President Trump’s recent Executive Order (EO), titled “Unleashing American Energy,” signals a significant shift in U.S. energy policy. While the EO aims to boost domestic energy production and reduce regulatory burdens, it notably targets the concept of the social cost of carbon (SCC), calling it “logically deficient,” “poorly based in empirical science,” “politicized,” and “absent of a foundation in legislation”. This move has profound implications for our understanding of climate change and how we address it.
What is the Social Cost of Carbon?
The SCC is an economic estimate, measured in dollars, of the long-term damage caused by emitting one additional ton of carbon dioxide (CO2) into the atmosphere. It encompasses a wide range of impacts, such as:
- Rising sea levels
- More frequent and severe weather events
- Reduced agricultural productivity
- Negative health impacts
By assigning a monetary value to these harms, the SCC allows policymakers to weigh the costs of carbon emissions against the benefits of policies that reduce them. For example, if reducing emissions costs less than the SCC, then the action is economically justified. The SCC is also used to evaluate the benefits of reducing other greenhouse gasses, such as methane and nitrous oxide. Estimates of the SCC increase over time because future emissions are expected to produce larger damages as physical and economic systems become more stressed.
Why is the Social Cost of Carbon Important?
The SCC is essential for making informed decisions about energy production, infrastructure, and climate adaptation. It helps to justify investments in renewable energy and other measures that reduce greenhouse gas emissions. It provides a way to evaluate the trade-offs between short-term economic gains and long-term climate costs. Without this valuation, the true cost of carbon emissions remains hidden.
The Executive Order’s Attack on the SCC
President Trump’s EO specifically targets and disbands the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) and withdraws any guidance or documents issued by the IWG. The order also directs the EPA to consider eliminating the use of the SCC in any federal permitting or regulatory decision. The EO argues that the SCC slows regulatory decisions, makes the U.S. economy less competitive, and promotes a greater human impact on the environment.
Consequences of Denying the SCC
Denying or ignoring the SCC has severe repercussions:
- Unchecked Emissions: Without the SCC, regulations lack a foundation for enforcing emission reductions, which results in increased CO2 emissions and worsens global warming. Economic Inefficiency: Overlooking the SCC passes climate costs onto future generations, generating a concealed “climate debt.” Reduced Competitiveness: By disregarding the SCC, the U.S. risks becoming disconnected from global carbon markets and climate leadership, which could harm long-term economic prospects.
The Carbon Cycle and Human Impact
The carbon cycle describes how carbon moves between the atmosphere, oceans, land, and living organisms. Humans destabilize this cycle by burning fossil fuels, releasing billions of tons of CO2 annually. This overwhelms natural systems’ ability to absorb carbon, causing atmospheric concentrations to rise dramatically. This leads to a warming planet, more extreme weather, and ecosystem disruption.
Mitigation and Adaptation
To address climate change, both mitigation and adaptation measures are crucial:
- Mitigation: Reducing emissions through clean energy, reforestation, and carbon capture technologies is critical to stabilizing the climate.
- Adaptation: Preparing for inevitable impacts, like stronger storms or droughts, requires investments in resilient infrastructure and disaster response.
The Global Carbon Reward
In contrast to the approach of the EO, Delton Chen, along with early collaborators like Jonathan Cloud, proposed the Global Carbon Reward (GCR). The GCR is a system that issues a special currency to reward actions that reduce, avoid, or sequester carbon emissions. This currency aims to incentivize individuals, corporations, and governments to participate in climate action, aligning economic interests with environmental goals. The GCR was designed to be a positive incentive, which is seen as more effective and less politically contentious than carbon taxes alone. Chen and colleagues have argued for the use of a parallel currency, denominated in units of carbon, to manage climate systemic risk through monetary policy. The idea of a carbon reward system was popularized in Kim Stanley Robinson’s novel The Ministry for the Future.
The Holistic Market Hypothesis
The Global Carbon Reward is based on the Holistic Market Hypothesis (HMH), which proposes that there are two externalized costs of carbon emissions: the Social Cost of Carbon (SCC) and the Risk Cost of Carbon (RCC). The SCC is the cost of the negative impacts of carbon emissions, while the RCC is the cost of managing climate risk and avoiding dangerous tipping points. The HMH suggests that both costs need to be internalized into the economy to manage the climate problem. The HMH also includes a concept called Market Policy Dualism (MPD), which asserts that the combination of negative carbon pricing (like carbon taxes) and positive carbon pricing (like carbon rewards) can create a synergy that improves social cooperation and economic resilience.
Conclusion
President Trump’s Executive Order reflects a rejection of climate science and economics. By eliminating the SCC, the U.S. is removing a key driver of emission reductions in policy, likely leading to higher national and global emissions. Ignoring the SCC can result in escalating costs from disasters and health impacts. Reversing such a decision will require reasserting the importance of the SCC and adopting innovative solutions like the Global Carbon Reward to achieve a sustainable future.
The EO’s emphasis on “unleashing American energy” without accounting for the true cost of carbon emissions is a dangerous path that prioritizes short-term gains over long-term sustainability.
(This article was crafted with the help of ChatGPT, Microsoft Copilot, and NotebookLM. The latter also produced a “Deep Dive” podcast of just 10 minutes, that’s also worth listening to.)