The High Price of Carbon Dioxide

December 3, 2013

Today's policies to combat climate change cost much more than the benefits they produce. Unfortunately, bad political choices often make these policies even less cost-effective, says Bjørn Lomborg, director of the Copenhagen Consensus Center and an adjunct professor at Copenhagen Business School.

Consider the European Union's 20-20 policy, which targets a 20 percent reduction in carbon dioxide (CO2) emissions below 1990 levels by 2020.

  • The only peer-reviewed overview of EU climate policy estimates that it can avoid climate-related damage of about $10 billion per year.
  • So, for every dollar spent, the European Union stands to avoid about 10 cents of damage.

Furthermore, the European Union demanded that renewables like wind and solar account for 20 percent of energy supplies by 2020, though this is by no means the cheapest way to cut emissions.

  • For example, cutting a ton of CO2 with onshore wind turbines in Germany probably costs about $35, avoiding about 14 cents of climate damage per dollar.
  • But offshore wind turbines cost about $150 per ton of CO2, avoiding just three cents of climate damage per dollar.
  • Biofuels are even less efficient, costing more than $300 per ton of CO2 avoided.

Advocates of the European Union's policy often argue that we should pursue such policies nonetheless, because there is a risk that global warming will be much more severe than currently expected. But the absence of any temperature rise over the past 10-17 years has made such worse-than-expected outcomes extremely unlikely.

We need a smarter approach to tackling climate change. Rather than relying on cutting a few tons of incredibly overpriced CO2 now, we need to invest in research and development aimed at innovating down the cost of green energy in the long run, so that everyone will switch.

Source: Bjørn Lomborg, "The Climate-Policy Trap," Project Syndicate, November 14, 2013.

 

Browse more articles on Environment Issues