Social cost of carbon
Monetary damage caused by a tonne of greenhouse gas from North America / From Wikipedia, the free encyclopedia
The social cost of carbon (SCC) is the marginal cost of the impacts caused by emitting one extra tonne of carbon emissions at any point in time.[1] The purpose of putting a price on a tonne of emitted CO2 is to aid policymakers or other legislators in evaluating whether a policy designed to curb climate change is justified. The social cost of carbon is a calculation focused on taking corrective measures on climate change which can be deemed a form of market failure.[2] The only governments which use the SCC are in North America.[3] The Intergovernmental Panel on Climate Change suggested that a carbon price of $100 per tonne of CO2 could reduce global GHG emissions by at least half the 2019 level by 2030.[4]
Because of politics the SCC is different from a carbon price.[5] According to economic theory, a carbon price should be set equal to the SCC. In reality, carbon tax and carbon emission trading only cover a limited number of countries and sectors, which is vastly below the optimal SCC. In 2024 the social cost of carbon ranges to over $1000/tCO2,[6] while the carbon pricing only ranges to about $160/tCO2.[7] From a technological cost perspective, the 2018 IPCC report suggested that limiting global warming below 1.5 °C requires technology costs around $135 to $5500 in 2030 and $245 to $13000/tCO2 in 2050.[8] This is more than three times higher than for a 2 °C limit.
A 2024 study estimated the social cost of carbon (SCC) to be over $1000 per tonne of CO2[9]—more than five times the United States Environmental Protection Agency recommended value of around $190 per tonne,[10][11] which is in turn much more than the US government value of $51.[12]