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After witnessing first hand how global warming can have a profound impact on our economies, such as with the devastating destruction of Maui amidst rampant wildfires and the struggle for Americans to pay their taxes on time due to other natural disasters caused by climate change – new efforts such as the social cost of carbon are being implemented in order to secure a greater sense of control over the climate crisis.
The social cost of carbon refers to the method which will be used by politicians to help decipher the cost-benefit ratio of implementing a policy to decrease the current effects of climate change. Many are hopeful that the social cost of carbon can help to justify future, more stringent environmental regulations.
In this article, we’ll explain what the social cost of carbon is, why it is important in the midst of climate change, how to calculate the social cost of carbon, and what the future holds for this re-born, potentially efficacious method for policy makers.
The social cost of carbon, often referred to as SCC for short, is a method used by lawmakers to help them weigh the pros and cons of potential climate policies and environmental regulations.
As a result of how climate change has impacted the economy, the social cost of carbon has risen to prevalence in hopes that it can help heal the negative effects several markets have experienced as a result of excess carbon emissions and overall global warming.
Having first been developed in 2009 by the Obama administration under the IWG, or Interagency Working Group, the social cost of carbon aims to determine the future cost of damage per each ton of carbon dioxide emissions produced each day.
Some general rules to remember when it comes to the social cost of carbon include:
👉 Overall, the easiest way to think about the social cost of carbon is to think of it as someone paying their dues either ahead of time or afterwards. For instance, if there is a restaurant you visit often, you may ask them to keep a running tab of your purchases to avoid needing to pay upfront. The social cost of carbon aims to do the same thing by calculating the future cost of damages to be created by climate change.
The social cost of carbon is important in the midst of climate change, seeing as it can help policymakers develop the most effective climate legislation possible to help curb the negative effects of global warming.
👉 It is important to note that the primary reason why the social cost is essential in today’s world is because it provides a benefit-cost analysis that can help to avoid future, detrimental impacts to our economic systems.
However, seeking to implement the use of the social cost of carbon can do the world a lot of good – and not just for financial-related reasons.
Here are a few other reasons why the social cost of carbon can be viewed as an indispensable tool:
👉 Ultimately, the social cost of carbon is imperative as multiple markets continue to economically suffer as a result of climate change – and SCC can help to avoid future market-related issues.
The dollar amount for the social cost of carbon can be calculated by using algorithmic, computer models that will determine the social, economic, and physical impact of implementing a low or high social cost of carbon.
Here are the four types of information integral to the social cost of carbon broken down:
👉 Usually, a high discount rate insinuates that the region prefers to hold onto their money and not risk the potentially lucrative future benefits – whereas a low discount rate demonstrates a willingness to invest in programs which will benefit future generations in the area.
The social cost of carbon by country is as follows expressed in USD:
👉 Although calculating the social cost of carbon can prove beneficial, its method has proven extremely controversial in previous years – and has been modified numerous times under different presidential administrations.
The social cost of carbon has evolved with the times, especially as the method to calculating the social cost of carbon has been viewed as controversial over the years.
The first approach to calculating the social cost of carbon was developed by the Obama administration, which included the social cost of carbon for the increased need to use central heating and cooling systems due to erratic temperatures, how carbon impacted agriculture, and the potential coastal damage that excess carbon dioxide emissions could cause.
While this was good, the social cost of carbon did not include other future damage costs for other natural disasters caused by climate change because the costs were uncertain, such as with wildfires, flooding, or respiratory diseases – many of which we have suffered a great deal in 2023 alone.
Once Trump became president, he disbanded the IWG and prioritised the economic impact of carbon to the US only – meaning that calculating the social cost of carbon left out several variables once more.
👉 Luckily, as of the end of 2023, the Biden administration has worked hard to restore the social cost of carbon – with the help of improved climate science and a newfound awareness on the importance of climate change, even if the White House has yet to declare it a national emergency.
The future for the social cost of carbon is starting to look brighter, at least in the United States – as the Biden administration is making a consistent effort to ensure that SCC is more widely implemented in the coming years.
Biden is seeking to widen the social cost of carbon, seeing as the U.S. spends over $630 billion annually on products and services – it is becoming essential for the U.S. government to take greater control of its impact on carbon emissions.
Currently, Biden’s goal is to implement the social cost of carbon into procurement, which will help to:
Overall, the social cost of carbon has the potential to help the world finally take control of the excess carbon emissions we’ve been polluting our planet with – and could help pave the way for a more sustainable and ecologically viable life for future generations.
If reading this article about the social cost of carbon has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!
Seeking to understand how the social cost of carbon could have an impact on your business may seem difficult, but don’t worry – Greenly is here to help! Click here to book a demo and get personalised expertise on how you can start to reduce your own emissions and decrease your environmental impact.
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
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