#5 Transcript: How Much Damage Are We Doing? Emissions, Carbon, and the Costs of Climate Change
Introduction
Hi, and welcome to another episode with me, your host, Arvid Viaene. And I’m really excited about today’s episode, Because today, I am doing my first solo episode and we are going to get to core of what climate economics is all about by talking about the harm of climate change.
Because climate change is happening. But we while we often hear general statements like, climate change will be extremely harmful, or, climate change is a major threat.
But to an economist, the question is, how much? How harmful is climate change? What are the damages expressed in monetary terms? Because as a society, we have limited resources. And the money we spend on fighting climate change, we cannot spend on other things like better healthcare or education. So there is a trade-off to be made.
So in this episode, I want to give you the tools to calculate the magnitude of climate damages yourself. And I am going to do that by giving you some emission numbers and some estimates of climate damages. And then in the next episode, I will explain more about what is behind those climate damage estimates and why certain estimates are more credible than others.
Essential climate Statistics
So let's start off with some essential climate statistics. First, do you have an idea of how many tons of CO₂ the average person emitted in 2023? Feel free to pause and make a guess. The answer is 4.7 tons of CO₂ per person. That’s our global average and our first key number. In addition, there were around 8 billion people in 2023. So if we multiply those two numbers, the 4.7 tons and 8 billion, we get about 38 billion tons of CO₂ emitted in one year. That is our second key number to know.
Now let's do the second part and move from quantities to damages. The key concept economists think about is the following: How much economic damage results from emitting one additional ton of CO₂ into the atmosphere? -- This is called the social cost of carbon — or SCC.
In other words: We emit one ton today, and that ton contributes to warming which creates damages from lost agricultural yields, increased mortality, lower labor productivity and so on. So economists estimate those future costs, discount them back to today, and sum them up. That would be the social cost of carbon. One number today that captures the damages to everyone on the planet for all upcoming years.
So to get a sense of the range of estimates, let's have a look at the United states. Because in the United States, governments are legally obliged to have some estimate of this social cost of carbon. Under Obama, the Social cost of carbon was estimated to be around $50 per ton. Now, you can probably guess which direction it went under the first Trump administration. That's right, the social cost of carbon estimate was decreased to around $2. Then Biden got elected, and an agency estimated the social cost of carbon at around $185 per ton. Under Trump 2, it’s currently been set to zero
So under Obama, it was $50, under Trump basically zero, and then under Biden it became $185. So these estimates vary substantially. And in the next episode, I will show you why these different governments obtained such different numbers and why some estimates are much more credible than others.
Meanwhile, let's also look at the European Union. There there is no explicit social cost of carbon. However, the European Union has an emission trading scheme. That means that companies have to buy permits to emit CO2. So the European Union essentially adds a carbon tax to pollution. And while I will discuss this Emission trading scheme in more details in the future, for now just know that the prices of those emission permits have ranged from €80 to €100 per ton of CO2 in recent years. And that number is in between the number of the Obama and Biden administration.
So the goal of this episode is to give you the tools to calculate climate damages. And now we have some statistics and a range of numbers, and that is enough to start calculating damages.
Back-of-the-Envelope Damage Calculations
So let’s run some numbers. Let’s say, for simplicity, that each ton of CO₂ causes a €100 in damage. (Euros)
And let's approximate the global average by 5 tons per person, that then gives us a total damage of 500 euros per person, per year.
Now, you can scale this up or down based on what you think is correct.
If you think the estimate from climate change is lower, say €10/ton, then that’s €/50 per person
If you think the estimate from climate change is higher, say €200/ton, then that’s €/1000 per person
Now, what about the the global level of damages? Well, we can do that too.
Multiplying our 38 billion tons of CO2 by a 100 euro gives €3.8 trillion per year in damages.
In addition, global gross domestic product, a measure of how much we produce, in 2023 was a 100 trillion.
So we’re talking about damages of roughly 3.8% of global GDP — all tied to climate impacts on current and future generations.
