Switching to renewables is expensive, but it will cost Americans much more to stick with fossil fuels.
Most climate-change deniers don’t even bother fighting the established science anymore: The planet is warming, human activity is the cause, and we can do something about it if we really try. Modern deniers will concede all that, but fire back that the “do something about it” part is too hard, too expensive to be worth trying. We have to be pragmatic, they’ll say, and keep burning fossil fuels to make life easier on people.
But we keep finding evidence that not doing something about it will be far more expensive and hard on people. Being truly pragmatic means leaving fossil fuels behind as quickly as possible.
The latest clue comes from those known lefty rabble-rousers at the, uh, University of Chicago Booth School of Business and the University of Pennsylvania’s Wharton School. Booth finance professor Lubos Pastor and two Wharton researchers recently estimated that the social cost of the carbon emissions of US companies will amount to a cool $87 trillion through 2050. That was 131% of the total value of corporate equity at the time they measured and about three times the size of GDP.
US Companies Create More Carbon Burden Than They’re Worth
Most industries are responsible for carbon emissions that generate estimated social costs several times higher than their market value
Source: Pastor et al., 2024
Note: Scope 1 emissions are direct emissions from a company’s operations. Scope 2 are indirect emissions from a company’s purchased energy. Scope 3 are all other indirect emissions from a company’s value chain.
This is researchers’ latest effort to quantify the damage rising temperatures will inflict on the global economy, and they keep getting more specific. A study published last year by the National Bureau of Economic Research estimated a 12% hit to global GDP for every 1 degree Celsius of warming above pre-industrial averages.
They’re also starting to zero in on the culpability of individual companies. Last month, Dartmouth College and Stanford University researchers published a study in Nature suggesting 111 fossil-fuel companies inflicted $28 trillion in global damages between 1991 and 2020. They even assigned numbers to individual companies — $2.05 trillion to Saudi Aramco, $2 trillion to Gazprom PJSC, $1.98 trillion to Chevron Corp., and so on.
To come up with their $87 trillion figure, Pastor et al. used the Environmental Protection Agency’s measure of the social cost of carbon. The metric is meant to put a price on the many ways a chaotic climate affects human health, property, social stability, farming and more. That hasn’t been easy or uncontroversial. The first Trump administration pegged the carbon cost as low as $1per ton. Biden’s EPA figured it should start at a baseline of $190 per ton for 2020 emissions and rise every year after, and this was the far-more-realistic scale Pastor’s group favored. Trump’s current EPA would prefer to forget the concept altogether.
Suffice it to say that disasters, famines, pandemics, wars and other such apocalyptic horsemen all have an economic impact. Add it up over 25 years of escalating and compounding damages, and $87 trillion starts to seem like a low bid.
And that tally doesn’t include the many other companies and countries spewing greenhouse gases around the world. Topping the Carbon Majors league tables of the world’s biggest emitters, produced by the UK nonprofit InfluenceMap, are the former Soviet Union, China and Saudi Aramco. Only four US companies — Chevron, Exxon Mobil Corp., ConocoPhillips and Peabody Energy Corp. — even crack the top 25.
In other words, $87 trillion is a mere fraction of the total damage being done.
Not every industry is equally polluting. As you’d expect, the US energy sector generates more than 20 times its market cap in social costs, according to the Booth paper. Most of that falls under the category of “Scope 3” emissions, which are those created indirectly in the production and use of its products, including the gasoline burned in cars and the natural gas burned in homes. But most of the others still have large carbon burdens, including manufacturing, utilities and finance, all of which create at least five times their market value in social costs.
