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Concept
Social cost of carbon
Summary
The social cost of carbon (SCC) is the marginal cost of the impacts caused by emitting one extra tonne of carbon emissions at any point in time. The purpose of putting a price on a ton of emitted is to aid people in evaluating whether adjustments to curb climate change are justified. The social cost of carbon is a calculation focused on taking corrective measures on climate change which can be deemed a form of market failure. The Intergovernmental Panel on Climate Change suggested that a carbon price of 3000 per ton as a result of economy feedbacks and falling global GDP growth rates, while policy recommendations for a carbon price ranged from about 200.
Calculating the SCC requires estimating the societal damages caused by anthropogenic greenhouse gas emissions. This includes manifestations of environmental degradation as public disorder, conflict and reduced activity. Utilitarian valuations for a people can be difficult because the impacts on ecosystems do not have a market price and any ideal observer lacks legitimacy over many nation states. However, Hobbesian valuations for the global commons can be relatively simple and yield quite different outcomes.
Greenhouse gas emissions are an essential good that life cannot do without. The carbon cycle is more fundamental to existence than the sovereignty of states. Carbon management has relevance to all decisions, activities and governance frameworks. Climate change may be considered a relatively recent symptom of a rather ancient challenge for humanity. Hence, one is concerned with higher priority considerations than rates of saving.
Using theory of the social contract put forward by Hobbes in Leviathan, one simply divides historic enforcement costs by anthropogenic greenhouse gas emissions to arrive at past Commonwealth Costs of Carbon. Historic enforcement costs may be the sum total of global military, public order and safety expenditure.
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Carbon tax
A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more severe weather events. In this way, they are designed to reduce greenhouse gas emissions by increasing prices of the fossil fuels that emit them when burned. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive.