Who’s Paying the Price of Pollution?
A new peer-reviewed report released by the
Economics and Equity for the Environment (E3) network found that each ton of
CO2 emitted in the atmosphere results in as much as US$893 in economic damages,
far greater than the government’s current estimate of $21 per ton. Yet
international airlines are objecting to the European plan to “tax” airline
emissions. Says the Environmental Defence Fund: “Airlines should be racing to
comply with this law and deliver cleaner low-carbon travel to the flying
public, instead of racing to the courthouse to try to block a reasonable and
Reuters (16 July 2011):
With all eyes riveted on the debt talks and
efforts to avert an economy-busting government default, little attention is
being paid to another debt that is similarly ballooning out of control and
threatening to spur its own economic chaos.
The carbon debt. Those pesky greenhouse gas
emissions that we spew to power our businesses, drive our cars and heat and
cool our homes are accumulating in the atmosphere like an unpaid bill with
Economists now say that the bill for all that
unchecked carbon pollution is a lot bigger than previously thought — and that
the longer we wait to pay it, the more it’s going to cost us.
A new peer-reviewed report released this week
by the Economics and Equity for the Environment (E3) network found that each
ton of carbon dioxide emitted in the atmosphere results in as much as $893 in
economic damages, far greater than the government’s current estimate of $21 per
This figure, known as the “social cost
of carbon,” is used by federal agencies when weighing the costs and
benefits of carbon-reducing regulations, such as appliance efficiency standards
or fuel economy standards for cars and trucks. It’s an estimate of the monetary
damages caused by higher global temperatures, such as extreme weather events,
rising sea levels, agricultural losses and wildfires.
The government’s substantially lower social
cost of carbon — which E3 calls “fundamentally flawed” and a
“gross underestimate of the potential impacts of climate change” –
means that it is much harder to justify more stringent regulations to limit
E3′s new report further concludes that,
“it’s costing us more to do nothing about climate change than it would to
adopt mitigation measures.”
“Investing in reducing our emissions is
clearly the prudent option,” says Frank Ackerman, an economist with the
Stockholm Environment Institute and a report author. “It’s the difference
between servicing your car, or waiting for it to break down on the
A second report released the same day by the
World Resources and Environmental Law institutes similarly agrees that the
government’s model for estimating a social cost of carbon oversimplifies
assumptions about climate change and discounts the costs of future mitigation,
resulting in an underestimate of true costs.
But look no further than recent headlines for
real-world proof that government economists may be low-balling the costs of
Earlier this week The New York Times reported
that unprecedented drought and heat across 14 states from Florida to Arizona is
creating huge agricultural losses expected to exceed $3 billion in Texas alone
and exacerbating long-standing water feuds between southern states.
La Nina may be the underlying cause of the
drought in the South, but rising temperatures from global warming make that
drought more severe. Moreover, extreme
drought and heat are precisely the impacts scientists tell us we can expect to
see more of in the U.S. Southwest in a warming world.
Meanwhile, insurers have already declared
2011 a year for the catastrophe record books, with losses from thunderstorms
and twisters topping a record-setting $23.6 billion from just January to June.
Peter Hoppe, head of Munich Re’s Geo Risks
Research, has no qualms about associating these record losses with climate
change. Hoppe says that even when the role of rising population in storm paths
is removed from the accelerating trend in losses, climate change emerges as a
clear factor in the increased losses.
Scientists, and now economists, are telling
us that we are long past due for a more honest accounting of the true costs of
carbon dioxide, which is being emitted into the atmosphere largely at zero
cost. Our accounting mistake is wreaking ecological and economic damage across
the U.S. and the world.
“We are literally rewriting the economic
and financial history of disasters on a global scale,” Robert Hartwig,
chief economist and president of the Insurance Information Institute, told a
Beyond an upward revision of the U.S.
government’s social cost of carbon — which will more accurately capture the
benefits of emissions-cutting measures like tighter fuel economy standards –
we must eventually move to an economy wide price on carbon to spur innovation
in clean technologies.
Just as we now face painful choices on the
bill come due from deficit spending, we can expect painful choices the longer
we delay reconciling the bill for our carbon debt.
Stephanie Bodoni and Ewa Krukowska for
Bloomberg News (5 July 2011):
Luxembourg and Brussels
UNITED Continental, American Airlines and the
Air Transport Association of America (ATA) would challenge the EU’s plans for
emission curbs on aviation, it emerged yesterday.
In a hearing at the region’s highest court
today, they will dispute a law expanding the EU carbon market to encompass
flights that depart from or arrive at an EU airport.
The EU system, “as applied to international
aviation, violates international law and is bad policy”, Steve Lott, a
spokesman for the ATA, said yesterday. “It also clearly stands in the way of an
appropriate and effective global solution.”
The EU’s first attempt to extend the world’s
largest carbon cap-and-trade programme beyond its borders has sparked
international opposition. China’s airline association said that the measures,
which start next year, were “unreasonable and illegal” and warned of a
potential trade conflict.
Willie Walsh, the head of British Airways
parent International Consolidated Airlines Group, said last month that the
airline “fully expect(s)” other states to retaliate.
The move, which follows a doubling of
greenhouse gas discharges by airlines in Europe over two decades, was a
“practical example” of necessary action to prevent global warming, EU Climate
Commissioner Connie Hedegaard said last month.
“This legislation is fully consistent with
international law and we are confident that the court will side with us and
understand our arguments,” said Isaac Valero-Ladron, a spokesman for Hedegaard
at the European Commission, the EU’s executive agency.
The Emissions Trading System, started in
2005, covers more than 11 000 utilities and manufacturers and is the
cornerstone of the EU’s climate plan. It requires companies that exceed their
carbon dioxide emissions quotas to pay a fine or buy spare permits from
businesses that emit less.
The US carriers are claiming that the plan
violates international law, the Kyoto Protocol, an EU-US aviation accord and
the Convention on International Civil Aviation, the so-called Chicago
“Airlines should be racing to comply with
this law and deliver cleaner low-carbon travel to the flying public, instead of
racing to the courthouse to try to block a reasonable and well-designed law,”
said Annie Petsonk, international counsel at New-York-based climate campaign
group Environmental Defence Fund.
Airlines would be the second-largest sector
in the system, after power generators.
Under the legislation, 82 percent of the
emission allowances making up the airline-industry cap would be allocated for
free and 15 percent would be auctioned. The remaining 3 percent would be put
into a special reserve for later distribution to fast-growing airlines and new
The High Court in London referred the case to
the EU Court of Justice in Luxembourg last year.
The ATA, the largest US airline trade group,
has said that it had been “compelled” to file its lawsuit in the UK because the
country was the first to implement the EU law into its national rules and there
were “looming” deadlines to act.
While the legislation offers an option to
exclude incoming flights if the source nation implements “equivalent” measures
to cut airplane pollution, the US contended the scheme did not apply to its
airlines, a government official said last month. Equivalent measures were “the
only avenue” that the EU would explore when considering an exemption,
Valero-Ladron said. – Bloomberg