Nobel laureate Joseph Stiglitz and Lord Nicholas Stern published a paper on Monday excoriating the U.S. government—and many of their own peers in economics—for methods used to estimate the cost of climate change. The warning from two influential economists that policymakers are understating the looming damage from warming temperatures comes just days before President Joe Biden’s administration is expected to release an interim report on what’s known as the “social cost of carbon.”
Calculations to define the social cost of carbon allow regulators to adjust federal benefit-cost analyses to account for environmental damage associated with fossil fuels, capturing potentially enormous economic impacts that aren’t reflected in market prices paid to fill a fuel tank or generate electricity by burning gas. This approach enabled President Barack Obama to go ahead with dozens of regulations that account for pollution from energy use. President Donald Trump’s team virtually eliminated the social cost of carbon to reverse Obama era policies, drawing criticism from many resource economists.
Without a new approach to the social cost of carbon, the authors warn that the U.S. is significantly underestimating the financial impact of carbon emissions and hindering President Biden’s efforts to steer the country toward a net-zero economy by 2050.