The Social Cost of Carbon

July 7, 2021

Have you heard of the social cost of carbon?

The social cost of carbon (SCC) is a cost estimate of the future economic damages that would result from emitting one additional ton of greenhouse gas today. In other words, it’s a way to attribute a cost to the future impact of additional greenhouse gas pollution. SCC is used by policymakers to estimate the cost or the benefit of various technologies.

SCC is based on a modeled price for future climate change impacts (currently determined to be $50 in Canada) and a discount value for how significantly this impact will affect future generations.

Future costs and benefits are generally considered less significant than present-day costs and benefits. (Refresher on calculating net present values here.) There is an interesting debate on whether future climate impacts will have a devastating effect on future generations–which would warrant a lower discount value meaning future impacts are seen as closer to equivalent to the impact today–or whether future climate impacts will be easily mitigated by future generations because of technology advances that allow them to adapt–warranting a higher discount value.

Examples of future climate impacts include rising sea levels and extreme weather events like drought, hail storms, heatwaves, etc.

Experts are still debating the precise measure of the social cost of carbon and the appropriate discount value. Meanwhile, without a value, the effective price is $0. This means the impacts today and in the future are “not valuable.” However, just by looking at the damage from extreme weather events (hello Texas power outage!), we know this is completely false.

This article is contributed by

Amy Zell
Amy Zell is the Director, Advisory Services at Bluesource where she helps organizations and innovators access the carbon market. Her technical background and passion for balancing economic imperatives with environmental realities enable her to help companies take the next step on their climate journey.

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