According to this figure, global carbon dioxide emissions last year amounted to about 30.4 billion tons. The US contribution was slightly more than 5 billion tons. The IPCC estimates that the damage caused by a ton of CO2 is roughly $25. Putting these together, it seems to be that the annual damage* caused by CO2 emissions is $760 billion.
Here’s my tongue in my cheek: that’s the annual budget of the health and human services department. Simply eliminate that department and dedicate those funds toward climate mitigation and we’ve taken care of the CO2 problem for the entire world!
Here’s something less tongue in cheek: how much would a sensible investor pay to prevent annual damages of $760 billion? That is the same question as asking, what is an investment that nets $760 billion each year worth? The answer depends on what the path of interest rates is, and what the other risk-adjusted returns are in the market. For argument’s sake, suppose the relevant rates of return are around 2%. What is a $760 billion stream of benefits worth? About $38 trillion. Use a higher rate of return and this number will fall, use a lower one and it would rise.
So, when these kinds of guys estimate that it will cost $100 trillion to change the entire planet’s electricity generation system (excluding the costs of transmission lines and regulatory and legal costs), the thing to keep in mind is that they are arguing it is worth spending $100 trillion for sure, to save an annual expected stream of damages of roughly $760 billion (and presumably increasing). Those do not seem like good numbers, unless of course we enter a world where interest rates go negative. And we could never get into that kind of a situation, could we?
One final caveat: I am attributing 100% of the damages from CO2 emissions to that produced by the electricity sector, but that is nowhere near the case. Here is what the source of CO2 emissions across the globe looks like:
If this is right, and I have no reason to suspect PBS of fudging these numbers, then a little over a quarter of CO2 emissions comes from electricity. Let’s assume that 100% of transport and energy supply is covered by the plan above – so we are talking about 39% of CO2 emissions and hence 39% of CO2 damages. Would you spend $100 trillion to prevent $297 billion of losses each year?
* This is really the present value of future damages. Despite what you might read, there is very little current confirmed damage from CO2 emissions. Certainly if there is, you would be reading gross damage figures and not net ones. At low levels of warming, it is pretty apparent even from the alarmist models that the net effects of CO2 emissions are positive.