New Research Updates Key Elements of the Social Cost of Carbon
In a new paper prepared for a Brookings Institution conference, scholars at Resources for the Future and top research universities explore methods to estimate a more accurate social cost of carbon.
The US government should update its approach to estimating an important metric underlying a wide range of federal climate policies—from power plant emissions rules to vehicle fuel economy standards, suggests a paper to be discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 9.
The paper—The Social Cost of Carbon: Advances in Long-term Probabilistic Projections of Population, GDP, Emissions, and Discount Rates—examines a variety of models, estimates, and accounting that can help to build a better—and more accurate—social cost of carbon. The social cost of carbon is an estimate of the economic costs, or damages, of emitting one additional ton of carbon dioxide into the atmosphere, and thus the benefits of reducing emissions. The estimate informs billions of dollars of policy and investment decisions in the United States and abroad.
The paper’s authors are Kevin Rennert, Brian C. Prest, William A. Pizer, Richard G. Newell, and Roger Cooke of Resources for the Future, a non-profit research institution; David Anthoff, Cora Kingdon, and Lisa Rennels of the University of California-Berkeley; Adrian E. Raftery and Hana Ševčíková of the University of Washington; and Frank Errickson of Princeton University.
“The social cost of carbon is a vitally important metric for informing the climate policy of numerous entities, including most notably its role in guiding climate regulations issued by the US federal government,” the authors write. “… It is critical that its calculation is supported by the best available science, including an explicit incorporation of uncertainty.”
To this end, the authors explore the challenges of—and potential solutions to—generating estimates that reflect the range of future socioeconomic projections. The paper presents an updated approach that reflects the latest understanding of population growth, per capita economic growth, projected emissions, and the earth’s climate, while also supporting calculations over the very long time-horizon of greenhouse gases emitted to the atmosphere. The authors incorporate uncertainty in a manner that addresses previous limitations of the estimates and provide an economic discounting approach that reflects the intergenerational timescale of climate change.
“If you want to know what the damages from climate change are going to be, you have to understand the range of how many people could be on the planet, what the future economy could look like, and what that means for future greenhouse gas emissions,” Rennert said in an interview with The Brookings Institution.
The paper implements key recommendations from the National Academies of Sciences, Engineering and Medicine that are guiding the efforts of the Interagency Working Group on the Social Cost of Carbon, an Obama-era body re-established by executive order on President Biden’s first day in office. The interagency working group currently uses an interim social cost of carbon of $51 and is expected to announce an updated value for this critical estimate in a January 2022 report. New research grappling with uncertainty around climate change finds that the social cost of carbon likely is higher than previously estimated, especially if appropriate weight is given to future impacts.
This release was written by David Skidmore of The Brookings Institution.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
Kevin Rennert is a fellow at RFF. He also serves as director of the Federal Climate Policy Initiative.
Brian C. Prest
Fellow; Director, Social Cost of Carbon Initiative
Brian Prest is an economist and fellow at Resources for the Future specializing in climate change, oil and gas, and energy economics.
Richard G. Newell
President and CEO, Resources for the Future
Dr. Richard G. Newell is the President and CEO of Resources for the Future. From 2009 to 2011, he served as the administrator of the US Energy Information Administration, the agency responsible for official US government energy statistics and analysis.
Working Paper — Sep 9, 2021
The Social Cost of Carbon: Advances in Long-Term Probabilistic Projections of Population, GDP, Emissions, and Discount Rates
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