The academic community is stepping up to provide an update to the social cost of carbon as the Trump administration steps away from the metric, which is used to place a dollar amount on the release of each ton of carbon into the atmosphere.
The social cost of carbon has been used by the federal and state governments, businesses, regulators and others to inform policy and investment decisions. Last adjusted in 2014, the current estimated cost of a ton of carbon is $40. The National Academies of Sciences, in response to a request from the federal government, provided detailed recommendations in January as to how estimates of the social cost of carbon should be improved after two-years of intensive research.
Instead of acting on the recommendations, though, the Trump administration disbanded the government's interagency working group tasked with updating the metric, and rescinded the previous estimates, calling them no longer representative of federal policy. Resources for the Future, or RFF, a nonpartisan Washington, D.C.-based think tank that specializes in natural resources and the environment, has now launched an initiative to update the social cost of carbon in line with the Academies' recommendations, which advised ways to improve transparency and utilize the most up-to-date science.
RFF told S&P Global Market Intelligence that the carbon-cost calculation informs billions of dollars of policy and investment decisions and is a key component of the federal government's cost-benefit analysis process. Federal courts have required the federal government to account for the cost of climate change in its decision-making.
In a March interview, Jason Schwartz, legal director for the New York University's Institute for Policy Integrity, said the social cost of carbon can be traced back to the George W. Bush administration, when officials began work on the metric. The Obama administration stepped up efforts to ensure that the number was backed by robust science and used by agencies across the federal government. The number has been used for regulations issued by the Department of Energy, U.S. Environmental Protection Agency and others, and for environmental impact statements.
The EPA, for instance, estimated that the Clean Power Plan would deliver between $3.5 billion and $8.1 billion in combined climate and health benefits in 2020, depending on the measures implemented by the states, based on the avoided cost of carbon emissions.
Despite the Trump administration's intention to end the use of the social cost of carbon, RFF said there are plenty of parties still interested in an update. Regulators in Colorado, Minnesota, Illinois and New York all have used, or intend to use, the value in regulatory decisions. For instance, Illinois and New York use the social cost of carbon to calculate payments to nuclear power generators for zero-emission credits. The U.S.-developed metric has also been adopted by Canada and is being considered by the Mexican government as well.
RFF analysts emphasize that the calculations will be open and transparent. RFF intends to release the resulting computing platform and code used to determine the social cost of carbon on an open platform that can be downloaded and improved upon by the general public.