Social cost of carbon

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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]