US Policy

The social cost of carbon (SCC) is vital to estimate as it quantifies the hidden costs of climate change, like health impacts and economic losses. Policymakers rely on it to set carbon pricing and guide climate policies, ensuring efficient mitigation strategies and incentivizing emissions reductions, thus crucial in combatting climate change effectively.

The US Environment Protection Agency recently updated its estimates of the Social Cost of Carbon and other greenhouse gas emissions (see here). This variable has been described as ‘The most important number you’ve never heard of’ because it is ‘currently used by local, state, and federal governments to inform billions of dollars of policy and investment decisions in the United States and abroad.” (Michael Greenstone, the former chief economist under the Obama administration, Resources for the Future).

The team’s work  has been cited numerous times by the US Environmental Protection Agency Interagency Working Group’s report on cost benefit analysis, particularly in relation to social discounting and the social cost of carbon.

The team informed the US EPA’s early draft SCC estimates (2021) and then revised draft SCC estimates (2022), public consultations on both, and a final published version (also November 2023) alongside a response to the consultation.  Our work is cited in all relevant documents, we put in a public consultation submissions to both the early draft (2021) and draft (2022) versions.  The latter is one of the few specifically identified in EPA’s consultation response amongst the several thousand submitted, and we spoke to the team working on this as well as providing a number of email responses to specific questions they asked us.

Ben’s paper ‘Discounting Disentangled‘ was cited and used in a court case that led to the New York State to reduce its Social Discount Rate to 2% rather than 3%, which made the social cost of carbon increase from $40 to $125 per tonne of CO2. More info here.

The contribution to the public consultation on the measurement of the social cost of carbon can be found here: Public Consultation Response Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review: EPA-HQ-OAR-2021-0317-1460

The latter is one of the few specifically identified in EPA’s consultation response amongst the several thousand submitted, and we spoke to the team working on this as well as providing a number of email responses to specific questions they asked us. Our contribution to the public consultation led to another paper entitled “Sense and Sensitivity”, which explores when sensitivity analysis is valid and when it is not.