Full Title: Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866
Author(s): Interagency Working Group on Social Cost of Carbon, United States Government
Publisher(s): Interagency Working Group on Social Cost of Carbon, United States Government
Publication Date: 5/2013

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Description:

Under Executive Order 12866, agencies are required, to the extent permitted by law, “to assess both the costs and benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, proposed or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” The purpose of the “social cost of carbon” (SCC) estimates presented here is to allow agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts.

The interagency process that developed the original U.S. government’s SCC estimates is described in the 2010 interaganecy technical support document (TSD) (Interagency Working Group on Social Cost of Carbon 2010). Through that process the interagency group selected four SCC values for use in regulatory analyses. Three values are based on the average SCC from three integrated assessment models (IAMs), at a discount rate of 2.5, 3, and 5 percent. The fourth value, which represents the 95th percentile SCC estimate across all three models at a 3 percent discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the SCC distribution.

While acknowledging the continued limitations of the approach taken by the interagnecy group in 2010, this document provides an update of the SCC estimates based on new versions of each IAM (DICE, PAGE, and FUND). It does not revisit other interagency modeling decisions. Improvements in the way damages are modeled are confined to those that have been incorporated into the latest versions of the models by the developers themselves int he peer-reviewed literature.

The SCC estimate using the update versions of the models are higher than those reported in the 2010 TSD. By way of comparison, the four 2020 SCC estimates reported int he 2010 TSD were $7, $26, $42 and $81 (2007$). The model updates that are relevant to the SCC estimate include: and explicit representation of sea level rise damages in the DICE and PAGE models; updated adaptation assumptions, revisions to ensure damages are constrained by GDP, updated regional scaling of damages, and a revised treamtent of potentially abrupt shifts in climate damages in the PAGE model; an updated carbon cycle in the DICE model, and updated damage functions for sea level rise impacts, the agricultural sector, and reduced space heating requirements, as well as changes to the transient response of temperature to the buildup of GHG concentrations and the inclusion of indirect effects of methane emissions in the FUND model. The SCC estimates vary by year.