With the 2015 UN climate conference looming less than a month away, there’s a strong economic reason for the United States to support a strong international agreement to curb carbon emissions, says a new report: There are trillions of dollars to be gained at home from other countries’ climate mitigation efforts.
The report, which was published on Thursday by the New York University School of Law’s Institute for Policy Integrity, calculates that other nations’ existing climate policies, by lessening the impacts of climate change, have already benefited the United States to the tune of more than $200 billion, and additional pledges for future action could save the country more than $2 trillion by the year 2030. This number could rise above $10 trillion by mid-century.
“There’s a really strong economic self-interest for the United States to try to lead this effort and build a global coalition around [climate] action,” said Jason Schwartz, legal director at the Institute for Policy Integrity, who co-authored the report with his colleague Peter Howard. “A lot of the arguments that advocates use to push the United States to lead are based on moral responsibilities to solve a global problem, and that’s certainly a valid perspective — but there’s also an economic perspective.”
Delegates from the United States will gather with dozens of other nations in Paris at the end of this month for the climate summit, where they will attempt to finalize a binding international agreement to cut down on carbon emissions and mitigate the threat of climate change. In advance of the summit, nearly 150 nations, including the United States, have already submitted pledges to slash their greenhouse gas emissions by certain amounts throughout the coming decades. The goal of the Paris meeting will be to develop an agreement that will incorporate the pledges and hold each nation to its own goals, as well as to set up a process for strengthening targets over time.
So while the United States has already shown initiative on that front, some critics have argued that actually implementing additional emissions reduction policies could backfire. As the authors note in the report, “Opponents of U.S. regulation of greenhouse gas emissions have long cited fears that the rest of the world — and especially China and India — will free-ride on our climate policies if we act first.”
But the calculations included in Schwartz and Howard’s report suggest that, in fact, “the United States already stands to gain more from global efforts on climate change than proposed U.S. regulations would cost,” they write.
“The report does a good job highlighting the direct economic benefits to the U.S. of global cooperation to mitigate climate change,” said Solomon Hsiang, chancellor’s associate professor of public policy at the University of California at Berkeley, who was not involved with the report, in an e-mail to The Post. “If the U.S. does not contribute reciprocally to global actions, we will be free-riding on the hard work of other nations.”
The report’s calculations rely on a metric known as the “social cost of carbon,” which is the estimated economic cost of every additional ton of carbon dioxide emitted into the atmosphere. This economic cost takes into account damages caused by climate effects, such as agricultural losses, reduced labor productivity, trade interruptions, public health consequences, extreme weather events, floods and human conflicts, among others.
The report uses values for the social cost of carbon established by the federal Interagency Working Group on the Social Cost of Carbon. These costs are expected to increase in the future, as the consequences of climate change escalate. Currently, the working group values the global social cost of one ton of carbon dioxide at $41. By 2050, the working group projects this cost will rise to $79.
These values imply that the entire world would save $41 by mitigating one ton of carbon dioxide. This is because greenhouse gases that go into the atmosphere bring about climatic changes that affect the whole planet in the way of rising temperatures and their associated effects. But in order to find out how much the United States alone would save, authors Schwartz and Howard had to take into account estimations of how much of a share the country has of the social cost of carbon — in other words, what percentage of this cost would be returned as a direct benefit to the United States if that one ton of carbon dioxide were saved. The same working group estimated that the U.S. share is anywhere from 7 to 23 percent.
So in order to determine how much the United States stands to gain from another country’s climate policies, the authors had to calculate how much carbon dioxide was avoided, find the social cost of that amount of carbon and then take the U.S. share of that social cost.
The authors came up with a range of potential savings by assuming either high or low global emissions reduction scenarios and assuming either the high or low end of the estimated range of the U.S. share of the global social cost of carbon (that is, either 7 percent or 23 percent).
The authors first looked at other nations that already have existing carbon mitigation policies in place to figure out how much money the United States has already saved from other countries’ climate action. One example is the European Union’s Emissions Trading Scheme, which has been in effect since 2005, and aims to bring industrial greenhouse gas emissions down to 43 percent of their 2005 levels by the year 2030.
During the past five years alone, Schwartz and Howard write in the paper, “existing global policies have likely reduced up to 24 billion metric tons of carbon dioxide-equivalent emissions, thereby directly benefiting the United States by at least $60 to $231 billion.” And they predict that by 2030, U.S. benefits from existing foreign climate policies could top $2 trillion.
Another important consideration is the potential effects of the as-yet-unimplemented climate pledges that will be addressed in Paris. If the pledges are successfully implemented, the authors find that the United States could gain additional benefits of anywhere from $54 billion to $544 billion by the year 2030. And altogether, they estimate that existing and future foreign climate policies could save the United States up to $10 trillion by the middle of the century.
One important point is that these estimates are likely quite conservative, Schwartz noted. He said many experts agree that calculations of the social cost of carbon are significantly underestimated, thanks to difficulties putting a price on certain climate consequences, such as national security threats or the loss of ecosystem services.
Furthermore, the estimated U.S. share of the costs is also likely underestimated, Schwartz said, largely because these estimates don’t fully account for “spillover effects” from other nations into the United States.
“The United States is interconnected to global markets, we’re connected to every ecosystem, we’re connected via migration, via national security issues — so things that happen even outside our own border still very much can affect the United States and the pocketbooks of average Americans,” Schwartz said. So even 23 percent may be a conservative estimate of the country’s share in the economic benefits of mitigating carbon emissions.
With the economic stakes so high, these potential benefits provide a clear incentive for the United States to continue showing leadership in Paris.
“It’s pretty much like going to a potluck dinner and not bringing any food with you, but still eating the food that others have prepared,” said Hsiang in his e-mail. “The U.S. now has to decide whether we want to be the guy who does that or shows up with the incredible casserole that makes everyone else jealous.”
Chelsea Harvey is a freelance journalist covering science. She specializes in environmental health and policy.
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