Today’s carbon emitted into the atmosphere adds to the future cost of living through the climate crisis, a concept referred to as the social cost of carbon. To help clarify this abstract idea, we have an idea that lets you help future generations cover the social cost of carbon for the gasoline you use.
At some point, governments or private markets are expected to put a price on carbon, and the future impact of a ton of carbon emitted today will be a key factor in that price. From the cost of carbon removal and climate-related weather or health costs to lost food production and other impacts that raise the cost of living, today’s CO2 emissions come at a high cost for our descendants.
The Biden Administration recently announced new guidance that could raise the future cost of a ton of carbon from $51, the price set in 2021, to $190. This non-binding price is important in recognizing the environmental debt we’re leaving our children, their children, and future generations. The Trump Administration previously set the social cost of 1 ton of carbon at only $8. Several studies, including a September 2022 report in Nature that set the price at $185/ton, have suggested that the actual cost is much higher. On entering the White House, the Biden team set the price at $51.
Now, according to National Public Radio, the Environmental Protection Agency is considering changing its estimate to $190 a ton. Based on the new $190 per-ton price, in 2021 the world’s living generations who emitted 31.5 billion metric tons (or 35.2 billion imperial tons) borrowed $6.68 trillion dollars from future generations, who will have to cover those costs out of their own pockets. And that’s just one year’s emissions. Over the course of the past decade, we’ve front-loaded future costs of more $70 trillion into the cost of living in 2050.
One Simple Idea: Pay the Debt You’re Leaving Your Kids
We don’t have to be like Popeye’s perpetual financial foil, Wimpy, and wait for the EPA’s decision before acting to finance our descendants’ solution. We can act today.
We suggest that the social cost of a ton of carbon can be the basis for a simple investment strategy that can pay out today’s social cost of carbon to your descendants. This idea addresses a family’s future risk if you keep the money in a directed trust fund, which could specify how the funds can be used. If you’d like to set aside money for societal costs in general, making a charitable gift to a nonprofit that administers these funds for wider social impact, the idea can be extended to all of society.
We can plan ahead by using an easy-to-access U.S. Treasury bond that protects the principal from inflation, the I bond, to set aside money for up to 30 years, when, if we manage to end carbon emissions, the worst impacts of climate change are likely to strike. If you put $1 in today, your beneficiaries will receive $1 plus the accrued interest between five and 30 years in the future, effectively hedging the principal investment — the cash you put in — against inflation.
NerdWallet explains that I bond interest rates are reset by the Department of the Treasury every six months to pay out at a rate that ensures the cash investment is preserved despite rising prices. At this writing, I bonds pay 6.89% (click the percentage to see the current rate). There will be a federal tax due on the interest received over the years if the money is used for anything other than education expenses, which are tax free.
Editor’s note: Earth911 is not an investment advisory and has no economic interest in the recommended strategy. Discuss this idea with your financial advisor before making any decisions.
Think Before You Gas Up
How can we help defray the huge future costs created by the CO2 we emit today? The simplest way to to stop burning fossil fuels and make our economy efficient. But that is a long process that requires worldwide participation.
Instead, think about how you might set aside some funding to help your descendants deal with the cost of climate change. Each time you fill up your gas tank, if you still have an internal combustion vehicle, track the number of gallons. Then, every six months, you can do some simple math to decide how much to invest for your children.
How much should you set aside? There is a reliable formula to use because a gallon of gas always emits the same amount, 19.37 pounds, of carbon dioxide when burned. In other words, a gallon of gas produces 0.009685 tons of CO2, and that can be converted into a dollar value per gallon which, at $190 per ton, is $1.84 per gallon. At the current established social cost of CO2, $51/ton, you’d need to put aside $0.50 per gallon burned. Maybe you’d like to pick a higher or lower social cost per ton of carbon. If so, here’s a quick sample of per-gallon investments you’d need to make:
Two Ways To Make a Quick Social Cost of Your Driving Calculation
Any solution needs to be easy, and we found two ways to make quick work of calculating the social cost of your driving.
You can keep your receipts and add up how many gallons of gas you purchased every six months. To find your future cost of the emissions, multiply the number of gallons by $1.84 to get the total to put into a bond fund — for instance, 65 gallons of gas burned produces 1,259.05 pounds of CO2, which at $190/ton ($1.84/gallon), will cost future generations $119.60.
Or, don’t bother to save receipts and instead record your mileage every six months, subtracting the previous total from the latest mileage reported by your odometer. For example, if you odometer reads 21,300 miles on January 1 and 26,500 on July 1, it’s easy to calculate that you drove 5,200 miles. Divide your miles driven by the EPA’s reported miles per gallon for your vehicle: 5,200 miles driven divided by 22 mpg = 236 gallons of gas. Now, multiply the gallons purchased by $1.84, the per-gallon cost at $190 per ton of CO2 emissions, to find the amount to invest in I bonds: $434.24.
Here’s the formula to convert your gas usage from gallons to the social cost you would need to cover for future generations:
GALLONS OF GASOLINE PURCHASED * SOCIAL COST PER GALLON = $ to invest in I bonds
The same principle can be applied to any carbon-emitting activity, for example heating your home with natural gas or fossil fuel burned to generate the electricity you use. See our article Carbon Calculating: Estimating Your Home Energy Impact for more information about the emissions factors of other fuels.
The point of this suggestion is not that you must pay this amount to future generations — that’s a decision each of us needs to make for ourselves. We provide this idea as a basis for understanding the impact of driving an internal combustion vehicle on future generations. If we cannot change, let’s consider how to help our children and their children adapt.