The Social Cost of Carbon
EPA and other federal agencies use the social cost of carbon (SCC) to estimate the climate benefits of rulemakings. The SCC is an estimate of the economic damages associated with a small increase in carbon dioxide (CO2) emissions, conventionally one metric ton, in a given year. This dollar figure also represents the value of damages avoided for a small emission reduction (i.e. the benefit of a CO2 reduction).
The SCC is meant to be a comprehensive estimate of climate change damages and includes, but is not limited to, changes in net agricultural productivity, human health, and property damages from increased flood risk. However, given current modeling and data limitations, it does not include all important damages. As noted by the IPCC Fourth Assessment Report, it is “very likely that [SCC] underestimates” the damages. The models used to develop SCC estimates, known as integrated assessment models, do not currently include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature because of a lack of precise information on the nature of damages and because the science incorporated into these models naturally lags behind the most recent research. Nonetheless, the SCC is a useful measure to assess the benefits of CO2 reductions.
The table below presents the most recent SCC estimates (PDF, 22 pp, 780 KB) (updated in 2013) for certain years.
|Discount Rate and Statistic|
|Year||5% Average||3% Average||2.5% Average||3% 95th percentile|
a The SCC values are dollar-year and emissions-year specific.
EPA has used the SCC to analyze the carbon dioxide impacts of various rulemakings since the interagency group first published SCC estimates in 2010 (PDF, 51 pp, 847 KB). Some of these rulemakings have directly targeted carbon dioxide emissions, such as the car and truck standards, whereas others have set standards for conventional or toxic pollutants that indirectly affect carbon dioxide emissions, such as the final rulemaking to control mercury and other air toxic pollutants (PDF, 510 pp, 8.3 MB) from power plants. The rulemakings directly targeting carbon dioxide emissions have projected notable climate-related benefits for society. For example, the projected net present value of carbon dioxide mitigation benefits over the next forty years from three vehicle rulemakings was estimated to range from $78 billion to $1.2 trillion ($2010), depending on which of the four SCC estimates were used (i.e., the average SCC at 5, 3, and 2.5 percent and the 95th percentile SCC at 3 percent). These three rulemakings are:
- The Joint EPA/Department of Transportation Rulemaking to establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (2012-2016) (PDF, 474 pp, 5.89 MB)
- Joint EPA/Department of Transportation Rulemaking to establish Medium- and Heavy-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (PDF, 553 pp, 9.12 MB)
- Joint EPA/Department of Transportation Rulemaking to establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards (2017-2025) (PDF, 555 pp, 8.83 MB)
For more information see the SCC Fact Sheet (PDF, 4 pp, 80 KB). See also the following documents for information about ongoing research to improve the SCC.
- EPA and Department of Energy hosted a series of workshops to inform SCC: workshop one, workshop two.
- EPA funded a workshop on discounting, a critical SCC modeling input. World-recognized experts discussed how the benefits and costs of regulations should be discounted for projects with long time horizons.