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243. Social Cost of Greenhouse Gases

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In January 2021, with the inauguration of the the U.S. President Biden, one of the first actions of the new administration was the return to the Paris Agreement. On his first day in office, President Biden ordered the re-establishment of Interagency Working Group to estimate the social cost of carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) greenhouse gases.

Climate change brings about extreme weather, which leads to direct damage to crop production, reduced productivity, destruction of infrastructure, health hazards and diseases, but these external costs are not reflected in market prices and greenhouse gas emissions. The effectiveness of climate change measures aimed at reduction is also often underestimated. The social cost of carbon (SCC) is key to responding to climate change to achieve carbon neutrality by 2050. This indicator is a way to estimate the burden of today's emissions on future generations by reflecting the external costs of additional carbon emissions. In other words, reflecting the future value of reducing carbon dioxide emissions per ton is a signal that encourages investment in climate change to slow global warming. In contrast to carbon tax, which has a direct cost burden, social cost of carbon is not actually paid by anyone, but it is a policy-wise tool that puts a great deal of weight on climate change. Prominent economists Nicholas Stern and Joseph Stiglitz have reassessed economic models for estimating future climate change damage and provided ethical reasons to focus more on the welfare of future generations. They were also concerned about the current ultra-low interest rates and proposed a social cost of $50-100 per ton.

On February 26, the Biden administration's Interagency Working Group announced that it would make scientific evidence-based decisions and tentatively returned the social costs of greenhouse gases to the levels of the Obama administration. After offering options with discount rates of 2.5%, 3%, and 5%, the social cost per ton in 2020 under the discount rate of 3% is $51 for carbon dioxide, $1,500 for methane, and $18,000 for nitrous oxide. The working group has set these as provisional figures and will continue to update them based on the evidence, and the final figures will be announce in January 2022. Economists have suggested that a discount rate of around 2% is justified, and there seems to be room for further increases in social costs.

Compared with carbon dioxide, methane (CH4) is about 25 times and nitrous oxide is about 300 times more potent as greenhouse gases. Agricultural activities are considered to be the main anthropogenic sources of these, with methane being generated by livestock and paddy field management, and nitrous oxide being generated by the application of nitrogen fertilizer and the action of soil microorganisms. JIRCAS is working with partners in developing countries and international organizations to establish methods for estimating methane emissions from livestock and paddy fields, and to develop agricultural system technologies with low environmental impact by reducing nitrous oxide.

Eight priorities for calculating the social cost of carbon. Feb 19, 2021. Nature 590, 548-550 (2021) doi: https://doi.org/10.1038/d41586-021-00441-0

The White House. A Return to Science: Evidence-Based Estimates of the Benefits of Reducing Climate Pollution. FEBRUARY 26, 2021 • BLOG  https://www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-sc…

Contributor: IIYAMA Miyuki (Research Strategy Office)