Social Price of Carbon – Watts Up With That?


By Paul Homewood

Ken Gregory has sent me his latest paper on the Social Cost of Carbon.

If he is correct, it upends all of the arguments for spending trillions of dollars on a non existent problem:

Social Cost (Benefit) of Carbon Dioxide from FUND

with Corrected Temperatures, Energy and CO2 Fertilization

By Ken Gregory, P.Eng. May 26, 2021


Climate policies such as carbon taxes are set by governments using social cost of carbon (SCC) values calculated by economic computer programs called integrated assessment models (IAM). FUND is the most complex of the IAMs which links emissions scenarios and models of economics, climate and impacts for 16 world regions. Unfortunately, the climate component of FUND that determines temperature is flawed as it assumes that the deep oceans are instantly in temperature equilibrium with the atmosphere, without any time delay, when the equilibrium climate sensitivity (ECS) is 1.5 °C or less. The FUND model runs too warm compared to climate models.

The ESC can only be estimated using the energy balance method that compares the climate forcings to historical temperature records. The paper Lewis & Curry 2018 presents estimates of ECS with uncertainty analysis. The analysis was deficient in that the natural climate change was not considered and no correction was applied to remove the urban heat island effect from the temperature record. Making these adjustments, the likely range of ECS based on energy balance calculations using actual historical temperatures is 0.76 – 1.39 °C with a best estimate of 1.04 °C.

The energy impact components for space heating and cooling expenditures of FUND are very flawed. The change of expenditures with temperatures does not correspond to expenditure data published for the USA states. A paper by Peter Lang and me shows that a 3 °C temperature rise would decrease energy expenditures in the USA by 0.07% of gross domestic product (GDP) but FUND projects an increase of expenditures of 0.80% of GDP with non-temperature drivers held constant. A study by Dayaratna, McKitrick and Michaels (D, M & M 2020) of the CO2 fertilization effect and the FUND agricultural component shows that the FUND CO2 fertilization effect should be increased by 30%.

I have created a modified version of FUND which incorporates a 2-box ocean climate model that is tuned to closely match the temperature profile of climate models. I have replaced the flawed space heating and cooling components with new components to match the empirical heating and cooling USA data and increased the FUND CO2 fertilization effect by 30%. The social net benefit of CO2 emissions is calculated using the ECS probability distribution. The results show the net benefits of CO2 emissions are 11.74 and 8.41 US$/tCO2 at 3% and 5% discount rate, respectively.

Agriculture dominates the SCC values which are greater than 100% of the net benefits of CO2 emissions. The mainstream media is fixated on storms and sea level rise which are insignificant. The data show that climate change with the CO2 fertilization effect is quite beneficial, so policies costing trillions of dollars to reduce CO2 emissions are misguided. See the report here.


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