“Social Cost of Carbon” (SCC) is a tool to provide a fiscal accounting for all the damage implications of adding carbon to the atmosphere. The U.S. government has a SCC figure of about $20 per ton, which is radically below what reasonable. Even though a radically low figure, it matters that SCC has made its way into numerous Federal analyses as per this 2010 EPA report (pdf):
To date, economic analyses for Federal regulations have used a wide range of values to estimate the benefits associated with reducing carbon dioxide emissions. In the final model year 2011 CAFE rule, the Department of Transportation (DOT) used both a “domestic” SCC value of $2 per ton of CO2 and a “global” SCC value of $33 per ton of CO2 for 2007 emission reductions (in 2007 dollars), increasing both values at 2.4 percent per year. It also included a sensitivity analysis at $80 per ton of CO2. A domestic SCC value is meant to reflect the value of damages in the United States resulting from a unit change in carbon dioxide emissions, while a global SCC value is meant to reflect the value of damages worldwide.
A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton CO2 (in 2006 dollars) for 2011 emission reductions (with a range of $0-$14 for sensitivity analysis), also increasing at 2.4 percent per year. A regulation finalized by DOE in October of 2008 used a domestic SCC range of $0 to $20 per ton CO2 for 2007 emission reductions (in 2007 dollars). In addition, EPA’s 2008 Advance Notice of Proposed Rulemaking for Greenhouse Gases identified what it described as “very preliminary” SCC estimates subject to revision. EPA’s global mean values were $68 and $40 per ton CO2 for discount rates of approximately 2 percent and 3 percent, respectively (in 2006 dollars for 2007 emissions)
A huge range — from as high as $80 (still too low …) to as little as $2 — in these figures but at least some effort to include the “costs” of carbon in decision-making.
It is with the SCC — whether the drastically inadequate $2 to $20 or a more sensible $80+ — in mind that I contemplated the most recent bid for a coal lease. In Colorado, the Bureau of Land Management opened bidding for 21.3 million tons of coal. As is typical, only one company bid.
Blue Mountain Energy, submitted a bid for the coal. The coal company, which hopes to expand its Deserado mine that supplies coal to the Bonanza coal plant in Utah, offered $6,390,000 – amounting to just 30 cents a ton.
Remember that Social Cost of Carbon only deals with “carbon” and not other pollutants / economic impacts from burning coal (such as mercury, particulates, etc …).
Thus, working with the absurdly low $2 SCC translates into, roughly, a $4 per ton “Social Cost of Coal (Carbon Emissions)”.
Working with that lowest figure, the Blue Mountain Energy bid is under ten percent of that figure. Without accounting for land reclamation, mercury (and other) pollution costs, etc …, the societal cost for leasing this coal for mining is easily far more than 10x the money the Federal Government will receive.
While the “direct” bank account might seem to look good, with $s coming into the Treasury, the “externalities” in this case massively exceed that marginal incoming flow — without, again, attempting to account for the massive additional costs from coal on society.
With this in mind, a very simple rule should be put into place:
The Bureau of Land Management should not allow a mine sale to go ahead where the revenue raised is exceeded by the Social Cost of Carbon (SCC) implications from the sale.