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Global Energy Enterprise

Social Cost of Carbon

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In policy making, we must consider the cost of a proposed policy against the benefits of the proposed policy. How much would it cost taxpayers? How much would it benefit tax payers?

In the case of policies designed to address climate change, how does government put a value on the benefits of reducing emissions? What is saving a ton of CO2 emissions worth to tax payers? A mechanism used to give a value to emission reductions is called the social cost of carbon (SCC). It puts a dollar value of the costs to society caused by a single ton (or tonne) of CO2 emissions. In  other words, the SCC is the calculated cost, in dollars, of the externalities of carbon emissions.

The SCC is set by the federal government (note that this is "not the current EPA website" due to changes from the Trump Administration) and is used to determine the value to tax payers of proposed policies designed to reduce CO2 emissions. As such, it is a matter of public politics with a wide range of highly motivated and engaged stakeholders.

To Read Now

To Read Now

Calculating and utilizing the SCC is a complicated and controversial topic. The following articles are not meant to be comprehensive, but to provide a snapshot of the science behind, and some competing views of SCC.

  • For an updated look on the Trump Administration's SCC proposal, as well as a lot of good details about the various sides to this argument, read "Trump Put a Low Cost on Carbon Emissions. Here's Why It Matters," by Brad Palmer in the New York Times, Aug. 23, 2018. (Note that Dr. Michael Greenstone is quoted in this article as one of the people that helped craft the Obama Administration's SCC, and is the co-author of the peer-reviewed article above.)
  • "Federal Court Rules in Favor of Social Cost of Carbon and Environmental Justice." Triple Pundit, August 17th, 2016. According to this article, this court decision "is the first time that a U.S. court has ruled on the legality of carbon accounting in any form," and so is a very important decision. Note the variety of nonmarket actions.
  • "Estimated social cost of climate change not accurate, Stanford scientists say." Stanford News, Jan. 2015. This is a summary of an oft-cited peer-reviewed study on SCC.
  • Finally, please read the written testimony of Robert P. Murphy of the Institute for Energy Research (IER). The IER is funded by the fossil fuel industry, and it's former president Thomas Pyle led Trump's transition team for the Department of Energy. It provides a window into some arguments presented by stakeholders who are opposed to the SCC.