Social Cost of Carbon Calculator

The social cost of carbon is the estimated present value of total economic damage caused by emitting one additional tonne of carbon dioxide, expressed in dollars per tonne. It is produced by integrated assessment models that link an emissions pulse to concentration, then to temperature, then to damages in sectors such as agriculture, coastal flooding, energy demand and mortality, and finally discount that damage stream back to the present. Because a tonne emitted today keeps causing harm for centuries, the discount rate dominates the answer more than any physical parameter does. Moving from 3 percent to 2 percent typically multiplies the estimate by two to three, which is why published central values range from under 20 dollars to more than 300 dollars per tonne. This tool takes the per-tonne value as an input rather than modelling damages, then applies two adjustments used in project appraisal. The value is escalated at an assumed annual growth rate, usually 1.5 to 3 percent, reflecting that a tonne emitted later strikes a wealthier but more damaged and more climate-sensitive world. The resulting stream of annual damages is discounted at the chosen rate to a present value and can be annualised for comparison against capital costs. Two caveats are important. Damage functions in integrated assessment models are calibrated mainly on moderate warming and are widely thought to understate tipping points, conflict and ecosystem loss. A single global figure also hides very uneven regional incidence, with damages concentrated in low-latitude and lower-income countries.

Formal cost-benefit modelling of climate damage began with William Nordhaus, whose Dynamic Integrated Climate-Economy model was published in the early 1990s and produced the first widely cited marginal damage estimates; he shared the 2018 Nobel Memorial Prize in Economic Sciences for that work. Two other models became standard alongside it: PAGE, developed by Chris Hope at Cambridge, and FUND, developed by Richard Tol. The Stern Review, commissioned by the UK Treasury and published in 2006, demonstrated how decisive the discount rate is by applying a near-zero pure rate of time preference and arriving at damage figures far above those Nordhaus had reported, opening a debate among economists that remains unresolved. The metric entered United States regulatory practice in 2010, when an Interagency Working Group convened under the Office of Management and Budget published a central value of about 21 dollars per tonne of CO2 in 2007 dollars at a 3 percent discount rate, so that federal rules could monetise climate effects consistently. That figure was updated to roughly 37 dollars in 2013, replaced by a much lower domestic-only value in 2017, and restored as an interim 51 dollars per tonne in 2021. A 2022 Nature paper by Kevin Rennert and colleagues, using updated damage functions and Ramsey discounting, estimated about 185 dollars per tonne, and the US Environmental Protection Agency adopted a comparable figure near 190 dollars in its 2023 supplementary guidance.