Wednesday, March 31, 2010, 11:53pm PDT | Modified: March 31, 2010, 11:53 PM

Economist network speaks up on carbon pricing

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A network of environmentally concerned economists released a report today warning that the Obama Administration may be working with a theoretical price for carbon that is too low to support aggressive action on climate change.

The Portland-based group, Economics for Equity and the Environment, or E3 Network, addresses the “social cost of carbon,” an economic construct that the report calls “the most important number you’ve never heard of.”

The authors of the report, Frank Ackerman and Elizabeth A. Stanton of the Stockholm Environment Institute’s U.S. Center, say that rulemaking agencies of the federal government such as the Environmental Protection Agency and the Department of Energy will use the social cost of carbon — which interagency work groups have set at a “central” estimate of $21 per ton of CO2 — to establish policies about everything from energy efficiency to emissions regulations.

“If adopted this obscure number will have immense practical consequences: A low SCC could result in ineffectual regulations that lead to few if any reductions in U.S. emissions until Congress passes a climate bill,” the report states.

The E3 Network, a program of Portland-based Ecotrust, incorporates 200 working economists across the country whose research supports environmental protection. Kristen Sheeran, executive director of the network, said that the social cost of carbon is a number that’s meant to encapsulate the economic damage done by a ton of carbon emissions.

“Is that even possible to calculate?” Sheeran asked. “There’s a degree of hubris within economics to think so.”

But what the figure does is act as a justification for ratcheting up or down regulation on emissions. If the social cost of carbon is pegged high, it’s used as a reason for more stringent rules on emissions. Set low, there’s no real reason to make changes.

The report provides the following examples for the equivalent to a ton of carbon emissions:

• · The emissions of an average family car every two and a half months.
• · A household’s use of electricity every six weeks.
• · The typical use of a microwave oven every seven years or a refrigerator every 15 months.

Sheeran said that by calculating the social cost of carbon at $21 per ton, it’s effectively sending the message that, if the United States were to put a tax on carbon, it would be set at $21 per ton and that carbon emission permits would run $21 per ton — hardly a deterrent for a large, deep-pocketed company.

“It’s not enough to effect behavior change,” Sheeran said.

There’s some distrust of carbon pricing in the United States, but in the United Kingdom where the idea was pioneered, the government’s latest calculation, based on mitigation costs, the latest calculation for the cost per ton of carbon emitted is a central estimate of $83, according to the report.