Geoscience Reference
In-Depth Information
of view of happiness, it is costly to stay home because we were really
looking forward to our trip to New Mexico. Some of these substitutions
may be inexpensive, while others will be costly. But the central lesson
from economics is that attaining the goals of climate-change policy—
particularly the ambitious ones—will require substantial investments.
THE METRIC FOR MEASURING COSTS
The usual way to measure the costs in this area is “dollars per ton
of CO
2
reduced.” At fi rst, this seems strange, but it is just a price. We are
used to paying “dollars per pound of potatoes.” The difference here is that
we are paying not to produce something rather than to produce some-
thing. It is like paying someone to cart off the trash. The logic is simple.
Suppose that you can reduce your CO
2
emissions 10 tons by spending
$1,000; then the cost is $100 per ton (= $1,000/10).
Let's take two specifi c examples.
Example 1: New refrigerator. I have an old refrigerator and am
thinking of buying a new energy-effi cient model that costs $1,000.
Each refrigerator will last 10 years and has identical size and cooling.
The new one uses less electricity, and I calculate the cost savings to be
$50 per year, so (ignoring discounting) the new refrigerator will have a
net cost of $500. A little research shows that the new fridge emits about
0.3 tons of CO
2
per year less than the old one. So over the 10 years I can
reduce my CO
2
emissions by 3 tons for a cost of $500. This comes to
$167 per ton of CO
2
reduced [
10)]. This cost is a little
higher if we discount the costs, as we should for investments.
1
Example 2: Natural gas electricity generation. The cost of reducing
emissions by replacing my old refrigerator turns out to be high. Let's
turn to another example, which is motivated by my discussion in Chap-
ter 14 of the advantage of substituting natural gas for coal in electricity
generation. Suppose the old coal plant is ineffi cient and has variable cost
about 1 cent per kWh more than the new gas plant. The difference in CO
2
emissions is about half a ton of CO
2
per 1,000 kWh. Dividing these, we
get a cost of $20 per ton of CO
2
removed. The arithmetic is
($10/1,000 kWh)/(0.5 tons of CO
2
/1,000 kWh)
=
$500/(0.3
×
$20/ton of CO
2
. So this is
much less costly than replacing the refrigerator.
2
=
