The Social Benefit Of Carbon

The Social Benefit Of Carbon

Willis Eschenbach  December 15, 2018

Guest Post by Willis Eschenbach

After my recent post on the futility of the US cutting down on CO2 emissions, I got to thinking about what is called the “social cost of carbon”. (In passing, even the name is a lie. It’s actually the supposed cost of carbon DIOXIDE, not carbon … salesmanship and “framing” applied to what should be science. But I digress …)

According to the Environmental Defense Fund the “social cost of carbon” is:

… the dollar value of the total damages from emitting one ton of carbon dioxide into the atmosphere. The current central estimate of the social cost of carbon is roughly $40 per ton.

Now, for me, discussing the “social cost of carbon” is a dereliction of scientific duty because it is only half of an analysis.

A real analysis is where you draw a vertical line down the middle of a sheet of paper. At the top of one side of the paper you write “Costs”, and under that heading, you list the costs of whatever you are analyzing … and at the top of the other side of the paper you write “Benefits” and beneath, you list those benefits. This is what is called a “cost/benefit analysis”, and only considering only the “Costs” column and ignoring the “Benefits” column constitutes scientific malfeasance.

Instead of just looking at the “social cost of carbon”, we also need to look at the “social benefit of carbon”, which if I follow the logic of the previous definition would be the dollar value of the total benefits from emitting one ton of carbon dioxide into the atmosphere.

Now, the carbon emissions are coming from the use of fossil fuels. This set me to wondering about the historical changes in the mix of different fuels that power our planetary economy. So as is my wont, I got the data and I graphed it up. Figure 1 shows the changes in the mix of the fuels that the world uses to give us our amazing standard of living.

Figure 1: Global Total Primary Energy Consumption, 1965-2017.

First a word about units used to measure energy. The units of energy in Figure 1 are “million tonnes of oil equivalent”, abbreviated Mtoe. (“Tonnes” means metric tons of 1,000 kilograms, which are about 2200 pounds.).

An “Mtoe” is the amount of a given energy source, be it coal, natural gas, solar, or hydroelectric, that has the same amount of energy as a million tonnes of oil. There are other variants of this measure, such as billion tonnes of oil equivalent (Btoe), thousand or “kilo” tonnes of oil equivalent (Ktoe), and barrels of oil equivalent (BOE). One BOE is equivalent to 1,682 kilowatt-hours of energy. For these types of conversions from one unit to another I use the wonderful UnitJuggler.

Now that we understand the units, see that red thread up at the top of Figure 1 above? That’s solar energy.

Plus wind energy.

Plus biofuels energy from ethanol and biodiesel.

Plus geothermal energy.

Plus tidal energy.

Plus biomass energy.

Plus wave energy.

In short, that red line is the sum of every kind of renewable energy we use commercially, and after years of subsidies, it’s grown all the way up to being two and a half percent of the total energy we use.

Be still, my beating heart …

And sadly, this has been at a huge cost to the taxpayer. Not only does the renewable energy itself cost more than either fossil fuels or nuclear energy, but the subsidies are also horrendous. Figure 2 shows a part of what the US taxpayer has been shelling out for the privilege of using unreliable, weak, intermittent renewable energy …

Figure 2. Average US subsidies on various fuel sources.

Figure 2 shows the subsidy per barrel of oil equivalent energy (BOE). For energy from oil and coal, the subsidy is trivially small. For nuclear, it’s larger, but still reasonable, since nuclear energy is dispatchable reliable baseline power.

But the subsidy for intermittent, unreliable renewable energy is huge. For comparison with the renewable subsidy, today’s price for a barrel of West Texas Intermediate (WTI) crude oil is $51.15. Plus the $0.26 per barrel subsidy on oil, we’re paying $51.41 per barrel … which means that the subsidy alone on renewable energy is over half of the cost of an equivalent amount of oil!

And that’s just the Federal subsidies. In addition, states like California have costly “Cap And Trade” programs, “carbon taxes”, and “renewable mandates” that are all extra costs tacked on to the price of renewable energy.

And even with that huge Federal subsidy, plus all of the other coercive measures used to push the renewable dream year after year, after immense amounts of money spent decade after decade, after all of that, renewable energy is STILL less than three percent of the global energy usage.

And as we’ve seen in France, folks are getting fed up with paying this exorbitant subsidy for an economically uncompetitive form of energy …

One thing that these figures make abundantly clear is that renewable energy ain’t gonna save us. For the foreseeable future, the world will continue to be powered mostly by fossil fuels, and all the subsidies, and all the carbon taxes, and all the “renewable mandates”, and all the US Resolutions and the wishful thinking won’t change that.

While looking at the graphs above, I fell to considering how energy is inextricably linked to economic development. Energy is what drives the great economic engine of the planet, the engine that has lifted us out of the ugly, short, brutal lives of our predecessors and has insulated us from the vagaries of the weather.

So … how well does historical energy use correlate with the global Gross Domestic Product, which is the global sum of all of the goods and services produced annually? Figure 3 shows that relationship.

Figure 3. Scatterplot, global energy use versus global gross domestic product. Energy use source as in Figure 1. As noted on the vertical axis, all prices are in constant (inflation-adjusted) current US$.

As you can see, the global Gross Domestic Product (GDP) is a simple linear function of how much energy we use. You could think of the economy as a giant machine that turns energy into goods and services. We harvest energy in one of a hundred forms, including human labor, and we use that energy to make steel and build houses and create medicines and catch fish and grow food and manufacture automobiles and engage in all forms of creation of wealth. The relationship is clear—how wealthy we are is simply a function of how much energy we can command.

