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Social cost of carbon
The social cost of carbon (SCC) is an estimate, typically expressed in dollars, of the economic damages associated with emitting one additional ton of carbon dioxide into the atmosphere. By translating the effects of climate change into monetary terms, the SCC provides policymakers with a tool to assess the potential impacts of actions that increase or reduce greenhouse gas emissions. It is commonly used in regulatory impact analyses to inform investment decisions, cost-benefit assessments, and climate policy development.[obsolete source]
The concept of pricing environmental externalities was first proposed by economist Arthur Pigou in 1912, who suggested taxing activities that generate negative externalities, such as pollution. Although Pigou's framework did not specifically address carbon dioxide emissions, it laid the intellectual foundation for the development of the Social Cost of Carbon.
In the early 1990s, economist William Nordhaus introduced the Dynamic Integrated Climate-Economy (DICE) model, one of the first Integrated Assessment Models (IAMs) to explicitly estimate the external costs of greenhouse gas emissions. His work helped formalize the idea that economic damages from climate change could be quantified.
Various countries began implementing carbon pricing schemes in the 2000s, including the European Union Emissions Trading Scheme (EU ETS) in 2005 and New Zealand's ETS in 2008. Meanwhile, the UK explored IAM-based policy evaluation with the Government Economic Service Working Paper 140 in 2002.
In 2007, the United States Court of Appeals for the Ninth Circuit ruled in Center for Biological Diversity v. National Highway Traffic Safety Administration that the federal government must account for the monetary effects of climate change in regulatory analyses.
The United States formalized the Social Cost of Carbon under President Barack Obama in 2010. An Interagency Working Group (IWG) composed of 12 federal agencies developed the first U.S. government SCC estimates, drawing on outputs from three IAMs: DICE, FUND, and PAGE. These estimates were updated in 2013 and 2016. In 2017, the National Academies of Sciences, Engineering, and Medicine issued recommendations for improving SCC calculations. However, Executive Order 13783 under President Donald Trump disbanded the IWG. President Joe Biden reinstated the IWG through Executive Order 13990 in 2021, directing it to update SCC estimates to reflect scientific advances.[citation needed]
In 2025, President Trump signed an executive order to again disband the IWG, and the Environmental Protection Agency (EPA) subsequently announced plans to "overhaul" SCC calculations.
Following Nordhaus's early work, the concept of the Social Cost of Carbon gained prominence through the Stern Review (2006) and the formation of the U.S. Interagency Working Group in 2009. The SCC became a standard tool for regulatory analysis under the Obama administration.
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Social cost of carbon
The social cost of carbon (SCC) is an estimate, typically expressed in dollars, of the economic damages associated with emitting one additional ton of carbon dioxide into the atmosphere. By translating the effects of climate change into monetary terms, the SCC provides policymakers with a tool to assess the potential impacts of actions that increase or reduce greenhouse gas emissions. It is commonly used in regulatory impact analyses to inform investment decisions, cost-benefit assessments, and climate policy development.[obsolete source]
The concept of pricing environmental externalities was first proposed by economist Arthur Pigou in 1912, who suggested taxing activities that generate negative externalities, such as pollution. Although Pigou's framework did not specifically address carbon dioxide emissions, it laid the intellectual foundation for the development of the Social Cost of Carbon.
In the early 1990s, economist William Nordhaus introduced the Dynamic Integrated Climate-Economy (DICE) model, one of the first Integrated Assessment Models (IAMs) to explicitly estimate the external costs of greenhouse gas emissions. His work helped formalize the idea that economic damages from climate change could be quantified.
Various countries began implementing carbon pricing schemes in the 2000s, including the European Union Emissions Trading Scheme (EU ETS) in 2005 and New Zealand's ETS in 2008. Meanwhile, the UK explored IAM-based policy evaluation with the Government Economic Service Working Paper 140 in 2002.
In 2007, the United States Court of Appeals for the Ninth Circuit ruled in Center for Biological Diversity v. National Highway Traffic Safety Administration that the federal government must account for the monetary effects of climate change in regulatory analyses.
The United States formalized the Social Cost of Carbon under President Barack Obama in 2010. An Interagency Working Group (IWG) composed of 12 federal agencies developed the first U.S. government SCC estimates, drawing on outputs from three IAMs: DICE, FUND, and PAGE. These estimates were updated in 2013 and 2016. In 2017, the National Academies of Sciences, Engineering, and Medicine issued recommendations for improving SCC calculations. However, Executive Order 13783 under President Donald Trump disbanded the IWG. President Joe Biden reinstated the IWG through Executive Order 13990 in 2021, directing it to update SCC estimates to reflect scientific advances.[citation needed]
In 2025, President Trump signed an executive order to again disband the IWG, and the Environmental Protection Agency (EPA) subsequently announced plans to "overhaul" SCC calculations.
Following Nordhaus's early work, the concept of the Social Cost of Carbon gained prominence through the Stern Review (2006) and the formation of the U.S. Interagency Working Group in 2009. The SCC became a standard tool for regulatory analysis under the Obama administration.