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Special Edition Magazine, Fall 2020: The Green Recovery

The No DICE Carbon Price

If there is a single issue that matters more than any other in the broader debate about climate change, it is how to price carbon dioxide emissions. The battle against catastrophic global warming will have already been lost if those advocating a low figure come out on top.

NEW YORK – If there is a single metric that captures the complexity, ambition, and desperation of climate policy, it is the “social cost of carbon” (SCC). How much does each ton of carbon dioxide emitted into the atmosphere cost society? How much should it cost each of us who emits CO2 through the course of our daily activities? And where does one draw the line between “is” and “ought” – that is, between known facts about climate change and political judgements about who should bear which costs?

These aren’t academic questions. Putting the right price on carbon could avert trillions of dollars of climate-related costs. It could determine whether or not infrastructure projects – from pipelines to bike lanes – are built, whether your next stove will be induction or gas-powered, how large your next home will be, and how far you will commute to work. A future US Congress could put America on a more sustainable economic-development path, or it could offer mere token gestures, thereby locking in dirty, outdated fossil-fuel infrastructure for decades to come. Much of this will depend on the SCC, and on politicians’ interpretations of the level of climate-policy ambition it represents.

But the SCC is not just a powerful metric; it is also a lens through which to view the world. No longer can we ignore the inherent trade-offs between economic activity and a stable climate, between short-term profit and long-term sustainability, between private and public pain. By calculating the SCC, we can improve our decision-making under conditions of uncertainty, and reveal whatever genuine limitations – political and otherwise – we may face.

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