Author(s): Ackerman, F., and Stanton, E.A.

Year: 2011

In: Report for the Economics for Equity and the Environment Network

Type: Report



Link to SEI authors:

Climate Risks and Carbon Prices: Revising the Social Cost of Carbon

A new SEI analysis raises serious questions about the U.S. government's estimate of the "social cost of carbon" – a key factor in environmental regulation.

The SCC – a calculation of the damage caused by each ton of carbon dioxide (CO2) emitted into the atmosphere – is a sort of "volume dial" for climate policy: The higher the SCC, the tougher (and more expensive) the regulations that policymakers will consider cost-effective. The figure the U.S. government has used since last year, developed by an interagency group, is per ton of CO2.

But that number, this peer-reviewed report shows, is based on fundamentally flawed methodologies and grossly understates the potential impact and uncertainty of climate change.

Making small adjustment to the models to reflect these factors lead to values as high as 3 per ton in 2010 and 50 in 2050.

Since the projected cost of emissions abatement is significantly lower, the authors conclude, the U.S. government would do better to set an emission reduction target, find the least-cost ways to achieve it, and price carbon accordingly.

The report was published by Economics for Equity and the Environment Network (E3 Network), packaged with comments by Simon Dietz, of the London School of Economics and Political Science. It builds on more than a year's worth of research and analyses by the authors (see links to previous reports on side menu).

Note: A revised version of this report is available as Economics E-journal Discussion Paper No. 2011-40.

Download the report (PDF, 1.3mb)

Individual parts & support materials:
Executive summary (external link, PDF)
Comments by Simon Dietz (external link, PDF)
Fact sheet (external link, PDF)

Audio: Briefing for NGOs (July 12, 2011; MP3 stream)