ECON 330 Social Cost of Carbon
ECON 330 Social Cost of Carbon
Use value refers to the direct value of a good or service to the user. For example, the use value of a car is the direct benefit of transportation it provides to the owner. Nonuse value, on the other hand, refers to the value that a good or service has to someone who does not use it directly (Bastien-Olvera & Moore, 2021). An example of nonuse value is the value that people place on preserving natural resources, such as clean air and water, even if they do not directly use them.
In the context of greenhouse gas emissions reductions, the use value of reducing emissions would be the direct benefits to the user, such as lower energy bills and improved air quality. The nonuse value would be the benefits to people who do not directly use the reduced emissions, such as future generations who will not have to deal with the negative effects of climate change. Additionally, the non-use value of reducing greenhouse gas emissions is the avoided damages from climate change, such as sea level rise, heat waves, and biodiversity loss which would be experienced by people who do not directly use the reduced emissions.
In summary, use value is the direct benefit of a good or service to the user, while nonuse value is the value that a good or service has to someone who does not use it directly. In the context of greenhouse gas emissions reductions, the use value would be the direct benefits to the user, while the nonuse value would be the benefits to people who do not directly use the reduced emissions, such as future generations.
The social cost of carbon (SCC) is an estimate of the economic damages caused by each additional ton of carbon dioxide emissions. It is calculated using economic models that take into account factors such as changes in crop yields, human health impacts, and property damages from sea level rise. The SCC is used in the evaluation of environmental programs to estimate the benefits of reducing carbon emissions (Dong et al., 2019). The U.S. government currently estimates the SCC to be around $50 per ton of CO2. The SCC is used in cost-benefit analysis for regulations and policy decisions related to climate change, such as setting emissions standards for power plants and vehicles.
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Whether environmental and natural resource management policies should be put to a strict benefit-cost test is a matter of debate. One argument in favor of conducting a strict benefit-cost test is that it can help policymakers and resource managers identify the most cost-effective ways to achieve their goals. This can be important when resources are limited, as it can help ensure that they are used in the most efficient manner possible (Rode et al., 2021). On the other hand, some argue that a strict benefit-cost test may not be appropriate for evaluating environmental and natural resource management policies. This is because the benefits of these policies may not be easily quantifiable in terms of dollars and cents. For example, the value of preserving biodiversity or protecting cultural resources may be difficult to measure in economic terms (Kikstra et al., 2021). Additionally, some argue that a strict benefit-cost test may not take into account the long-term benefits of environmental and natural resource management policies. Ultimately, whether or not to put environmental and natural resource management policies to a strict benefit-cost test will depend on the specific context and goals of the policy in question.
There are many lessons that can be drawn from the assignment including the calculation and the social cost of carbon and its importance in the evaluation of environmental programs. The social cost of carbon (SCC) is an estimate of the economic damages caused by each additional ton of carbon dioxide emissions. One way to apply this knowledge in the workplace or everyday life is to consider the potential SCC when making decisions related to energy use, transportation, and purchasing choices. For example, in the workplace, this could mean implementing energy-efficient practices, investing in renewable energy sources, and encouraging employees to reduce their carbon footprint.
Bastien-Olvera, B. A., & Moore, F. C. (2021). Use and non-use value of nature and the social cost of carbon. Nature Sustainability, 4(2), 101-108. https://www.nature.com/articles/s41893-020-00615-0
Dong, Y., Hauschild, M., Sørup, H., Rousselet, R., & Fantke, P. (2019). Evaluating the monetary values of greenhouse gases emissions in life cycle impact assessment. Journal of Cleaner Production, 209, 538-549. https://www.sciencedirect.com/science/article/abs/pii/S095965261833227X
Kikstra, J. S., Waidelich, P., Rising, J., Yumashev, D., Hope, C., & Brierley, C. M. (2021). The social cost of carbon dioxide under climate-economy feedbacks and temperature variability. Environmental Research Letters, 16(9), 094037. https://iopscience.iop.org/article/10.1088/1748-9326/ac1d0b/meta
Rode, A., Carleton, T., Delgado, M., Greenstone, M., Houser, T., Hsiang, S., … & Yuan, J. (2021). Estimating a social cost of carbon for global energy consumption. Nature, 598(7880), 308-314. https://www.nature.com/articles/s41586-021-03883-8