A social cost of carbon consistent with a net-zero climate goal
The Biden administration has pledged to put the US on the path to net-zero greenhouse gas emissions by 2050 and to limit warming to well below 2°C in line with the Paris Agreement. In order to meet these goals, it is crucial that the price of carbon used by the federal government to design climate policy is consistent with that pledge.
In the US, this price is estimated using the social cost of carbon (SCC)—a value representing the monetary impacts of climate damage. Thus far, however, the social cost of carbon has been estimated using Integrated Assessment Models (IAMs) that do not consider the global cost of reaching any particular temperature or emissions target and that rely on assumptions which, when altered, provide widely varied estimates. As a result, past estimates of the social cost of carbon and the interim estimates published by the Interagency Working Group on Social Cost of Greenhouse Gases in January 2021 are unreliable and too low to move policy toward the agreed upon climate targets. As climate disaster worsens and we are faced with growing urgency for bold action, a new approach to pricing carbon is necessary.
In “A Social Cost of Carbon Consistent with a Net-Zero Climate Goal,” authors Nicholas Stern, Joseph Stiglitz, Kristina Karlsson, and Charlotte Taylor present an alternative approach to determining the SCC that takes as given the objectives of the Paris Agreement and the Biden administration’s commitment to the US reaching net-zero emissions by 2050, and derives an SCC necessary to reach those goals.
Nicholas Stern, Joseph Stiglitz, Kristina Karlsson, Charlotte Taylor, Roosevelt Institute 2022