Document Type:Technical Results
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The social cost of carbon (SCC) is a monetary estimate of the global climate change damages to society from an additional unit of carbon dioxide (CO2) emitted to the earth’s atmosphere. The U.S. Government uses SCC estimates to value the benefits of estimated CO2 reductions associated with federal rulemakings. SCC estimates are also being utilized in a variety of other policy contexts, domestic and international. However, there is little attention being paid to how the SCC is being applied in informing policy. Specifically, there is limited evaluation of how SCC estimates are being used, and next to no guidance on proper use. This lack of attention to SCC application is surprising given the fact that it is potential CO2 damages and CO2 reduction benefits that are of greatest concern. This study reviews current SCC applications, taking stock of various application types and developing an inventory of U.S. regulatory applications. We analyze the applications and discover that decision-makers, analysts, and the public need to pay more attention to use of the SCC. We identify a variety of issues and opportunities for improving existing and future CO2 reduction benefit estimates and cost-benefit analyses. These issues should be considered, discussed, and potentially acted upon to improve the reliability of insights and conclusions from those analyses. Going forward, guidance is needed for SCC application within and across agencies and with other jurisdictions. This study also explores a particular issue in detail—emissions leakage potential in the U.S. power sector and energy system with regionally differentiated pricing of power sector CO2 emissions. In this focused issue analysis, we also evaluate other socially important potential environmental and economic implications.
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