Setting the Social Cost of Carbon

Abstract

The ‘social cost of carbon’ is an economic concept that represents – in monetary net present value terms – the damages caused by the emission of a ton of carbon dioxide. Estimates of the social cost of carbon are currently used by governments to evaluate policies to reduce greenhouse gas emissions. Economic analysis of the damages caused by climate change raises a number of important conceptual and technical challenges, and there have been sustained efforts in environmental economics to respond to these challenges. As the issue of climate change continues to dominate environmental policy making, the social cost of carbon is likely to play an increasingly important role in the field of environmental law.