The Social Cost of Carbonis an essential tool for incorporating the cost of climate change in policy-making, corporate planning and investment decision-making in the US and around the world.
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).
Carleton, Tamma and Greenstone, Michael, Updating the United States Government’s Social Cost of Carbon (January 14, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-04, Available at SSRN: https://ssrn.com/abstract=3764255
This paper outlines a two-step process to return the United States government’s Social Cost of Carbon (SCC) to the frontier of economics and climate science.
Ciscar, J.-C., Rising, J., Kopp, R. E., & Feyen, L. (2019). Assessing future climate change impacts in the EU and the USA: insights and lessons from two continental-scale projects. Environmental Research Letters, 14(8), 084010. https://doi.org/10.1088/1748-9326/ab281e
Duffy, P. B., Field, C.B., Diffenbaugh, N. S., Doney, S. C., Dutton, Z., Goodman, S., Heinzerling, L., Hsiang, S., Lobell, D. B., Mickley, L. J., Myers, S., Natali, S. M., Parmesan, C., Tierney, S., Williams, A. P. Published Online DOI: 10.1126/science.aat5982
We assess scientific evidence that has emerged since the U.S. Environmental Protection Agency’s 2009 Endangerment Finding for six well-mixed greenhouse gases, and find that this new evidence lends increased support to the conclusion that these gases pose a danger to public health and welfare. Newly available evidence about a wide range of observed and projected impacts strengthens the association between risk of some of these impacts and anthropogenic climate change; indicates that some impacts or combinations of impacts have the potential to be more severe than previously understood; and identifies substantial risk of additional impacts through processes and pathways not considered in the endangerment finding.
Presentation by Michael Greenstone and the Climate Impact Lab at the National Academies Fifth Meeting of the Committee on Assessing Approaches to Updating the Social Cost of Carbon. May 5, 2017.
Michael Greenstone describes pathbreaking new work by the Climate Impact Lab on how to forecast climate damages. Greenstone presented the team's work alongside other experts at the National Academy of Science.
Houser, T., Hsiang, S., Kopp, R.E., Larsen, K., Delgado, M., Jina, A., Mastrandrea, M., Mohan, S., Muir-Wood, R., Rasmussen, D.J., Rising, J. and P. Wilson. (2015). Economic Risks of Climate Change: An American Prospectus. New York, NY: Columbia University Press.
Combines the latest climate models, state-of-the-art econometric research on human responses to climate, and cutting-edge private-sector risk-assessment tools to craft a game-changing profile of the economic risks of climate change in the United States.
William Pizer, Matthew Adler, Joseph Aldy, David Anthoff, Maureen Cropper, Kenneth Gillingham, Michael Greenstone, Brian Murray, Richard Newell, Richard Richels, Arden Rowell, Stephanie Waldhoff, Jonathan Wiener, “Using and improving the social cost of carbon,” Science,
The social cost of carbon (SCC) is a crucial tool for economic analysis of climate policies. The SCC estimates the dollar value of reduced climate change damages associated with a one-metric-ton reduction in carbon dioxide (CO2) emissions. Although the conceptual basis, challenges, and merits of the SCC are well established, its use in government cost-benefit analysis (CBA) is relatively new. In light of challenges in constructing the SCC, its newness in government regulation, and the importance of updating, we propose an institutional process for regular SCC review and revision when used in government policy-making and suggest how scientists might contribute to improved SCC estimates.