This article explores how the ‘social cost of carbon’ (SCC) metric, a crucial tool for climate decision-making, can actually conceal economic inequalities and the disproportionate impacts of climate change on poorer countries. It delves into the modeling approach used to calculate the SCC and how this methodology fails to account for the real-world disparities in climate change damages experienced by lower-income nations. The piece argues that addressing this imbalance requires a combination of financial transfers and practical cooperation between richer and poorer countries to ensure a more equitable sharing of the costs and benefits of global emissions reductions. Social cost of carbon, Climate change, Economic inequality
The Flawed Assumption of the Social Cost of Carbon
The social cost of carbon (SCC) is a crucial tool used by policymakers around the world to weigh the benefits of reducing carbon dioxide (CO2) emissions against the broader societal costs of continued fossil fuel use. However, as this article reveals, the way the SCC is calculated can actually mask the disproportionate impact of climate change on poorer nations.
The SCC is a global-level value that attempts to aggregate the damages from climate change across all countries. But when you break down this global estimate into country-specific SCC values, a stark inequality emerges. Poorer countries tend to have significantly lower SCC values than their richer counterparts, despite facing more severe climate change impacts. This discrepancy is rooted in the modeling approach used to estimate the SCC, which assigns a lower monetary value to damages in regions with lower overall income levels.
The Hidden Costs of Climate Change for Developing Nations
The article cites a revealing example: the United States Environmental Protection Agency recommends a global SCC of $208 per ton of CO2 for 2024, a value that the Government of Canada also uses. However, when this global figure is broken down to country-specific estimates, it reveals SCCs of less than $1 for poorer nations.
This does not mean that poorer countries are less affected by climate change – quite the opposite. Studies show that the damages associated with climate change, such as reduced agricultural productivity, increased energy expenditures, and premature deaths, are proportionally higher for lower-income countries. The reason for the low SCC values is that the monetary value assigned to these losses is significantly lower due to the overall lower income levels in these regions.
Addressing the Imbalance: Towards a More Equitable Approach to Climate Policy
The article argues that this imbalance in SCC values between richer and poorer nations has serious implications. For national policymakers in developing countries, an almost negligible SCC means that climate change-related projects will struggle to compete with more immediate basic-needs projects, such as addressing malnutrition. From a global perspective, this leaves poorer countries with little incentive to allocate resources to the fight against climate change, as they may see their efforts as nothing more than donations to wealthier nations.
To address this issue, the article proposes two potential solutions. First, the differences in SCC values between poorer and richer countries could be used to inform international climate negotiations on the implied historical responsibility and liability, commonly known as the loss and damage funds. Second, international development assistance to climate adaptation funds should be more equitably aligned with these SCC imbalances, ensuring that richer countries – which will benefit more from emissions reduction efforts – help bear the burden of supporting poorer nations’ adaptation and mitigation efforts. By implementing these measures, the costs and benefits of global CO2 emissions reductions can be shared more equally, accounting for both ethical and economic considerations.
