Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation

Abstract

The United States Government recently concluded a year-long process to develop a range of values representing the monetized damages associated with an incremental increase in carbon dioxide (CO2) emissions, commonly referred to as the social cost of carbon (SCC). These values are currently used in benefit-cost analyses to assess potential federal regulations. For 2010, the central value of the SCC is $21 per ton of CO2 emissions and sensitivity analyses are to be conducted at $5, $35, and $65 (2007$). This paper summarizes the methodology and process used to develop the SCC values, complemented with our own commentary about how the SCC can be used to inform regulatory decisions and areas where further research would be particularly useful.

Keywords: climate change, social cost of carbon, integrated assessment modeling, valuation of environmental quality, U.S. climate policy

JEL Classification: Q54, Q51, Q58