social cost of carbon

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William Jefferson Clinton Federal Building In Washington DC

New report raises social cost of carbon estimates, surpassing previous estimates by more than 250%.

By Joshua Bledsoe, Kevin Homrighausen, and John Detrich

On December 2, 2023, the US Environmental Protection Agency (EPA) released a final report that substantially increases estimates of the social cost of greenhouse gases (GHG), including carbon dioxide, methane, and nitrous oxide (collectively, SC-GHG). The report describes SC-GHG as “the monetary value of the net harm to society from emitting one metric ton of that GHG into the atmosphere in a given year.”[1] The new estimates are intended to serve as a tool for decision-makers, aiding in the cost-benefit analysis of actions that would reduce or increase GHG emissions. Indeed, federal agencies are expected to use the estimates in future rule-makings and in the environmental review of forthcoming projects.

By Stacey VanBelleghem and Benjamin Lawless

On January 11, 2017, the National Academies of Sciences, Engineering and Medicine (NASEM) released a report, “Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxider,” recommending an updated framework for how the Federal government calculates the social cost of carbon (SCC) in regulatory rulemakings and other economically significant regulatory actions. The SCC is a cost-benefit analysis tool designed to estimate “the net damages incurred by society from a 1 metric ton increase in carbon dioxide emissions in a given year.”

Federal agencies first began engaging in ad hoc efforts to develop SCC estimates following the US Court of Appeals for the Ninth Circuit’s 2008 decision in Center for Biological Diversity v. National Highway Traffic Safety Administration. In 2010, the U.S. Interagency Working Group on Social Cost of Carbon (IWG) issued the first formal, government-wide SCC estimates. The US Government Accountability Office reports that SCC has been used in more than 150 regulatory actions since 2008.  The SCC has been revised in 2013,  2015 and 2016, to reflect new versions of the models upon which the estimates were based. The current SCC estimates a cost of $36 per ton of carbon dioxide for 2015, at a 3 percent average discount rate, with projected increases to $50/ton in 2030 and $69/ton in 2050.