Tuesday, June 17, 2014

How Should We Measure The Social Cost Of Carbon?

The EPA's new rules will reduce carbon emissions by electric utilities.  The new rules were justified by showing that the social benefits from carbon reduction exceeded the cost of reducing carbon emissions.  The US Chamber of Commerce has challenged the EPA justification for the new rules because some of the social benefits from carbon reduction in the US went to the rest of the world.  It opposes the new rules by arguing that the cost of carbon reduction in the US exceeds the social benefits received by the US.  The Chamber argues against the use of global social benefits in the calculations made by the EPA.

Jeff Sachs explains why the Chamber's position should be ignored by the EPA.  The Chamber's position is not only immoral, it is impractical.  If every nation employed the same justification standard, they would refuse to support carbon reduction policies that benefited the US.  Moreover, climate change is a global problem.  It will require global solutions rather than national solutions.  No country is immune from the problems created by other nations which decide against the reduction of carbon emissions.  The US approach to acid rain reduction provides a good example.  Individual states were required to pay a price for the sulfur dioxide that was carried by prevailing winds to other states.  This policy was successful in reducing acid rain in the US.  If the states that produced the acid rain only calculated the benefits from reducing acid rain in their own state, they would not have made the necessary changes that were required to benefit the nation as a whole.  The US Chamber of Commerce, which has essentially become a lobbyist against government regulations that affect their clients, should work with Chambers of Commerce in other nations to foster global solutions to a global problem.

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