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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.

Our efforts to put the brakes on climate change or adapt to a warming climate present a fundamental tradeoff between costs borne today and benefits that accrue to the children and grandchildren of the current generation. In making investments today that affect future generations' prospects, we need to think carefully about how we value their welfare compared to our own. A common economic formula recommends giving up only 5 cents today for every dollar of benefits 100 years in the future; we call this "discounting" the future. Underlying this approach is the assumption that future generations will be much better off than our own, just as we are much wealthier than our ancestors were. Would our descendants' agree with this approach? Are there reasons to put more value on future benefits? William Pizer, Ben Groom, and Simon Dietz discuss three possible reasons that we might put a higher value on future benefits. First, people disagree considerably about the correct discount rate. Other plausible interpretations of society's preferences or observed data could increase the weight we place on future benefits by as much as a factor of five. Second, we may have failed to correctly value future climate change impacts, particularly those related to the loss of environmental amenities that have no close monetary substitutes. Third, we may not be properly valuing the risk that a warming climate could cause sudden and catastrophic changes that would drastically alter the size of the population. Ultimately, the authors write, many of the choices about how we value future generations' welfare come down to ethical questions, and many of the decisions we must make come down to societal preferences--all of which will be difficult to extract from data or theory.

Market-based policies to address fossil fuel-related externalities including climate change typically operate by raising the price of those fuels. Increases in energy prices have important consequences for a typical U.S. household that spent almost $4,000 per year on electricity, fuel oil, natural gas, and gasoline in 2005. A key question for policymakers is how these consequences vary over different regions and subpopulations across the country—especially as adjustment and compensation programs are designed to protect more vulnerable regions. To answer this question, we use non-publicly available data from the U.S. Consumer Expenditure Survey over the period 1984–2000 to estimate long-run geographic variation in household use of electricity, fuel oil, natural gas, and gasoline, as well as the associated incidence of a $10 per ton tax on carbon dioxide (ignoring behavioral response). We find substantial variation: incidence from the tax range from $97 dollars per year per household in New York County, New York to $235 per year per household in Tensas Parish, Louisiana. This variation can be explained by differences in energy use, carbon intensity of electricity generation, and electricity regulation.