Developing a Social Cost of Carbon for US Regulatory Analysis: A Methodology and Interpretation

Abstract

The US government recently developed a range of values representing the monetized global damages associated with an incremental increase in carbon dioxide (CO[subscript 2]) emissions, commonly referred to as the social cost of carbon (SCC). These values are currently used in benefit–cost analyses to assess potential federal regulations. For 2010, the central value of the SCC is $21 per ton of CO[subscript 2] emissions, with sensitivity analyses to be conducted at $5, $35, and $65 per ton of CO[subscript 2] (2007 dollars). This article summarizes the methodology and interagency process used to develop these SCC values, offers our own commentary on how the SCC can be used to inform regulatory decisions, and identifies priorities for further research. (JEL: Q54, Q51, and Q58)