Now, again, this was an example of the calculation. You can then rescale the calculation based on your estimates of how harmful climate change is. For example,
At €10/ton, the additional damage would be 380 billion euros, or 0.4% of global GDP
At €200/ton, the additional damage would be 7.6 trillion euros, or 7.6% of GDP
So once you have the social cost of carbon and some emission statistics, it is straightforward to calculate climate damages.
Now, this damage estimate is not simply a matter of belief, but should ideally come from a rigorous evaluation of the damages. So make sure to catch the next episode where I tackle this. But the goal of this episode was to give you an initial feel for damages through ranges.
Additional Considerations
We now discussed the main calculation. However, I want to point out a few additional considerations. First, these damage estimates are averages. But climate change will hit some regions harder than others. If you want to learn more about that, I recommend my second episode with Harvard economist Ishan Nath where we discuss why the global south will be hit harder than the north.
Second, we have not taken into account the additional damages from air pollution arising from fossil fuel combustion. That was the topic of my interview with Dr. Christa Hasenkopf in episode 3.
Third, we have only talked about CO₂. There are also other greenhouse gases, like methane and nitrous oxide, which are much more powerful, gram for gram. But they do disappear faster from the atmosphere. Scientists have constructed a method to convert these other greenhouse gasses to CO2-equivalents. So if you do those calculations, Then the average CO2 per person would rise from 4.7 to 6.7 tons CO₂-equivalent per person. That’s about a 40% increase when we include those other greenhouse gases.
However, the calculations we did earlier are a bit trickier because these other gases are much more powerful in the short run, but also disappear faster. I might cover this in more detail in a later episode.
Regional Differences
A final point I want to discuss is regional differences. Because we only talked about global averages so far.
So let's start with the country that emitted the most in 2023, which is China. China emitted about 12 billion tons , or 32% of global emissions. But China also has 1.4 billion people, so that’s about 8.5 tons per person — nearly double the global average.
Then we have the United States. The U.S. emitted around 5 billion tons of CO2, or 13% of global emissions — less than China in total. But it has only 350 million people. So per person, emissions are around 14.3 tons — which is triple the global average, and 6 tons more than China
Now let's move on to India and Europe. India emits about 3 billion tons. The EU emits about 2.5 billion tons. But India has 1.4 billion people, and the EU only 450 million. So India’s per-person emissions are just 2.1 tons, which is less than half while the EU’s are around 5.6 tons.
And then we have Africa and South America which are quite similar in terms of emissions.
Africa emits 1.4 billion tons and has an average of 1 ton/CO2 per person. South America emits 1 billion tons of CO2 with an average of 2.6 tons per person.
Now let’s play with a thought experiment: If India’s per-person emissions rise from 2.1 tons to 8.5 tons, the level of China,, that would be an increase of 6.4 tons per person. Multiplying that by 1.4 billion people, and you get an increase of about 9 billion tons. That would make total global emissions go up from 38 to 47 billion ton, which is an increase of around 25% .
This calculation illustrates a significant challenge. As developing countries grow, their emissions are likely to rise because they want higher living standards like the rest of the world — even though historically, they’ve contributed far less to the problem. This tension is central to climate negotiations.
Cumulative Emissions
And let’s zoom out for a second. We’ve been talking about annual emissions. But what about the total amount of CO₂ we’ve emitted since the Industrial Revolution?
Take a guess. How many tons have we released into the atmosphere in total? [pause] Answer: About 1.8 trillion tons of CO₂ — or 225 tons per person, globally. That’s a massive number. And so we are adding 2% to that per year
Wrap-Up
Let’s stop here for today.
In this episode, we:
Looked at how much we emit — 4.7 tons per person globally, and the massive differences between regions
Introduced the social cost of carbon — and how uncertain, yet important, that number is
Ran a simple damage estimate — with potential losses between 0.4% and 8% of global GDP
And briefly touched on the importance of non-CO₂ greenhouse gases
In our next episode, we’ll go deeper into the economics behind the SCC — and why the different U.S. administration used such strongly different numbers.
Thanks so much for listening — and if you enjoyed this episode, consider leaving a rating or sharing it with someone who's curious about the intersection of climate and economics.
See you next time!