Social Cost of Carbon: Do the Monetary Benefits of CO2 Emissions Outweigh the Costs?

Climate campaigners increasingly invoke the concept of the “social cost of carbon” to justify carbon taxes, mandatory production quota for renewable electricity, and other policies to suppress fossil-fuel consumption.

They argue that CO2 emissions impose a harm or cost on society not reflected in market prices for coal, gas, and oil, energy derived from those fuels, or products and services supported by fossil energy. The social cost of carbon (SCC) is an estimate of how much damage each incremental ton of CO2 emissions does to society.

As noted previously on this blog, the Obama administration’s May 2013 SCC estimates are roughly 60% higher than its 2010 SCC estimates — apparently in deference to the “worse than we thought” political mantra. If anything, those estimates should have declined, because the climate outlook is better than they told us. They did not anticipate a 16-year warming pause, a growing mismatch between models and observations, or a pile of papers indicating a lower climate sensitivity than the IPCC had assumed. Perhaps most important, even consensus climatology now eschews the doomsday scenarios that once made global warming look like mankind’s biggest problem.

In any case, carbon’s alleged social cost is highly subjective, inferred from speculative assessments of climate sensitivity, how global warming will affect weather patterns, how climate changes will affect economic activity, and how adaptive capabilities will develop as climate changes. Moreover, agency analysts injected a strong upward bias into their SCC estimates by flouting OMB-approved regulatory accounting practices.

Craig Idso of the Center for the Study of Carbon Dioxide and Global Change provides a compelling new reason to take all SCC estimates with several handfuls of salt: Such estimates typically omit, or severely underrate, the benefits of CO2 fertilization on crop production, global food security, and public health.

In a new study, The Positive Externalities of Carbon Dioxide, Idso estimates that rising CO2 concentrations boosted global crop production by $3.2 trillion during 1961-2011, and will increase output by another $9.8 trillion between now and 2050. Those huge benefits are absent from most — maybe all — SCC estimates. Moreover, since CO2 fertilization benefits are confirmed by literally thousands of laboratory and field experiments, they should carry more weight than negative externalities derived from multiple speculative assumptions.

From the study’s abstract:

Several analyses have been conducted to estimate potential monetary damages of the rising atmospheric CO2 concentration. Few, however, have attempted to investigate its monetary benefits. Chief among such positive externalities is the economic value added to global crop production by several growth-enhancing properties of atmospheric CO2 enrichment. As literally thousands of laboratory and field studies have demonstrated, elevated levels of atmospheric CO2 have been conclusively shown to stimulate plant productivity and growth, as well as to foster certain water-conserving and stress-alleviating benefits. For a 300-ppm increase in the air’s CO2 content, for example, herbaceous plant biomass is typically enhanced by 25 to 55%, representing an important positive externality that is absent from today’s state-of-the-art social cost of carbon (SCC) calculations.

The present study addresses this deficiency by providing a quantitative estimate of the direct monetary benefits conferred by atmospheric CO2 enrichment on both historic and future global crop production. The results indicate that the annual total monetary value of this benefit grew from $18.5 billion in 1961 to over $140 billion by 2011, amounting to a total sum of $3.2 trillion over the 50-year period 1961-2011. Projecting the monetary value of this positive externality forward in time reveals it will likely bestow an additional $9.8 trillion on crop production between now and 2050.

The incorporation of these findings into future SCC studies will help to ensure a more realistic assessment of the total net economic impact of rising atmospheric CO2 concentrations due to both negative and positive externalities. Furthermore, the observationally-deduced benefits of atmospheric CO2 enrichment on crop production should be given premier weighting over the speculative negative externalities that are projected to occur as a result of computer model computations of CO2-induced global warming. Until this is done, little if any weight should be placed on current SCC calculations.

Idso employed the following methodology. (1) He used Food and Agriculture Organization data on annual yield, production, and monetary value of 45 crops comprising 95% of total world crop production. (2) He used the Center’s enormous database on CO2 enrichment experiments to estimate how much an additional 300 parts per million of CO2 boosts yields for each of the 45 crops.

(3) He calculated “what portion of each crop’s annual yield over the period 1961-2011 was due to each year’s increase in atmospheric CO2 concentration above the baseline value of 280 ppm that existed at the beginning of the Industrial Revolution.” For example, a 300 ppm increase above pre-industrial concentrations boosts wheat yields by 34.9%. In 1961, CO2 levels were 37.4 ppm above pre-industrial levels. These numbers imply that the 1961 wheat yield was 4.35% larger than would it would have been had CO2 concentrations remained at the pre-industrial level. He used similar calculations “for each of the remaining years in the 50-year period, as well as for each of the 44 remaining crops accounting for 95% of global food production.”

(4) He determined “what percentage of the total annual yield of each crop in each year was due” to the extra atmospheric CO2.

Finally, (5) he calculated the production value of the percentage annual increases in crop yields attributable to atmospheric CO2 enrichment.

Idso summarizes the results:

Such benefits over the period 1961-2011 have amounted to at least $1 billion for each of the 45 crops examined; and for nine of the crops the monetary increase due to CO2 over this period is well over $100 billion. The largest of these benefits is noted for rice, wheat and grapes, which saw increases of $579 billion, $274 billion and $270 billion, respectively.

But, someone might object, won’t those benefits diminish over time as the planet warms? They haven’t so far. Quite the reverse, the annual CO2 benefit has increased over time. Idso notes: “Whereas it [the monetary benefit of CO2 enrichment] amounted to approximately $18.5 billion in 1961, by the end of the record it had grown to over $140 billion annually.”

And projected benefits keep increasing over the next several decades.

Idso summarizes: “Over the period 2012 through 2050, the projected benefit amounts to $9.8 trillion, which is much larger than the $3.2 trillion that was observed in the longer 50-year historic period of 1961-2011.”

His conclusion will be a bitter pill for the “worse than we thought” crowd to swallow:

The very real positive externality of inadvertent atmospheric CO2 enrichment must be considered in all studies examining the SCC; and its observationally-deduced effects must be given premier weighting over the speculative negative externalities presumed to occur in computer model projections of global warming. Until that time, little if any weight should be placed on current SCC calculations.