Estimating a social cost of carbon for global energy consumption

Ashwin Rode (), Tamma Carleton, Michael Delgado, Michael Greenstone, Trevor Houser, Solomon Hsiang (), Andrew Hultgren, Amir Jina, Robert Kopp (), Kelly E. McCusker, Ishan Nath, James Rising and Jiacan Yuan
Additional contact information
Ashwin Rode: University of Chicago
Tamma Carleton: University of California, Santa Barbara
Michael Delgado: Rhodium Group
Trevor Houser: Rhodium Group
Solomon Hsiang: National Bureau of Economic Research
Andrew Hultgren: University of Chicago
Amir Jina: National Bureau of Economic Research
Kelly E. McCusker: Rhodium Group
Ishan Nath: Princeton University
James Rising: University of Delaware
Jiacan Yuan: Fudan University

Nature, 2021, vol. 598, issue 7880, 308-314

Abstract: Abstract Estimates of global economic damage caused by carbon dioxide (CO2) emissions can inform climate policy1–3. The social cost of carbon (SCC) quantifies these damages by characterizing how additional CO2 emissions today impact future economic outcomes through altering the climate4–6. Previous estimates have suggested that large, warming-driven increases in energy expenditures could dominate the SCC7,8, but they rely on models9–11 that are spatially coarse and not tightly linked to data2,3,6,7,12,13. Here we show that the release of one ton of CO2 today is projected to reduce total future energy expenditures, with most estimates valued between −US$3 and −US$1, depending on discount rates. Our results are based on an architecture that integrates global data, econometrics and climate science to estimate local damages worldwide. Notably, we project that emerging economies in the tropics will dramatically increase electricity consumption owing to warming, which requires critical infrastructure planning. However, heating reductions in colder countries offset this increase globally. We estimate that 2099 annual global electricity consumption increases by about 4.5 exajoules (7 per cent of current global consumption) per one-degree-Celsius increase in global mean surface temperature (GMST), whereas direct consumption of other fuels declines by about 11.3 exajoules (7 per cent of current global consumption) per one-degree-Celsius increase in GMST. Our finding of net savings contradicts previous research7,8, because global data indicate that many populations will remain too poor for most of the twenty-first century to substantially increase energy consumption in response to warming. Importantly, damage estimates would differ if poorer populations were given greater weight14.

Date: 2021
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DOI: 10.1038/s41586-021-03883-8

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