The Social Cost of Carbon: Advances in Long-Term Probabilistic Projections of Population, GDP, Emissions, and Discount Rates
This paper, published in Brookings Papers on Economic Activity, examines the key methods and challenges involved in estimating a more accurate social cost of carbon.
The social cost of carbon (SCC) is a crucial metric for informing climate policy, most notably for guiding climate regulations issued by the US government. Characterization of uncertainty and transparency of assumptions are critical for supporting such an influential metric. Challenges inherent to SCC estimation push the boundaries of typical analytical techniques and require augmented approaches to assess uncertainty, raising important considerations for discounting. This paper addresses the challenges of projecting very long-term economic growth, population, and greenhouse gas emissions, as well as calibration of discounting parameters for consistency with those projections. Our work improves on alternative approaches, such as nonprobabilistic scenarios and constant discounting, that have been used by the government but do not fully characterize the uncertainty distribution of fully probabilistic model input data or corresponding SCC estimate outputs. Incorporating the full range of economic uncertainty in the social cost of carbon underscores the importance of adopting a stochastic discounting approach to account for uncertainty in an integrated manner.
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.
William A. Pizer
Vice President for Research and Policy Engagement
Billy Pizer is Vice President for Research and Policy Engagement at RFF. Previously, he was the Susan B. King Professor at the Sanford School of Public Policy, Duke University. He is also a Research Associate at the National Bureau of Economic Research.
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.
David Anthoff is a university fellow at RFF and assistant professor in the Energy and Resources Group at the University of California, Berkeley. As an environmental economist, he studies climate change and environmental policy.
Senior Fellow Emeritus
Roger Cooke is a senior fellow emeritus at RFF. He joined RFF in September 2005 as the first appointee to the Chauncey Starr Chair in Risk Analysis.
On the Issues — Sep 9, 2022
On the Issues: The Economic Cost of Carbon Emissions
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: the economic cost of carbon emissions.
Media Highlight — Sep 8, 2022
Barron's: "The Damage from Carbon Is More Costly Than We Thought"
An op-ed written by RFF scholars Maureen Cropper, Richard Newell, Brian Prest, and Kevin Rennert discusses the significance of new findings that the social cost of carbon is $185 per ton.