In a landmark shift from past US climate policy, the Biden administration has committed to the Paris Agreement’s mandate and pledged to put the US on a path that will lead to net-zero annual emissions of greenhouse gases by 2050. Crucial in developing, evaluating, and ultimately passing climate policy is the social cost of carbon (SCC)—the dollar value of the total climate damages incurred from emitting each additional metric ton of carbon dioxide.
Getting the SCC number right is integral to effective climate policy and ultimately making good on Biden’s commitment. Interim estimates of the SCC have been too low to deliver on international and domestic climate commitments, and a new modeling approach must come before the end of the month, when the Interagency Working Group (IAWG) on the Social Cost of Greenhouse Gases releases its permanent social cost of carbon values.
A new Roosevelt brief, “A Social Cost of Carbon Consistent with a Net-Zero Climate Goal,” suggests the federal government use a “target-consistent” approach to determining the SCC. This approach takes as given that the Paris Agreement’s objective to limit global warming to well below 2°C and the Biden administration’s commitment to the US reaching net-zero emissions by 2050 should be met. It then produces a price pathway that efficiently moves policy and economic activity toward those goals. The brief outlines six key methodological flaws inherent in the current Integrated Assessment Model (IAM) approach to estimating the SCC, including an inadequate treatment of risk, high discount rates, and extreme sensitivity to changing assumptions. Implementing a target-consistent approach addresses these flaws and will ensure that the SCC value is adequate to meet climate goals.
Co-authored by Lord Nicholas Stern (London School of Economics), Joseph E. Stiglitz (Columbia University and Roosevelt Institute chief economist), Kristina Karlsson (Roosevelt Institute), and Charlotte Taylor (Grantham Research Institute), the brief then goes on to describe how this new approach can be implemented by the IAWG and suggests that a full suite of progressive climate policies will be needed to meet the scale of the climate crisis and usher in the pro-growth economic transformation America needs.
Insight from the Authors:
“President Biden is the first US president to make a net-zero commitment, and we must do everything in our power to help ensure the US meets that goal. Employing a target-consistent social cost of carbon in policymaking and regulatory review is crucial to doing that.
We also urge the federal government and policymakers to utilize all the policy levers and mechanisms at their disposal, including regulations that improve the disclosure of climate risk, green procurement, green lending, research and development, and changes in the design of our cities, our energy systems, agriculture, and our transportation systems.
A new suite of policy actions will not only mitigate the impacts of climate change but usher in economic growth and, if done in the right way, improve another growing and profound threat: inequality.”
About the Roosevelt Institute
The Roosevelt Institute is a think tank, a student network, and the nonprofit partner to the Franklin D. Roosevelt Presidential Library and Museum that, together, are learning from the past and working to redefine the future of the American economy. Focusing on corporate and public power, labor and wages, and the economics of race and gender inequality, the Roosevelt Institute unifies experts, invests in young leaders, and advances progressive policies that bring the legacy of Franklin and Eleanor into the 21st century.