The Fluctuating Social Cost of Carbon

In my past posts, I have discussed the important crossover between economic and climate issues. My posts have focused primarily on the problems of climate change and not on the movement to a solution. Economics is very intertwined with climate mitigation as it is expensive and impactful on every aspect of human life. To measure climate mitigation it is necessary to put climate costs in numeric values, one of the most important measurements is the social cost of carbon. The social cost of carbon is “an estimate of the cost, in dollars of the damage done by each additional ton of carbon emissions”. Assigning a monetary value to carbon aids policymakers in their cost-benefit analysis. Important policies like fuel standards and electricity standards are decided based on the SCC. However, the SCC can change based on the administration, creating uncertainty for policymakers and the industries the policies affect. The Obama administration set the SCC at $43/ton globally, but once the Trump administration took power they lowered the SCC to only $3-$5/ton. The SCC is still being contested as the Biden administration has reassessed the SCC to $51/ton though the EPA recently came out with a proposal to raise the SCC to $190/ton. The wide variation in these calculated costs shows how easily the SCC can be manipulated to prioritize different objectives. For example, the Trump administration was able to come up with such a low SCC compared to the EPA, Biden, and Obama administrations by changing the parameters of the calculation. Trump’s administration calculated the SCC only within American borders, which disregards how carbon emissions by the US will harm the rest of the world. The Trump administration also placed a lower value on future costs to achieve a low SCC. These seemingly easy manipulations have vast effects on climate policy that affect both the US and the rest of the world. In my opinion climate mitigation policies should be based on less variable values. To actually combat climate change we need long-lasting policies so that firms on governments can decrease pollution consistently. Monetizing climate costs by utilizing the tool of the social cost of carbon is an effective and convincing way of passing policies, however, the constant change of the SCC yields slower results.