Factoring the Cost of Climate Change into Government Rulemaking

The social cost carbon is a critical tool for rulemaking because it monetizes the damages associated with a one metric ton increase in emissions. By calculating the costs of climate change, the social cost of carbon allows for the calculation of the monetary benefits of regulations that reduce greenhouse gases. These benefits can then be compared to the costs of implementing the regulation to determine whether the regulation is socially beneficial on net.

The Lab has worked closely with the Biden administration to help them establish a single, government‑wide social cost of carbon to guide policy and investments that will lower greenhouse gas emissions. As part of this work, the administration has used the Lab’s estimates of the social and economic costs of climate change to guide new climate rulemaking, including vehicle and power plant regulations. This builds on a legacy of using these costs to form more than 80 regulations projected to produce more than $1 trillion of benefits.

The Lab has also worked with state lawmakers and top officials from other countries to build their capacity and knowledge about the impacts of climate change and how to use the social cost of carbon to craft strong climate policies and adaptation measures in their countries and states. As part of that work, the Lab has partnered directly with the U.S. Climate Alliance—a coalition of bipartisan governors—and hosted top officials from Canada, Norway, and state governments for a full day of training and capacity building. Co-hosted by the California Air Resources Board (CARB), the event included representatives from nearly a dozen states, relevant federal agencies, and major academic institutions. In a rich set of discussions, policymakers identified new opportunities for climate policies in their own states, traded practical insights and best practices, and laid the foundations for an enduring network of policymakers committed to making climate policy work.