Comprehensive evidence implies a higher social cost of CO ₂

Abstract

The social cost of carbon dioxide (SC-CO ₂) measures the monetized value of the damages to society caused by an incremental metric tonne of CO ₂ emissions and is a key metric informing climate policy. Used by governments and other decision-makers in benefit–cost analysis for over a decade, SC-CO ₂ estimates draw on climate science, economics, demography and other disciplines. However, a 2017 report by the US National Academies of Sciences, Engineering, and Medicine ¹ (NASEM) highlighted that current SC-CO ₂ estimates no longer reflect the latest research. The report provided a series of recommendations for improving the scientific basis, transparency and uncertainty characterization of SC-CO ₂ estimates. Here we show that improved probabilistic socioeconomic projections, climate models, damage functions, and discounting methods that collectively reflect theoretically consistent valuation of risk, substantially increase estimates of the SC-CO ₂. Our preferred mean SC-CO ₂ estimate is $185 per tonne of CO ₂ ($44–$413 per tCO ₂: 5%–95% range, 2020 US dollars) at a near-term risk-free discount rate of 2%, a value 3.6 times higher than the US government’s current value of $51 per tCO ₂. Our estimates incorporate updated scientific understanding throughout all components of SC-CO ₂ estimation in the new open-source Greenhouse Gas Impact Value Estimator (GIVE) model, in a manner fully responsive to the near-term NASEM recommendations. Our higher SC-CO ₂ values, compared with estimates currently used in policy evaluation, substantially increase the estimated benefits of greenhouse gas mitigation and thereby increase the expected net benefits of more stringent climate policies.

Abstract

Coupling advances in socioeconomic projections, climate models, damage functions and discounting methods yields an estimate of the social cost of carbon of US$185 per tonne of CO ₂—triple the widely used value published by the US government.