Social Cost of Carbon

An estimate of the dollar value of reduced climate change damages associated with a metric ton reduction in carbon dioxide (CO2) emissions, the Social Cost of Carbon (SCC) makes it possible for benefit–cost analyses to incorporate the social benefits of regulatory actions that are expected to reduce these emissions.

The SCC is meant to be a comprehensive estimate of climate change damages and includes changes in net agricultural productivity, human health, property damages from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. However, given current modeling and data limitations, it does not include all important damages. The IPCC Fifth Assessment report observed that SCC estimates omit various impacts that would likely increase damages. The models used to develop SCC estimates, known as integrated assessment models (IAMs), do not currently include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature because of a lack of precise information on the nature of damages and because the science incorporated into these models naturally lags behind the most recent research.

While the exact costs of future climate change are uncertain, society must balance costs to our economy today with our best understanding of coming climate damages

To ensure that the official SCC keeps up with the latest available science and economics, in 2015 the White House directed the National Academies of Sciences to review the latest research on modeling the economic aspects of climate change. After a comprehensive assessment, the panel released their recommendations in January 2017. Recognizing that our social and economic understanding of the impacts of climate change have advanced greatly since the original social cost of carbon was released seven years ago, the National Academies report identifies important ways to take advantage of those improvements by providing a new framework that would strengthen the scientific basis, provide greater transparency, and improve characterization of the uncertainties of the estimates.

While the exact costs of future climate change are uncertain, society must balance costs to our economy today with our best understanding of coming climate damages. In line with recommendations from the National Academies, the Climate Impact Lab is working to leverage recent advances in science and economics to develop the world’s first empirically-derived estimate of the social cost of carbon. As part of this effort, we have designed a fully modular bottom-up architecture, the Data-driven Spatial Climate Impact Model (DSCIM).