

The United States federal government has increased its estimates for the “social cost of carbon” (SCC) by more than 50 per cent.

It sounds geeky, but packs a wallop. Its main use is to decide whether a particular climate policy will benefit society. But it can also be an invaluable tool to identify hidden carbon risks in the economy.

Below I'll show how applying this new data to Canada's economy and the Alberta oilsands industry reveals some unsettling risks. But first, a Q&A will help set the stage.

Q: What exactly is the "social cost of carbon"?

A: The SCC estimates the "monetized damages" to society caused by the release of one tonne of CO2 (tCO2).

Q: Who determined these new SCC values?

A: Eleven US federal agencies -- only two of which are "environmental" -- shared their expertise and worked together to make these estimates:

  • Council of Economic Advisers
  • Council on Environmental Quality
  • Department of Agriculture
  • Department of Commerce
  • Department of Energy
  • Department of Transportation
  • Environmental Protection Agency
  • National Economic Council
  • Office of Management and Budget
  • Office of Science and Technology Policy
  • Department of the Treasury

Q: Do other groups calculate the "social cost of carbon"?

A: Definitely. It is an active field of research. A 2011 survey published by the Canadian think tank Sustainable Prosperity looked at over two hundred estimates of the Social Cost of Carbon by economists worldwide. It said the previous US SCC:

"… is very low because the working group opted for the most conservative parameters to calculate it."

However, the US numbers carry a lot of weight because of the expertise the government can bring to the calculations and the fact that America is the world's second largest climate polluter today and the largest overall in cumulative emissions.

Q: What are the new SCC dollar values?

A: The new calculations (overview pdf) estimate that every tonne of CO2 emitted this year causes around $36 of "monetized damages" to society. Estimated CO2 damage increases about a dollar a year. For example, a tonne of CO2 released in 2020 is estimated to cause $43 in damage to society. Here is a table and chart I made of the "central values" the US calculated for different years:


Q: Why will releasing a tonne of CO2 in the future create more damage than it does now?

A: The US government report explains why future CO2 will inflict greater costs on society:

"…the SCC increases over time because future emissions are expected to produce larger incremental damages as physical and economic systems become more stressed in response to greater climatic change."

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