosphere to 350 parts per million or let it rise to 450 parts per million or whatever. And then we just just ask the question: what's the cheapest way to meet that goal? That's cost effectiveness.

Cost-benefit analysis goes a big step further, in that it uses or purports to use economic analysis to set the goal itself. So rather than saying, well, we have a responsibility to future generations to keep the planet, you know, within the following range of parts per million of carbon dioxide or whatever, the cost-benefit analysis says, well, you know, how much is it worth to save the planet, and how much should we be willing to spend? And on that basis it comes up with a goal which is also sometimes described as being efficient. But it hasn't been set on the basis of anything other than these dollars and cents calculations.

NOOR: So you're saying it doesn't make much sense to use cost-benefit analysis to set environmental goals, especially when, you know, we're talking about the survival of the planet.

BOYCE: Well, I think many people--and I would include myself in this--would argue that there are some things in life, some decisions we face as a society where the things we're talking about are really priceless. They're not a matter of dollars and cents. I mean, after all, we as a society ban slavery. We ban murder. We don't ask what are the costs and benefits of allowing slavery or allowing murder. We don't say, how much is it worth for the victims to avoid being killed and how much is it worth for the killers to kill them? We don't do that. We say that people have a right not to be enslaved, people have a right not to be murdered.

Well, in the same way, we might say that people have a right to clean air, to clean water, or to a stable climate future and that the question here is not how do we weigh up what it's worth to them to have those things, but rather we say those are their rights, we have to respect those rights, and we want to find the most cost effective way of doing so.

So that, I think, is one of the major problems with this notion that everything can be reduced to dollars and cents. It really misses the fundamental idea that there are rights and there are things that really could and should be treated as priceless rather than be treated as if it's analogous to the decision of whether or not to buy a new car or what sort of fuel efficiency vehicle I want to invest in.

NOOR: So, James Boyce, thank you so much for joining us for part one of this conversation.

BOYCE: Thank you, Jaisal.

NOOR: We're going to continue this conversation in part two. We'll post that at Thank you so a much for joining us.


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