Social cost of carbon
Also called: SCC · Topic: Environment and Sustainable Development · NCERT: Beyond NCERT
Meaning
The social cost of carbon (SCC) is the money value of all future damage caused by emitting one more tonne of CO2. That damage includes crop loss, health harm and flood damage. The SCC is expressed as a present value, meaning future damages are converted into today's money. It is used as a benchmark for how high a carbon tax or carbon price should be. If the carbon price equals the SCC, polluters pay the full damage they cause.
Example
In 2023, the US Environmental Protection Agency estimated the SCC at about $190 per tonne of CO2. That estimate was later withdrawn. Its logic still holds: a carbon price well below the SCC means pollution remains under-priced.
Don't confuse with
- Internal carbon price: a notional price that a firm chooses for its own investment decisions. The SCC is an estimate of damage to society as a whole.
- Carbon credit price: set by supply and demand in a carbon market, and it can be far below the SCC.
Related concepts
- Internalisation of externalities
- Carbon pricing
- Green tax
- Internal carbon price
- Fossil fuel subsidies
- Cap-and-trade
- Carbon market
- Compliance carbon market
- Voluntary carbon market
- Carbon credit