If you’re on this page, you probably fully understand that the prices of products containing carbon do not include all the costs they impose on society. The list includes medical costs related to polluted air, wildfire and hurricane damage due in part to climate change, and more.
So we applaud the Biden administration’s September 21 decision to determine an honest carbon price and use it in federal government purchasing choices. As The New York Times’ Coral Davenport wrote, “The idea is to take into account the greenhouse gases generated by goods and projects, how they contribute to global warming, and the cost of that to the economy.”
As she pointed out, “the potential impact is significant. The federal government is the world’s largest consumer of goods and services, spending roughly $600 billion each year. The changes could shift purchases for the federal government’s fleet of roughly 600,000 cars and trucks from gasoline-powered to all-electric vehicles, redirect the flow of billions of dollars of government grants and reshape or kill some major construction projects.”
A White House fact sheet cited a recent federal finding that climate-related disasters could increase federal spending by more than $100 billion annually and decrease annual federal revenue by up to $2 trillion by the end of the century.
“It will be the first time this ‘whole of government approach’ is used to evaluate the climate consequences of government actions,” said Richard Revesz, the president’s regulatory chief.
“This is a very big deal,” said U.S. Senator Sheldon Whitehouse, the leading advocate in Congress for a strong, governmentwide social cost of carbon. This action, he noted, “will put the full weight of federal government decisions into fighting climate change – a solution I’ve been encouraging for many years. The International Monetary Fund has calculated the American government subsidy for Big Oil at $760 billion per year, none of which reflects the harm and damage the industry’s products do to the planet.
“Under President Biden’s leadership, America is fighting back on behalf of taxpayers and will begin factoring the true costs of carbon pollution into a wide array of government actions, cutting back on taxpayers’ bills for climate-related disasters over the long term. The biggest private sector companies have been doing this for years because it makes good economic sense. By incorporating the social cost of carbon into procurement calculations, today’s action will result in economies of scale for clean energy and low-emission products, bringing down prices for consumers.”
As PoliticoPro’s Alex Guillen explained, the social cost of carbon was first calculated by the Obama administration and included only carbon dioxide. It was expanded to include other climate pollutants, notably methane and nitrous oxide. The price was determined to be $42. Under President Donald Trump, that figure was lowered to less than $5.
Biden ordered that cost restored to roughly the same level established under Obama (an inflation-adjusted $51) and directed an interagency working group to overhaul the metric. In November 2022, EPA issued a proposal with three possible levels for the social cost of carbon, including $120. That proposal will be finalized after EPA has reviewed public comments.
Coming up this fall is a U.S. Supreme Court decision on whether to hear an appeal by Missouri and other Republican-held states that challenges the use of the social cost metric. That case failed in a federal district court and in the 8th U.S. Circuit Court of Appeals. Both courts ruled the states lacked standing to bring their lawsuit because they failed to show they had been actually harmed by the metric.
We strongly advocate enactment of a fee on carbon to incorporate the costs of carbon in all prices throughout the nation’s economy.