Get ready. You’re about to meet “the most important figure you’ve never heard of.”

SCC.

No, not SEC—Securities and Exchange Commission. (And you sports fans thought that was Southeastern Conference!)

SCC stands for “social cost of carbon.” Which should prompt you immediately to ask two questions: “What’s that?” and “What’s that?”

Okay, that’s one question. But you need to ask it twice.

The first time, you want to know what it means. The answer, according to Wikipedia, is (take a deep breath)

“the marginal cost of the impacts caused by emitting one extra tonne of greenhouse gas (carbon dioxide equivalent) at any point in time, inclusive of ‘non-market’ impacts on the environment and human health.”

The federal Environmental Protection Agency (EPA) used to define it (in a page no longer online) as “an estimate of the economic damages associated with a small increase in carbon dioxide (CO2) emissions, conventionally one metric ton, in a given year.”

(Not to get distracted, but how come the acronym isn’t SCCD—social cost of carbon dioxide? The dirty little secret is that those who promote it know the public thinks of carbon as dirty black soot, smoke in the air, while carbon dioxide is an odorless, colorless gas that not only is harmless at concentrations 20 times the present atmospheric level but also is absolutely essential to all plant life, and therefore all animal life, on earth. If you want to scare people, you talk of carbon, not of carbon dioxide.)

Back to the point. Now you ask, “What’s that?” This time you want to know the dollar value of the damages to society done by a ton of CO2 added to the atmosphere.

Michael Greenstone, then Chief Economist of the Obama White House’s CEA (Council of Economic Advisors), called the answer “the most important figure you’ve never heard of.”

The answer doesn’t come easily. Yale Climate Connections reported five years ago that 12 federal offices or agencies worked together to get an answer that “takes into account predicted changes in economic growth and some physical impacts, such as the potential for increased flooding and property damage, diminished human health, and agricultural productivity loss”—among other things. (Interesting that they didn’t take into account potential improved human health through agricultural productivity gain driven by shorter winters, expanded growing ranges, and enhanced plant growth under heightened CO2.)

As of 2020, the official answer, according to the federal EPA and assuming a 5% discount rate (the SCC goes down as the discount rate goes up, and a more common discount rate for economic forecasting is 7%) was $12.00 in 2007 dollars ($14.84 in 2020 dollars). That is, each ton of CO2 added to the atmosphere was thought to cost “society” $14.84. Some others set the SCC much higher—the Natural Resources Defense Council, for instance, said it was $266 per ton. But Joseph Aldy, a Harvard environmental economist and Special Assistant to the President for Energy and Environment under Obama, said, “There’s no right answer…. I think it’s almost for regular people to decide, as opposed to people in the ivory tower.”

So let’s work with that official figure.

Now, lots of different things cost me $14.84 or more, even a lot more—a tank of gas, my monthly mortgage, a restaurant date with my wife, a flight ticket to visit my grandkids, a paperback book.

And—surprise, surprise!—I don’t stop getting them because they cost me something. That’s because I consider them worth more to me than they cost.

The same is true of “society.” Things cost it—yet it continues using/doing/getting them. Why? Because it judges that the benefits outweigh the costs.

For example, take residential electricity use. The average American home uses 10,968 kWh of electricity per year, and the average CO2 emissions from generating that much electricity come to 4.93 metric tons. At $14.84 per ton, that means the average annual social cost of residential electricity per home is $73.16.

So, I ask you: Would you trade all the services you get from electricity in your home for $73.16 per year? Air conditioning? Heating? Refrigeration? Hot water? Cooking? Dishwashing? Clothes washing and drying? Lights? TV, radio, computer, Internet, alarm system?

Obviously not. If you pay the bills for the average American home, you already trade $1,411.80 per year for all those things—which means you consider them worth more than $1,411.80. How much more? I don’t know—but I suspect that if your annual electric bill rose by $73.16, you wouldn’t disconnect your house and revert to life without electricity.

What that means is that you consider the “social cost of carbon” a price you’re willing to pay—and so do the vast majority of your neighbors.

This little exercise just demonstrated that you judge the benefits of the electricity you use, and consequently of the carbon dioxide you cause to be emitted into the atmosphere by using it, to be worth at least (1,411.80 ÷ 73.16 =) 19.3 times as much as the “social cost” of that carbon dioxide.

In very rough terms, we can take this from the household level to the global level. Fossil fuels provide roughly 85% of all energy the world uses, and everything we produce requires energy. Assume for the sake of illustration that fossil fuels account for the energy needed to produce 85% of gross world product.

In 2019, gross world product was $86.6 trillion, so fossil fuels’ portion was $73.6 trillion. In the same year, total CO2 emissions were about 36.8 billion metric tons. At a SCC of $14.84 per ton, that adds up to $546.1 billion. Even if all of that came from fossil fuels, the SBC of fossil fuel use was at least 159 times their SCC.

The biggest problem with the SCC is that it ignores the SBC—the social benefits of carbon dioxide. Its proponents want to club us over the head with the SCC but forget that the SCC is a consequence of the SBC—and if their actual choices are any indicator, people clearly think the SBC outweighs the SCC by a long shot.

What’s this all mean? It means there’s no reason to impose a “carbon tax”—a tax imposed to make up for the SCC.