Bangkok $75, Stern $77: Close Enough; Let's Price Carbon Emissions

Beneath the ineffable clutter of the IPCC report from Bangkok lies a fascinating factoid summarized in Friday's New York Times: "According to several authors, the final version estimates that bringing global carbon dioxide emissions by 2030 to levels measured in 2000 would require a cost on released carbon dioxide of $50 to $100 a ton ...."For our more adventurous readers, I recommend a go at distilling this factoid from pp. 10-11 of the report (pdf). As an economist, I'm afraid that it reinforces the widespread perception that teams of economists and scientists should always be under adult (or at least editorial) supervision when they take a stab at policy writing. I'm sure the world eagerly awaits a Summary for Policymakers of this Summary for Policymakers -- one that policymakers might actually read.Why is the range $50-$100 a ton so interesting? Because its midpoint, $75/ton, is almost precisely the social cost of carbon dioxide emissions ($77/ton) estimated by the Stern Review, the most extensive costing study of global warming to date. This social cost is the present and future damage from a ton of current emissions: floods, droughts, sea-level rise, declining food production, species extinction, etc. So here we have a very interesting convergence: The most complete accounting of the global cost of carbon dioxide emissions is effectively identical to an IPCC-consensus estimate of the economic incentive (carbon tax or tradable emissions permit price) needed to stabilize global emissions. This is a welcome convergence, which is probably not coincidental (after all, the two exercises have drawn on the same body of technical and economic work).With this additional, powerful support for Stern pricing of carbon emissions, the time seems right for the global public to begin submitting some bills to big emitters. Let's start with the power sector, the world's biggest carbon emitter (25% of the global total, according to the World Resources Institute). I've harnessed CGD's new CARMA (CARbon Monitoring for Action) database to estimate total emissions and Stern bills for the world's top five emitters in this sector. [1]Here are the global "accounts receivable," with an invitation to the companies concerned: Please advance the global dialogue by publishing your own estimates (verified by independent auditors, of course), with your plans for payment. Remember, these will be annual bills, so for your shareholders' sake you might want to think about ways to lower them.

Rank	Company	Headquarters Country	2007 CO2 Emissions (MillionTons)	Stern Bill (@$77/Ton) ($Billion)
1	ESKOM	South Africa	234.94	$18.09
2	HUANENG POWER INTERNATIONAL	China	210.02	$16.17
3	SOUTHERN CO	USA	175.10	$13.48
4	AMERICAN ELECTRIC POWER CO INC	USA	170.89	$13.16
5	NTPC LTD	India	135.55	$10.44

For perspective, here are the latest estimates of median damage costs for U.S. hurricanes at the five levels on the Saffir-Simpson intensity scale.[2] They indicate that all five companies are accountable every year for global damage comparable to the concentrated destruction from a category 4 hurricane.

Hurricane Category	MedianDamage($Billion)
1	$0.16
2	$1.00
3	$2.80
4	$15.30
5	$21.20

Obviously, this is not a Northern list -- three of the top five emitters are in the South. While the Southern presence partly reflects sectoral factors unique to South Africa, China and India, it also recalls the message of my previous blog, "Bangkok delusions". Even if the North didn't exist, the rapidly-developing South would be on the threshold of a planetary climate crisis in 2007. We're in the same boat, and it's going to sink unless we all start bailing.Find this posting interesting? Sign up for more like this by registering for CGD’s new Confronting Climate Change Update.

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1. Updated quarterly, CARMA includes specific CO2 emissions reports and estimates for about 45,000 power facilities worldwide, along with identification of their parent companies. For this posting, I’ve computed CARMA emissions totals for all parent companies and identified the top five.2. These are significantly higher than the costs cited in my previous posting, “The View From Mt. Storm.” The revised estimates reflect more complete information compiled by Roger A. Pielke, Jr., et al. in “Normalized Hurricane Damages in the United States: 1900-2005,” available online athttp://sciencepolicy.colorado.edu/publications/special/nhd_paper.pdf