Carbon Abatement Cost and the Social Cost of Carbon feat. Edgardo Sepulveda

In New England it has been calculated by Reiner Khur that the
carbon abatement cost of rooftop solar is 800$/ton, utility wind
and solar ~300$/ton and keeping existing nuclear on line ~25$/ton.
In the context of a social cost of carbon and proposed carbon tax
of 50$/ton the premature closure of Indian Point is a shocking
indictment of the environmental NGO's that fought so hard to kill
the plant. We need to add new generation to the grid not because of
a growing demand for electricity but rather the need to replace our
fossil fleet and “electrify everything” to get as close as possible
to zero emissions. In this light the key metric by which we should
judge the various decarbonisation tools from energy efficiency
retrofits at our disposal is the carbon abatement cost. I am joined
by Edgardo Sepulveda, a telecoms regulatory economist based in
Toronto with an interest in energy economics, for another deep-dive
into the Social Cost of Carbon (SCC) and carbon abatement costs.
The SCC is an economic construct that estimates the long-term
global monetary effect of emitting a ton of carbon today, relative
to a baseline. It is calculated using Integrated Assessment Models
(IAM) that estimate future population and economic growth,
corresponding climate changes, a “damages” function that monetizes
climate changes, and a discount rate to bring all those future
monetary losses from climate change due to an extra ton of carbon
emitted today to current dollars. Chris and Edgardo discuss how the
SCC has been around for 20-30 years and is one of the bases for
setting the level of carbon taxes. They discuss how the SCC deals
with uncertainty, and how new reserchers are dealing more seriously
with intra and inter-generational equity considerations. The Biden
administration just re-established the SCC at US$51/Ton CO2 The
abatement costs is a related concept that estimates the monetary
cost now of not having emitting carbon. It can be calculated for
any program or technology (the numerator) against a baseline (the
denominator). Conceptually, think how one kWh of nuclear with a
price of USD$0.07/kWh (in Ontario) if it displaces kWh gas (the
baseline with carbon intensity ≈600g/kWh), you get an abatement
cost of $116/ton; if it displaced kWh coal (≈950g/kWh) the cost is
$74/ton. Here is a review article looking at abatement costs,
including the difference between statics and dynamic concepts
https://www.aeaweb.org/articles/pdf/doi/10.1257/jep.32.4.53 It is
critical to be clear-eyed about how the numerator and denominator
are being calculated, and especially whether actual “full” prices,
with subsidies and all, are used, rather than some theoretical
levelized cost of electricity (LCOE). For example, the 2021
peer-reviewed study shows that based on average wind price in
Ontario of USD$0.12/kWh, the associated abatement cost is
USD$290/ton.
https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1440.pdf
Solar costs in Ontario are even higher, at USD$0.38/kWh; given past
policies to install wind and solar at inflated costs, electricity
prices in Ontario become a political liability and successive
Governments enacted extreme measures. Edgardo’s Twitter handle is
@E_R_Sepulveda Edgardo’s take on the Ontario electricity sector is
here
https://www.policyalternatives.ca/publications/monitor/power-people