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The Positive Externalities of Carbon Dioxide: Estimating the Monetary Benefits of Rising Atmospheric CO2 Concentrations on Global Food Production


Advancements in technology and scientific expertise since the birth of the Industrial Revolution have led to vast improvements in agricultural yield and production values. More efficient machinery and improved plant cultivars, for example, paved the way toward higher crop yields and increased global food production. And with the ever-increasing population of the planet, the increase in food production was a welcome societal benefit. But what remained largely unknown to society at that time, was the birth of an ancillary aid to agriculture that would confer great benefits upon future inhabitants of the globe throughout the decades and centuries to come. And the source of that aid: atmospheric carbon dioxide (CO2). Ironically, however, the modern rise of the air's CO2 content is currently viewed by many as a source of concern, not a benefit.

Driven primarily by gaseous emissions produced from the burning of fossil fuels such as coal, gas and oil, the air's CO2 content has risen steadily from a mean concentration of about 280 parts per million (ppm) at the onset of the Industrial Revolution in 1800 to a value of approximately 393 ppm today; and if current fuel consumption trends continue, the planet's atmospheric CO2 concentration could reach upwards of 700 ppm by the end of this century.

One of the more publicized potential consequences of this rise in the air's CO2 content is the possibility of significant CO2-induced global warming, which according to proponents of this hypothesis constitutes the greatest environmental threat ever to be faced by the biosphere. Predicting many adverse consequences for human health, ecosystems and the economies of nations, its supporters contend that augmented atmospheric CO2 concentrations will alter important energy transfer processes in the Earth-ocean-atmosphere system, leading to warmer global temperatures, devastating heat waves, melting of substantial portions of the polar ice caps, rising sea levels, crop-decimating droughts, as well as a host of other climate- and extreme-weather-related maladies.

Against this backdrop of projected negative externalities, economists and policy makers have sought to estimate the monetary damages of rising atmospheric CO2. Such calculations, termed the social cost of carbon (SCC), are often used in evaluating the CO2 impact of government rulemakings. They are also used as justification for fostering rules and regulations aimed at reducing CO2 emissions. In May of 2013, for example, eleven U.S. government agencies comprising the Interagency Working Group on Social Cost of Carbon collaborated to produce a technical document "to allow agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions into cost-benefit analyses of regulatory actions that impact cumulative global emissions" (Interagency Working Group on Social Cost of Carbon, 2013).

Absent (or severely underrated) in nearly all SCC analyses, however, is the recognition and incorporation of important CO2-induced benefits, such as improvements in human health and increases in crop production. With respect to human health, several studies have shown that the net effect of an increase in temperature is a reduction in sickness and death rate (Christidis et al., 2010; Wichmann et al., 2011; Egondi et al., 2012; Wanitschek et al., 2013; Wu et al., 2013). A warmer climate, therefore, is less expensive in terms of health care costs than a colder one. With respect to crop production, literally thousands of laboratory and field studies have documented growth-enhancing, water-conserving and stress-alleviating benefits of atmospheric CO2 enrichment on plants (Idso and Singer, 2009; Idso and Idso, 2011). For a 300-ppm increase in the air's CO2 content, such benefits typically enhance herbaceous plant biomass by around 30 to 35%, which represents an important positive externality entirely absent from today's state-of-the-art SCC calculations.

In the present study, this discrepancy is addressed by providing a quantitative estimate of the direct monetary benefits of atmospheric CO2 enrichment on both historic and future crop production, making it the first study to provide such a detailed appraisal. The incorporation of these estimates into future SCC studies will help to ensure a more realistic assessment of the total net economic impact of rising CO2 concentrations due to both negative and positive externalities.

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