Social cost of carbon
Monetary damage caused by a tonne of greenhouse gas from North America / From Wikipedia, the free encyclopedia
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The social cost of carbon (SCC) is the marginal cost of the impacts caused by emitting one extra tonne of carbon emissions at any point in time.[1] The purpose of putting a price on a tonne of emitted CO2 is to aid policymakers or other legislators in evaluating whether a policy designed to curb climate change is justified. The social cost of carbon is a calculation focused on taking corrective measures on climate change which can be deemed a form of market failure.[2] The only governments which use the SCC are in North America.[3] The Intergovernmental Panel on Climate Change suggested that a carbon price of $100 per tonne of CO2 could reduce global GHG emissions by at least half the 2019 level by 2030.[4]
Because of politics the SCC is different from a carbon price.[5] According to economic theory, a carbon price should be set equal to the SCC. In reality, carbon tax and carbon emission trading only cover a limited number of countries and sectors, which is vastly below the optimal SCC. The social cost of carbon ranges from −$13 to $2387/tCO2, while the carbon pricing at present only ranges from $0.50 to $137/tCO2 in 2022.[6] From a technological cost perspective, the 2018 IPCC report suggested that limiting global warming below 1.5 °C requires technology costs around $135 to $5500 in 2030 and $245 to $13000/tCO2 in 2050.[7] This is more than three times higher than for a 2 °C limit.
In 2021, the study "The social cost of carbon dioxide under climate-economy feedbacks and temperature variability" estimated even costs of more than $300/tCO2.[8][failed verification] A study published in September 2022 in Nature estimated the social cost of carbon (SCC) to be $185 per tonne of CO2—3.6 times higher than the U.S. government's then-current value of $51 per tonne.[9]