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. 2022 Oct;610(7933):687-692.
doi: 10.1038/s41586-022-05224-9. Epub 2022 Sep 1.

Comprehensive evidence implies a higher social cost of CO2

Kevin Rennert  1 , Frank Errickson #  2 , Brian C Prest #  1 , Lisa Rennels #  3 , Richard G Newell  1 , William Pizer  1 , Cora Kingdon  3 , Jordan Wingenroth  1 , Roger Cooke  1 , Bryan Parthum  4 , David Smith  4 , Kevin Cromar  5   6 , Delavane Diaz  7 , Frances C Moore  8 , Ulrich K Müller  9 , Richard J Plevin  10 , Adrian E Raftery  11 , Hana Ševčíková  12 , Hannah Sheets  13 , James H Stock  14 , Tammy Tan  4 , Mark Watson  9 , Tony E Wong  13 , David Anthoff  15
Affiliations

Comprehensive evidence implies a higher social cost of CO2

Kevin Rennert et al. Nature. 2022 Oct.

Abstract

The social cost of carbon dioxide (SC-CO2) measures the monetized value of the damages to society caused by an incremental metric tonne of CO2 emissions and is a key metric informing climate policy. Used by governments and other decision-makers in benefit-cost analysis for over a decade, SC-CO2 estimates draw on climate science, economics, demography and other disciplines. However, a 2017 report by the US National Academies of Sciences, Engineering, and Medicine1 (NASEM) highlighted that current SC-CO2 estimates no longer reflect the latest research. The report provided a series of recommendations for improving the scientific basis, transparency and uncertainty characterization of SC-CO2 estimates. Here we show that improved probabilistic socioeconomic projections, climate models, damage functions, and discounting methods that collectively reflect theoretically consistent valuation of risk, substantially increase estimates of the SC-CO2. Our preferred mean SC-CO2 estimate is $185 per tonne of CO2 ($44-$413 per tCO2: 5%-95% range, 2020 US dollars) at a near-term risk-free discount rate of 2%, a value 3.6 times higher than the US government's current value of $51 per tCO2. Our estimates incorporate updated scientific understanding throughout all components of SC-CO2 estimation in the new open-source Greenhouse Gas Impact Value Estimator (GIVE) model, in a manner fully responsive to the near-term NASEM recommendations. Our higher SC-CO2 values, compared with estimates currently used in policy evaluation, substantially increase the estimated benefits of greenhouse gas mitigation and thereby increase the expected net benefits of more stringent climate policies.

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Conflict of interest statement

D.A., F.E., B.C.P., L.R., K.R. and J.W. received support from ICF with funding from the US Environmental Protection Agency during part of the time this paper was developed; that funding was not affected by this study’s results. D.D. is employed at EPRI, a non-profit public interest research institute supported by a combination of funding from industry, governments and foundations that could be affected by the results of this research, both positively and negatively. R.G.N. is a member of the NASEM Board on Environmental Change and Society, which oversaw the NASEM consensus study that guided this research, and which he also co-chaired. W.P. was also a member of that NASEM consensus study committee when he was on the faculty at Duke University. R.G.N. has also been a member of the National Petroleum Council since 2016, a federally chartered advisory committee to the US Secretary of Energy, who appoints its members.

Figures

Fig. 1
Fig. 1. RFF-SP socioeconomic scenarios and the resulting climate system projections.
a–c, Probabilistic socioeconomic projections for global population (a), per capita GDP growth rates (b), and carbon dioxide emission levels (c) from the RFF-SP scenarios. d–f, Corresponding climate system projections that account for parametric uncertainty in FaIR and BRICK for atmospheric carbon dioxide concentrations (d), global surface temperature changes relative to the 1850–1900 mean (e), and global mean sea-level changes relative to 1900 (f). In all panels, solid centre lines depict the median outcome, with darker shading spanning the 25%–75% quantile range and lighter shading spanning the 5%–95% quantile range.
Fig. 2
Fig. 2. SC-CO2 distributions vary with the choice of near-term discount rates.
Distributions of the SC-CO2 based on RFF-SP scenario samples, a stochastic, growth-linked discounting framework, uncertainty in the FaIR climate and BRICK sea-level models, and uncertainty in climate damage parameters. Colours correspond to near-term average discount rates of 3.0% (blue), 2.5% (orange), 2.0% (red, our preferred specification) and 1.5% (teal). Dashed vertical lines highlight mean SC-CO2 values. Box and whisker plots along the bottom of the figure depict the median of each SC-CO2 distribution (centre white line), 25%–75% quantile range (box width), and 5%–95% quantile range (coloured horizontal lines) values. All SC-CO2 values are expressed in 2020 US dollars per metric tonne of CO2.
Fig. 3
Fig. 3. Partial SC-CO2 estimates and uncertainty levels strongly differ across the four climate damage sectors.
Box and whisker plots for the climate damage sectors included in the GIVE model, based on partial SC-CO2 estimates for each sector. The figure depicts the median (centre white line), 25%–75% quantile range (box width), and 5%–95% quantile range (coloured horizontal lines) partial SC-CO2 values. Black diamonds highlight each sector’s mean partial SC-CO2, with the numeric value written directly above. All SC-CO2 values are expressed in 2020 US dollars per metric tonne of CO2.
Extended Data Fig. 1
Extended Data Fig. 1. SC-CO2 distributions are robust to different damage function specifications ($ per tCO2).
Distributions of the SC-CO2 using the damage functions from GIVE (orange, our preferred specification), DICE-2016R (blue), and Howard & Sterner (red) for near-term discount rates of 1.5%, 2.0%, 2.5% and 3.0%. All results use the RFF-SP scenarios, a stochastic growth-linked discounting framework, and sample uncertain climate, sea-level and damage function parameters, including for DICE-2016R and Howard & Sterner damage functions. The DICE-2016R damage function is based on ref.  (see page 2 of that work’s supporting information). The Howard & Sterner damage function is based on the base coefficient in their table 2, specification (8). All SC-CO2 values are expressed in 2020 US dollars per metric tonne of CO2.
Extended Data Fig. 2
Extended Data Fig. 2. Discounted marginal damages by year, preferred 2% near-term discount rate case.
Solid line represents mean discounted marginal damages for a one-tonne CO2 emissions pulse in 2020, dotted line represents the median, with darker shading spanning the 25%–75% quantile range and lighter shading spanning the 5%–95% quantile range. All SC-CO2 values are expressed in 2020 US dollars per metric tonne of CO2.
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References

    1. National Academies of Sciences, Engineering, and Medicine. Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide (The National Academies Press, 2017).
    1. Aldy JE, Kotchen MJ, Stavins RN, Stock JH. Keep climate policy focused on the social cost of carbon. Science. 2021;373:850–852. - PubMed
    1. Rennert, K. et al. The social cost of carbon: advances in long-term probabilistic projections of population, GDP, emissions, and discount rates. Brook. Pap. Econ. Act. Fall 2021, 223–275 (2022).
    1. Value Balancing Alliance. Methodology Impact Statement General Paper (VBA, 2021).
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