Letter—The Social Cost of Carbon: A Global Imperative
To solve the unprecedented global commons problem posed by climate change, all nations must internalize the global externalities of their emissions (van der Ploeg 2016); otherwise, collective abatement efforts will never achieve an efficient, stable climate outcome. Yet lately, the U.S. government’s standard valuation of carbon pollution’s externalities has come under attack in both academic journals and courtrooms. This metric—the “social cost of carbon” (SCC)—is used to analyze and set climate policy, and since 2010 federal agencies have emphasized global valuations of climate damages (Interagency Working Group on Social Cost of Carbon 2010). Recently a handful of economists and policy experts have instead begun advocating domestic-only valuations (Dudley and Mannix 2014; Fraas et al. 2016), based on dubious arguments. The same arguments have been repeated in two major challenges in federal court against energy efficiency standards and the regulation of power plants’ carbon emissions. Even the U.S. Forest Service has proposed making important decisions about the management of coal mines based on the domestic-only SCC value. Finally, in a recent article published in this journal, Gayer and Viscusi (2016) try to make an economic and legal case for a domestic-only SCC. We are writing this letter to express our strong support for the continued use of a global SCC.