STAFF NEWS & ANALYSIS
Obama Admin Ups Social Costs of Carbon Damage by 60 Percent
By Staff News & Analysis - June 06, 2013

The Obama climate move that nobody noticed … The Obama administration just made a fairly significant move on climate change, and it flew right under the radar … The [social cost of carbon] estimates using the updated versions of the models are higher than those reported in the 2010 [report]. By way of comparison, the four 2020 SCC estimates reported in the 2010 [report] were $7, $26, $42 and $81 (2007$). The corresponding four updated SCC estimates for 2020 are $12, $43, $65, and $129 (2007$). Regardless, this is really something to pause and take note of. You don't have to be an economist to see that the second set of numbers is about 60 percent higher than the first. – Grist

Dominant Social Theme: There is no question about carbon. It needs to be reduced.

Free-Market Analysis: The whole issue of carbon dioxide in the atmosphere is questionable but that doesn't stop the Obama administration from enshrining carbon costs in the larger regulatory structure, as we can see from this insightful article.

The moves of the administration in this regard are important because the US Fedgov can set or suggest standards for industry. If the leaders of these governments decide that the damage from manmade carbon is significantly higher than they have previously estimated, then they will set high standards.

The higher the standard, the more the cost. This means that everything from refrigerators to cars will cost more and more because of these carbon assessments. Here's more from the article:

Why does it matter? Because the U.S. government uses it to assess the costs and benefits of regulatory action. The higher the social cost of carbon, the more action can be economically justified.

… How much damage does a ton of carbon emissions do? That dollar figure is known as the "social cost of carbon" and it is, as economist Frank Ackerman put it a few years ago, "the most important number you've never heard of." Specifically, regulations are assessed by the White House Office of Management and Budget (OMB).

… Why the big jump? It sounds like it mostly had to do with the models updating their estimates of damage from sea-level rise, though there are several other factors as well. (Suffice to say, the news from climate scientists lately has not been good.) The federal government just bumped up the cost of carbon by 60 percent. This will, all things being equal, increase by 60 percent the amount of carbon mitigation that can be economically justified. That's a big deal, especially in light of the fact that EPA regulations are going to make (or break) Obama's second-term climate legacy.

… If this number stays on the books — and if the government continues to update it based on the latest science — it will eventually worm its way deep into the regulatory apparatus and do something that no amount of argument and advocacy have been able to do: force the federal government to properly value the climate.

The article points out that the news from climate scientists has not been good of late. But in fact, the news from climate scientists is always bad. There is a virtual industry of "bad news" science when it comes to global warming or climate change or whatever they are calling it these days.

Most people apparently have tuned out when it comes to global warming, not believing it anymore. That's because the dire warnings never seem to come true and because opponents of the current climate science keep pointing out that none of the predictions have apparently been realized. The direst ones keep getting put off.

In fact, these days it looks like the climate may actually be cooling.

No matter. The political establishment continues to treat global warming as "established science" and to pursue various mandates that will force industry to raise prices to accommodate inaccurate damages caused by carbon in the atmosphere.

After Thoughts

From an investment standpoint, this remains a significant trend that can be capitalized on or not as one sees fit. But because the argument is increasingly enshrined in regulatory language, it cannot be ignored.

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