This article discusses the impact that climate change is having on the world’s economy.
The “social cost of carbon” (SCC) is the dollar value of the future climate damages from emitting an additional ton of carbon dioxide. During the Georgia W. Bush and Barack Obama administrations, the SCC was used in regulatory cost-benefit analysis. The SCC is also the starting point for thinking about the appropriate magnitude of a carbon tax to reduce carbon dioxide (CO2) emissions.
Over the past year, the SCC has come under attack both from the administration and from Congress. Last fall, the administration substantially reduced the value of the SCC by using — incorrectly — a high discount rate and a narrow construction of domestic benefits. Most recently, uncertainty about the size of the SCC has been used as an argument for a House resolution opposing a carbon tax.