We must also develop a metric for quantifying the social cost of other components so that the impact of local air pollution, too, can be monetised for policy formulation
Actions on the climate change front are again in the news in the US after President Joe Biden took charge. One of his first executive orders pertained to reassembling a federal, cross-Government team to figure out the “social cost of carbon.”
So, what is the social cost of carbon (SCC) or of Green House Gases (GHG)? SCC is the present value of future harm caused by an incremental ton of carbon dioxide emissions.
It is difficult to estimate SCC because carbon emissions, climate change, and economic harm are related through complex processes that are not fully understood. Additionally, the rate at which to discount future harm is contentious and critical to the magnitude of the present value.
As per the Interagency Working Group on Social Cost of Carbon, the US Government’s technical support document 2010: “The SCC is an estimate of the monetised damages associated with an incremental increase in carbon emissions in a given year. It is intended to include (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk and the value of ecosystem services due to climate change.”
It is a well-established fact that consequent to climate change, countries face a slew of adverse impacts; damages that are not adequately quantified while assessing these impacts. Developing economies like India are going to bear an unduly larger share of such impacts.
An analysis of the Climate Risk Index (CRI), 2021, shows India to be among the top 10 most affected countries in 2019 on account of climate change-induced extreme weather events.
India’s annual monsoon season continued for a month longer than usual. From June to the end of September 2019, 110 per cent of the normal rainfall occurred, a record since 1994.
According to the CRI, the floods caused by the heavy rains were responsible for 1,800 deaths across 14 States and led to the displacement of 1.8 million people. Overall, 11.8 million people were affected by the intense monsoon season with the economic damage estimated to be $10 billion.
Furthermore, with a total of eight tropical cyclones, 2019 was one of the most active Northern Indian Ocean cyclone seasons on record. Six of the eight cyclones intensified to become “very severe.”
The worst was Cyclone Fani that occurred in May 2019 and impacted a total of 28 million people, killing nearly 90 people in India and Bangladesh and causing economic losses of $8.1 billion. Then, there are other consequences in terms of impacts on human health and on food security, to name a few.
The relation between fossil fuels and climate change, too, is now accepted beyond any doubt. However, while carrying out the cost-benefit analysis of different options to replace fossil fuels, these damages — also known as “externalities” — are either not taken into account or remain fuzzy. And that is where a tool like the SCC may help.
As per the Institute for Policy Integrity, the SCC is “a metric designed to quantify and monetise climate damages, representing the net economic cost of carbon dioxide emissions.”
In a country like ours that is trying to transition to clean energy through its ambitious Nationally Determined Contributions (NDCs) in terms of emission-intensity reductions and quantum increase in non-fossil electricity; it is imperative that policymaking and regulatory frameworks are informed by scientific evidence.
This, in turn, demands a methodology to quantify the impacts that are based on verifiable numbers and are standardised across sectors.
But even more importantly, it is developed in an academically rigorous, transparent and peer-reviewed process so as to have universal acceptability.
And that is where an inter-agency or an inter-ministerial approach helps in forging a joint ownership. Given that this is not a one-time exercise, a formal mechanism needs to be put in place.
The Apex Committee for Implementation of Paris Agreement (AIPA) constituted by the Union Ministry of Environment, Forest, and Climate Change (MoEFCC) may very well provide such a unified platform. The mechanism must also provide for engaging with the public and other stakeholders in an ongoing fashion.
Going forward, we should aim at not only developing a metric for quantifying the social cost of GHG but also of other components so that the impact of local air pollution, too, can be holistically monetised from a policy formulation perspective.
It is time that such complex matters attract a more science-based approach, thereby obviating any kind of biases.
(The writer is Senior Director, Social Transformation, TERI. The views expressed are personal.)