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 of carbon dioxide (CO2) emissions. In other words, the SCC is the cost, in dollars, of the externalities of carbon emissions.
The SCC is set by the federal government (note that this is "note 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
More than Meets the Eye, The Social Cost of Carbon in U.S. Climate Policy, in Plain English (July 2011, World Resources Institute, Environmental Law Institute). Read Summary through section 4a How do the SCC Models Work?
Developing a Social Cost of Carbon for US Regulatory Analysis: A Methodology and Interpretation (2013, Review of Environmental Economics and Policy). Read Abstract, Introduction and Conclusions
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.
- "Federal Court Rules in Favor of Social Cost of Carbon and Environmental Justice." Triple Pundit, August 17th, 2016. Note the variety of nonmarket actions.
- "How Climate Rules Might Fade Away," Bloomberg Businessweek, Dec. 15th, 2016. This article provides a good summary of the impacts of assumptions on SCC models.
- Also read an update on President Trump's executive order that could have an impact on SCC: "Making Sense of Trump's Order on Climate Change," Cass Sunstein, Bloomerg View, March 29, 2017. (Note that Sunstein is a former Obama official.)
- "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.