The social cost of greenhouse gas (GHG) emissions, considered the single most important measure in addressing the climate crisis, is generally defined as an estimate of societal damages, including health harms, resulting from unpaid or externalized GHG emissions. Researchers have been calculating this cost for several decades. Federal agencies began regularly incorporating the social cost of these emissions in 2008 — today, over 80 federal regulations reflex its use.
Despite the fact that GHG emissions are defined as the greatest threat to human health this century, the social cost of the healthcare industry’s emissions has somehow escaped the interest of the Department of Health and Human Services (HHS), along with a sizable portion of the healthcare policy ecosystem.
This is difficult to comprehend, since the healthcare industry emits an enormous amount of GHG pollution.
A 2020 calculation by academic researchers estimated healthcare’s GHG emissions equaled 553 million metric tons of CO2e in 2018. (CO2e, or carbon dioxide equivalent, is the term used to express how much a particular GHG would contribute to global warming if it were carbon.) Per the Environmental Protection Agency (EPA), this amount equaled 12 percent of total U.S. emissions in 2018. For perspective, U.S. healthcare emissions are nearly five times that of the U.S. military — the world’s single largest institutional fossil fuel consumer.
If U.S. healthcare were its own state, it would easily fall within the top 10 percent of the highest emitting countries.
The largest industry in the world’s largest economy, U.S. healthcare accounts for roughly half — or $4.7 trillion — of total annual global healthcare spending. Long known for wasteful spending, U.S. healthcare is remarkably energy inefficient. For example, out of 6,129 hospitals, the industry’s largest GHG emitting sector, only 37, or 0.6 percent, were EPA Energy Star certified for energy efficiency in 2023. This number is even more trivial when you realize Energy Star measures only Scope 1 and 2 energy use intensity, which account for as little as 25 percent of hospitals’ total GHG footprint.
Despite the fact that healthcare’s GHG emissions disproportionately harm Medicare and Medicaid beneficiaries, HHS does not regulate healthcare’s GHG emissions. HHS has never discussed GHG social costs. It doesn't even mention Energy Star in the HHS and the National Academy of Medicine’s recently released Sustainability Journey Map, intended to support healthcare’s decarbonization.
In January 2021, President Biden issued an executive order that led to the EPA publishing in November a report that updates the annual social cost or monetary value of the net social harm from emitting — and, alternatively, the net social benefit of reducing — one metric ton of carbon dioxide, methane and nitrous oxide. Respectively, these gasses account for 79.4 percent, 11.5 percent and 6.2 percent of all U.S. GHG emissions.
Simply, a federal interagency work group that included the secretary of HHS calculated three conservative estimates for each greenhouse gas using three discount rates and three damage models for the period 2020 through 2080. For the three discount rates — specifically 2.5 percent, 2.0 percent and 1.5 percent — the EPA calculated in 2020 dollars the social cost of carbon dioxide at between $120 and $340 per ton. For methane, the social cost was estimated at between $1,300 and $2,300 per ton, and for nitrous oxide it was between $35,000 and $87,000.
For those unaware, discounting is based on the assumption that the value of $1 is worth more today than in the future. The discount rate therefore determines the present value of a cost or benefit occurring in the future by discounting its value by a certain amount each year. Using the three damage models, the EPA calculated in 2020 dollars the social cost of carbon dioxide at between $110 and $120 per ton, methane at between $190 and $200 and nitrous oxide at between $330 and $370.
The difference in social costs between these gases is due to the fact that they trap heat or absorb solar radiation at varying rates, resulting in different Global Warming Potential (GWP) scores. For example, methane over 100 years has a GWP of 30, meaning one ton of methane will absorb upwards of 30 times more energy than one ton of carbon dioxide. Outyear social costs substantially increase as environmental and economic systems become more stressed. For example, the EPA prices nitrous oxide in 2080 at upwards of $200,000 per ton. It is also important to note the EPA assumes social costs reflect the global value of climate impacts, principally for two reasons: U.S. GHG emissions have global impacts, and the U.S. is inextricably linked to the world economy.
Calculating the total social cost of healthcare’s GHG emissions is difficult largely because the EPA’s GHG commercial sector inventory does not disaggregate healthcare’s GHG emissions. In turn, the EPA does not delineate tons of healthcare cardon dioxide, methane and nitrous oxide emissions. This also means the EPA does not calculate the social cost of anesthetic gasses beyond nitrous oxide — this is especially problematic because commonly used desflurane, isoflurane and sevoflurane have much higher GWP scores. Desflurane, for example, has a GWP of 2,540 compared to nitrous oxide’s 289. Worldwide, emissions of these gases have been estimated at 3 million metric tons of CO2e, of which roughly 80 percent stems from desflurane.
Per the percent distribution noted above, assuming healthcare’s 553 million metric tons of CO2e equals 439 tons of carbon dioxide; 64 tons of methane and 34 tons of nitrous oxide (and ignoring the remaining 2.9 percent, or 16 million tons, of GHG emissions), we can conclude the following, in 2020 dollars:
- Using the EPA’s discount rates, in 2020 the social cost of U.S. healthcare’s GHG emissions ranged from between $255 billion and $3.3 trillion;
- Using the EPA’s damage models, in 2020 the social cost ranged between $1 trillion and $3.6 trillion;
- In 2030 dollars, the social cost for all six EPA models would range between $1.5 trillion and $4.2 trillion
For perspective, $3.6 trillion is more than twice Medicare and Medicaid spending in 2022, which equaled $1.750 trillion.
The EPA’s November report will likely have at least two near-term effects.
- This past September, the White House published a fact sheet that announced additional steps the administration will take to reduce GHG emissions. These include directing the Office of Management and Budget (OMB) to work with federal agencies to use the social costs of GHG emissions to calculate the impacts of federal programs and to justify budget proposals. Presumably this means OMB will begin to work with HHS to calculate GHG social costs for the Medicare and Medicaid programs. The fact sheet also encouraged federal agencies to consider incorporating GHG social costs in regulatory penalties — for example, via Medicare’s value-based programming.
- The highly anticipated Securities and Exchange Commission final rule requiring for-profits to publicly disclosure climate-related financial risks will substantially disrupt the healthcare industry. (Healthcare nonprofits cannot reasonably expect to avoid similar scrutiny and pressure.) This is largely because healthcare has significantly lagged all other major industries in publicly reporting environmental impact data. As a capital-intensive industry, healthcare is heavily dependent on financial investment. This means access to and the cost of capital for industries highly dependent on fossil fuels like healthcare will increasingly become more limited and expensive. That the proposed rule makes no mention of GHG social costs specifically is moot. The SEC promulgated the proposed rule largely in response to longstanding efforts by institutional investors and insurance companies seeking better information to evaluate climate exposure, sensitivity and adaptive capacity.
There has effectively been an arms race in capital markets to identify a comparable, consistent and reliable number that represents an acceptable greenhouse gas footprint. The EPA’s calculation of the GHG social costs is this number.
David Introcaso, Ph.D., is an independent health care policy consultant specializing in climate crisis-related health care policy reform. He has conducted environmental and health care policy research for the U.S. Congress and the Department of Health and Human Services. He also is the creator and host of “The Healthcare Policy Podcast.”
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