The Social Cost of Carbon Needs an Update: Green Insight

If prices for fossil fuels reflected their true cost to society—in deadly heat waves, water stress, disappearing crops—they’d be a lot higher than they are now. How much higher? Ask Michael Greenstone.

Greenstone is the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago. In the early years of the Obama administration, he and legal scholar Cass Sunstein co-led the team that developed what’s known as “the social cost of carbon.” Think of it as the baseline value of a viable future—or, as Greenstone puts it, “the benefit, in money terms, of reducing carbon emissions.”

The formula ...