Valuing Deaths Caused by Climate Change: Challenges for the Social Cost of Carbon and Global Externalities

How deaths caused by climate change are valued is now among the most consequential choices in the social cost of carbon (SCC): the metric used to account for climate impacts in benefit-cost analysis (BCA). We consider the three BCA approaches with support in the literature and practice: (1) Kaldor-Hicks, which values richer statistical lives more than poorer ones; (2) current US practice, which values all lives equally; and (3) welfare weighting, which reweights Kaldor-Hicks values for diminishing marginal utility and values lives nearly or exactly equally depending on parameter values. All three take the value of statistical life—the willingness to pay for changes in mortality risk—as a descriptive input; they differ in how they aggregate values across winners and losers, which is a normative choice justified with different rationales. The rationale for Kaldor-Hicks is weaker for global externalities than domestic ones because compensation to losers is less likely and autonomy and consumer-sovereignty arguments do not apply. Furthermore, current-generation SCC estimates are inconsistent with Kaldor-Hicks because they use purchasing-power-parity-adjusted money, which is incompatible with the compensation criterion. Rationales for current US practice and welfare weighting are comparatively stronger. Given these complexities, we emphasize reporting the mortality impacts implicit in every SCC in natural physical units—the mortality cost of carbon: the number of deaths per pulse of emissions—before valuation so that normative assumptions are explicit and transparent, as is standard for other impact categories in BCA.