Social cost of carbon

The social cost of carbon is the estimated present value of economic damages caused by emitting one additional tonne of carbon dioxide. It is a monetary measure of the marginal climate harm from an emission.

Integrated assessment model: A model that links human activity, environmental change, and economic outcomes to study their interactions over time. These models combine emissions, climate projections, and economic damages to calculate the carbon’s marginal cost.
Carbon tax: A tax imposed on carbon dioxide emissions or on fuels in proportion to their carbon content. Setting the tax near estimated marginal climate damages makes emitters face more of the harm they cause.
William Nordhaus: An American economist whose work developed economic models of climate change and climate policy. His early integrated assessment modeling helped establish quantitative analysis of climate damages and policy.
Domestic social cost of carbon: An estimate counting climate damages within a single country from an additional tonne of carbon dioxide emitted there. It excludes damages abroad that a global estimate includes.
Climate tipping point: A threshold beyond which a small change can trigger a large, potentially self-reinforcing shift in the climate system. Potential threshold damages are difficult to represent in models and may raise estimated marginal harm.
Discount rate: A rate used to convert future costs or benefits into present values. It determines how heavily the calculation weighs damages falling on future generations.
Cost-benefit analysis: A method that compares a policy’s expected benefits with its expected costs, often in monetary terms. The estimate lets analysts count avoided climate damages among a policy’s benefits.
DICE model: An integrated assessment model developed by William Nordhaus to analyze interactions between the economy and climate. It is a prominent model used to estimate the costs and benefits of emissions reductions.
Global social cost of carbon: An estimate counting climate damages worldwide from an additional tonne of carbon dioxide emissions. Its geographic scope includes foreign harms as well as domestic ones.
Nonmarket valuation: Methods for assigning economic values to goods and harms that lack ordinary market prices. Many climate losses, including ecosystem and health harms, have no direct market price.

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