Carbonated Fodder: The Social Cost of Carbon in Canadian and U.S. Regulatory Decision-Making

Abstract

For decades, cost-benefit analysis has been criticized while it has simultaneously been a core analytical tool in regulatory decision-making. Scrutiny of a relatively new component of cost-benefit analysis used to measure environmental benefits—the “social cost of carbon” (“SCC”)—provides fresh evidence that confirms long-standing concerns around bias, manipulation, uncertainty, and moral judgment. This Article is the first to examine and compare use of the social cost of carbon in Canadian and U.S. carbon emissions regulatory decision-making. It reveals that despite fundamental differences between the two countries, regulators on either side of the border use similar or identical dollar values and modelling. This practice erroneously assumes commonalities across the two countries that have not been empirically proven, including with respect to risk tolerance, moral judgment, value of ecosystem services, and the value of a human life. Additionally, the analysis finds differences in the way SCC values are selected and used by Canadian and U.S. decision-makers, demonstrating that another example of cost-benefit analysis is susceptible to bias and arbitrary decisions. This in turn undermines the credibility of regulatory decisions in the carbon emissions realm at a critical time in global climate governance. The Article goes on to suggest that SCC represents an opportunity for cost-benefit analysis to evolve and contribute to sound regulatory decision-making, but further improvement is needed to do so.

Keywords: cost-benefit analysis, climate change, social cost of carbon, carbon pricing