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.Â
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. Â 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).
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.
R. Revesz, M. Greenstone, M. Hanemann, M. Livermore, T. Sterner, D. Grab, P. Howard, J. Schwartz (2017). Best cost estimate of greenhouse gases. Science. doi: 10.1126/science.aao4322.
Prominent economists and lawyers highlight the continued validity of the Social Cost of Carbon for policy-making
Climate Impact Lab (CIL). 2023. Data-driven Spatial Climate Impact Model User Manual, Version 092023-EPA.
The Climate Impact Lab (CIL) has developed the Data-driven Spatial Climate Impact Model (DSCIM), a robust, empirically-based model for estimating SCGHGs that is grounded in the best available science and economics and is consistent with recommendations set out by the National Academies of Sciences (NASEM). The theory, framework, and implementation of the CIL’s complete approach has been peer-reviewed and is published in Nature and The Quarterly Journal of Economics, with many technical elements, including the construction of empirical damage functions and valuation of uncertain and unequal local impacts, published in our earlier 2017 Science article. In this user manual, we provide an overview of the key components of an implementation of DSCIM, referred to as DSCIM-EPA, for the U.S. Environmental Protection Agency’s September 2022 draft technical report, "Report on the Social Cost of Greenhouse Gases: Estimates Incorporating Recent Scientific Advances."
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.