Obama Quietly Raises 'Carbon Price' as Costs to Climate Increase

Buried in a little-noticed rule on microwave ovens is a change in the U.S. government’s accounting for carbon emissions that could have wide-ranging implications for everything from power plants to the Keystone XL pipeline.

The increase of the so-called social cost of carbon, to $38 a metric ton in 2015 from $23.80, adjusts the calculation the government uses to weigh costs and benefits of proposed regulations. The figure is meant to approximate losses from global warming such as flood damage and diminished crops.

With the change, government actions that lead to cuts in emissions -- anything from new mileage standards to clean-energy loans -- will appear more valuable in its cost-benefit analyses. On the flip side, environmentalists urge that it be used to judge projects that could lead to more carbon pollution, such as TransCanada Corp. (TRP)’s Keystone pipeline or coal-mining by companies such as Peabody Energy Corp. (BTU) on public lands, which would be viewed as more costly.

“As we learn that climate damage is worse and worse, there is no direction they could go but up,” Laurie Johnson, chief economist for climate at the Natural Resources Defense Council, said in an interview. Johnson says the administration should go further; she estimates the carbon cost could be as much as $266 a ton.

For example, the administration’s vehicle fuel-efficiency standards would cost industry $350 billion over the next 40 years, while benefits in energy security, less congestion and lower pollution totaled $278 billion.

Prime Minister Julia Gillard has enlisted the Terminator in her battle to convince voters of the merits of Labor's carbon price.

Ms Gillard met film star and former California governor Arnold Schwarzenegger in Perth on Thursday, after the pair penned a joint article on climate change.

The meeting came as polling showed the coalition appeared to be on track to seize at least 35 Labor seats at the September 14 election, with the Abbott government's first priority being the abolition of the carbon tax.

California's carbon trading scheme started on January 1 this year, six months after Australia's carbon price started.

Schwarzenegger argues the system has put California - which has a bigger economy than Australia's - on track to get a third of its energy from renewables by 2020.

Ms Gillard said after the meeting the former Republican governor recognised the need for a market approach to tackling climate change.

"He is from the conservative side of politics, a Republican. If he was here in Australia, he would be on the Liberal-National side of politics, but he saw his way to putting a price on carbon as the best way of tackling climate change," she said.

Opposition Leader Tony Abbott said the carbon tax had proven to be an "economic own goal", while failing to cut emissions within Australia.

"We'll have more trees, better soils, smarter technology and in the end it's human ingenuity that will keep our environment clean, not big government and more taxes," Mr Abbott said.

Asked about Labor's polling, Ms Gillard said she would not comment on "rumour and speculation".

She declined to use Schwarzenegger's famous "I'll be back" line about her political future, instead saying: "I am confident when people vote on September 14 and they are facing such a clear choice ... they will choose Labor."

Defence Minister and West Australian MP Stephen Smith said he was confident Labor would retain its three WA seats, particularly given public sector job cuts.

Meanwhile, the prime minister is likely to be handed a win on school funding on Friday with South Australia poised to sign on to the Gonski plan, following NSW and the ACT.