Now, every year the world is needing to feed and house and clothe and transport an increasing number of people. It’s not optional. The population is going up. Not only that, but poor people want to have reasonably comfortable lives like those of us in the industrialized world. There are only two ways that we will be able to take care of all of their needs.

The two ways are first, to use more energy … and second, to use it all more efficiently. Regarding efficiency, Figure 4 shows the increase over time in the GDP per barrel of oil equivalent energy used.

Figure 4. Change over time in the amount of goods and services (constant 2016 dollars) that we get from using energy. As noted on the vertical axis, all prices are in constant (inflation-adjusted) current US$.

Now, this is interesting. Back in 1965, for every barrel of oil equivalent energy that we used, we got about fifty dollars worth of goods and services.

And today, about fifty years later, we’re getting about five hundred dollars worth of goods and services out of the exact same amount of energy. This is good news—we’re getting more and more goods and services out of each unit of energy that we use. Thanks to the joys of competition and the fact that energy costs money, we’re constantly finding new and inventive ways to produce more with less energy.

With that relationship between energy and GDP as prologue, let me follow another train of thought. Fossil fuels are hydrocarbons, so-called because they are compounds of hydrogen and carbon. When they are burned, you get energy from two sources—the hydrogen and the carbon. When you burn hydrogen, you get water plus energy. When you burn carbon, you get carbon dioxide plus energy.

This means that the amount of carbon dioxide produced is a direct and simple function of the amount of energy used. Given the same mix of energy sources, more CO2 produced means more energy used, and vice versa. Figure 5 shows that relationship

Figure 5. Tonnes of CO2 emitted per tonnes of oil equivalent energy used.

(Yes, I know that it’s strange that we get more than one tonne of CO2 from burning one tonne of oil. The reason is that the oxygen in the carbon dioxide comes from the air. Before burning, the molecular weight of the carbon is 12 … after burning, the molecular weight of the CO2 is 44. Because of that, we get more than a tonne of CO2 out of burning a tonne of oil. We now return you to your previously scheduled programming …)

And this brings us to the final relationship. We know that both GDP and CO2 emissions are functions of the amount of energy used. This, of course, means that we can take a look at the relationship between GDP and CO2. To make the relationship clear and understandable, I’ve added CO2 to Figure 3, which showed GDP versus Energy Use.

Figure 6. Scatterplot, global energy use and concomitant CO2 emissions versus global gross domestic product. Energy use source as in Figure 1. As noted on the vertical axis, all prices are in constant (inflation-adjusted) current US$.

As in Figure 3, Figure 6 again shows that for each additional tonne of oil equivalent energy use, we get $5,740 in additional goods and services.

It also shows that for each additional tonne of CO2 produced from that energy use, we get $4,380 in additional goods and services.

And this brings me back to the question of cost/benefit analyses and the idea of the “social benefit of carbon”. As noted above, people put the “social cost of carbon” (actually carbon dioxide) at “roughly $40 per ton”.

Now, remember that corresponding to the “social cost of carbon”, the “social benefit of carbon” is:

… the dollar value of the total benefits from emitting one ton of carbon dioxide into the atmosphere.

As Figure 6 shows, the benefit that we get from emitting that additional tonne of carbon dioxide into the atmosphere is an increase in goods and services of $4,380 … which dwarfs the assumed social cost of carbon of $40. When we do an actual cost/benefit analysis, the result is almost all benefit.

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FOOTNOTE: Let me add one other much smaller aspect of the question of the social benefit of carbon. This involves the “greening” of the planet due to the increased atmospheric carbon dioxide. Greenhouse owners routinely release CO2 inside their greenhouses to improve plant growth. Figure 7 shows plant growth at ambient (AMB) CO2 levels, as well as at the current level plus 150, 300, and 450 ppmv.

Figure 7. Plant growth under differing levels of CO2.

Now, the best estimate is that to date, the increasing levels of atmospheric CO2 have increased global plant growth by about 10%.

To see how much difference that 10% makes to the human agricultural production, I turn to that marvelous site, the Food and Agricultural Organization (FAO) dataset, available here. It says that the total of all commercially-raised fruit, vegetable, and fiber production in 2016 was about US$4.6 trillion. If we assume that it increased by 7% due to the increased plant growth from CO2, that is a benefit of about US$322 billion dollars.

And dividing that by the 33.5 billion tonnes of CO2 emitted in 2016 gives us a net benefit of about $9 per tonne of CO2 … and I note that this does NOT include the value of the 10% growth in things like forest production of timber, or the increase in oceanic production of plankton and associated marine growth, or the increase in meat and dairy production due to increased pasture growth, or the increase in home-garden vegetables (which make up a surprising amount of world food production).

It also doesn’t include the benefits of the decreased cost of water used to produce fruits, fibers, and vegetables. Plants have pores in their skin through which they take in CO2. The less CO2 the air contains, the wider those pores must open. The problem is that water escapes through the pores, and the wider the pores open, the more water the plant uses, and thus the more water the plant needs to stay healthy. So when CO2 levels go up, water use goes down … another social benefit of CO2.

My conclusion? The reason that alarmists talk about the “social cost of carbon” and never talk about the “social benefits of carbon” is that the assumed possible costs of engaging in activities that emit CO2 are in measured in tens of dollars per tonne of CO2. Not only that, but those are predicted future costs, which will be valid only if the “CO2 Roolz The Temperature” theory is correct.

But the social benefits of engaging in activities that emit carbon dioxide, as we’ve seen above, are measured in thousands of dollars per tonne of CO2 … and those are real measurable benefits that don’t depend on alarmist doomcasts of future claimed catastrophes.