The social cost of carbon (SCC or sometimes referred to as SC-GHG) is an estimate of the cost, in dollars, of the damage done by each additional ton of carbon emissions and the benefit of any action taken to reduce a ton of carbon emissions. SCC is the main measure of the economic benefits of mitigating climate change used to weigh the benefits of proposals to tackle climate change (that is, the value of each ton of carbon that is not emitted) versus the costs (of regulation, equipment, transition to renewable fuels, etc.).
Why Does It Matter?
The more policy makers understand about the true estimate of SCC, the more they will be better able to determine whether the costs and benefits of a proposed policy to curb climate change are justified.
What Types of Information Are Significant When Calculating SCC?
There are four main components to be considered:
- how much manmade carbon emissions will be created as a result of the size of our population and our economic growth
- what will happen, as a consequence of those emissions, to the climate; how long will the emitted gases remain in the atmosphere; how much damage will result from sea level rise, temperature rise, increased precipitation and extreme weather
- what will the economic impact be from these climate changes --on agriculture, on energy use, on productivity, on human health?
- The cost of adaptation and mitigation. Most benefits will come in the form of avoided future damages but most costs will occur immediately. There will be a “discount rate” indicating the rate that society is willing to trade present benefits for future one.
This was very well explained in 2021 by Columbia Climate School.
Who Uses the Social Cost of Carbon?
The federal government has used it in evaluating hundreds of proposed regulations. Several states like New York, Illinois, Colorado, Minnesota, Washington, Delaware, Maine, Maryland, Nevada, New Jersey, North Carolina, Vermont, Virginia, Washington and California have also used it when considering policy analysis or implementation as they move to better account for the impact of greenhouse gas emissions. Here is an effective guide for state officials, published in 2022.
Are there estimates for the social cost of carbon?
They vary. The Obama administration initially estimated SCC globally at $43 a ton. The Trump administration estimated the US number to be $3-$5 a ton. Since 2021, the Biden administration has been using an interim value of $51 per metric ton of carbon.
In 2022, the EPA, based on a report they commissioned, proposed increasing that $51 value to $190 per metric ton. Sometimes called “the most important revision you’ve never heard of to the most important number you’ve never heard of,” that report concluded that the SCC is the most significant tool for governments and industries alike to determine the benefits to society from acting to curb heat-trapping pollution. The media concurred, with NPR reporting in February, 2023, " One of the most important tools the federal government has for cracking down on greenhouse gas emissions is a single number: the social cost of carbon. It represents all the damage from carbon emissions — everything from the cost of lost crops to the cost of climate-related deaths.”
If increasing the number is so critical to reducing the effects of climate change, why hasn’t the administration done it?
Politics. Since the 2022 mid-term elections, the democratic Biden administration no longer controls Congress. Embraced by most democrats as a powerful regulatory tool, Sen. Sheldon Whitehouse (D-R.I.) said the SCC metric would embed climate change considerations into everything the U.S. government did. “Think grants, permitting, purchasing, royalty rates, investment decisions, and trade agreements, just to name a few.” On the other side of the aisle, Senator Shelley Moore Capito (R-W.Va.), also recognizing the power of SCC, introduced legislation to bar agencies from using it for fear it would hamstring fossil fuel development.
Will the proposal become a regulation?
It’s unclear if and when it can move forward with a divided Congress. If it does, the whopping metric could be used across the federal government, including in upcoming EPA rules, Energy Department efficiency mandates, Department of Transportation fuel efficiency rules and environmental reviews for major projects.