SOCIAL COST OF CARBON

The Social Cost of Carbon Dioxide (SCC) is the number “that represents the negative (or positive) externality of emitting an additional ton of carbon dioxide into the atmosphere.” The SCC number is invaluable for a government to weigh the economic benefits and costs of regulations that apply to polluting industries, such as transportation and energy.

This obscure but critically important calculation to gauge the real-world costs that climate change is imposing on the U.S. economy has been used since the Obama administration to calculate the harm caused by each ton of pollution. 

And, if there is one thing that economists can universally agree on, it is the need for energy prices to reflect their true cost to human well-being. 

But estimating the “social cost of carbon” in a way that reflects the uneven distribution of damages has proven to be challenging.

WHY?

There are numerous factors playing into the number. When calculating the social cost of carbon, the main components are what happens to the climate and how these changes affect economic outcomes, including changes in agricultural productivity, damages caused by sea level rise, and decline in human health and labor productivity.

As scientists have increasingly been able to link planetary warming to wildfires, floods, droughts, storms and heat waves, estimates of the social cost of carbon have grown more sophisticated.

With models, researchers first simulate what the path of climate change would be in the absence of a policy change. Then, they augment the model to record how much damage and climate change increases as a result of an extra ton of emissions. The difference in damage is the social cost of carbon.

The higher the number, the greater the government’s justification for compelling polluters to reduce the emissions that are dangerously heating the planet. 

A LITTLE HISTORY

• During the Obama administration, White House economists calculated the social cost of carbon at $42 a ton. 
• The Trump administration lowered it to less than $5 a ton. 
• Under President Biden, the cost was returned to Obama levels, adjusted for inflation and set at $51.
• In November 2023, the EPA unveiled an updated estimate of the social cost of greenhouse gases as the Biden administration issued a rule to cut methane emissions from oil and gas,. In the EPA’s report they calculated the societal cost of a metric ton of carbon dioxide at $190 for the year 2020. The figure also ratcheted up over the years — a metric ton of carbon dioxide will be assumed to cost society  $230 in 2030 and $310 in 2050 and $410 in 2080. 

This new estimate made its debut in a legally binding federal regulation. E.P.A. officials said they intended to use that figure in all the agency’s climate regulations moving forward as it provided a basis for climate policy and justification for more stringent regulations, according to The New York Times. 

WHAT POSITION DOES THE CURRENT TRUMP ADMINISTRATION TAKE?

In May, 2025 the President says the number is “Zero” and his administration directed agencies to stop estimating the economic impact of climate change when developing policies and regulations.