September 2021, regarding areas of decision-making, budgeting, and procurement by the Federal Government where the SC-GHG should be applied. The SC-GHG has been used previously in nonregulatory Federal analysis, such as in federal procurement,[1] grant programs,[2] and National Environmental Policy Act (NEPA) analysis,[3] as well as in state level applications; the latter is discussed further in Section 5.
1.2Recommendations from the National Academies of Sciences, Engineering, and Medicine
In 2015, the IWG requested that the National Academies of Sciences, Engineering, and Medicine review and recommend potential approaches for improving its SC-CO2 estimation methodology. In response, the National Academies convened a multidisciplinary committee, the Committee on Assessing Approaches to Updating the Social Cost of Carbon. In addition to evaluating the IWG’s overall approach to SC-CO2 estimation, the committee reviewed its choices of IAMs and damage functions, climate science assumptions, future baseline socioeconomic and emission projections, presentation of uncertainty, and discount rates.
In its final report (National Academies 2017), the National Academies committee recommended that the IWG pursue an integrated modular approach to the key components of SC-CO2 estimation to allow for independent updating and review and to draw more readily on expertise from the wide range of scientific disciplines relevant to SC-CO2 estimation. Under this approach, each step in SC-CO2 estimation is developed as a module—socioeconomic projections, climate science, economic damages, and discounting—that reflects the state of scientific knowledge in the current, peer-reviewed literature. In the longer-term, it recommended that the IWG also fund research on ways to better capture interactions and feedbacks between these components. In addition, the committee noted that, while the IWG harmonized assumptions across the IAMs for socioeconomic and emission projections, climate sensitivity, and discount rates when estimating the SC-CO2, using a single climate module in the nearer-term (2–3 years) and eventually transitioning to a single IAM framework will enhance transparency, improve consistency with the underlying science, and allow for more explicit representation of uncertainty. It recommended these three criteria also be used to judge the value of other updates to the methodology. In addition, it recommended that the IWG update SC-CO2 estimates at regular intervals, suggesting a five-year cycle.
Regarding the key components of the SC-CO2, the committee recommended the following improvements in the nearer-term:
- Socioeconomic and emissions projections: Use accepted statistical methods and elicit expert judgment to project probability distributions of future annual growth rates of per-capita GDP and
- ↑ For example, SC-CO2 estimates have been used in Domestic Delivery Services contracts for USG parcel shipping (https://westcoastclimateforum.com/sites/westcoastclimateforum/files/related_documents/FedGSA_DDS3_green_features_fact_sheet.pdf).
- ↑ For example, in 2016 DOT’s Transportation Investment Generating Economic Recovery (TIGER) discretionary grant program required a demonstration that benefits justify costs for proposed projects, and the guidance DOT provides to applicants for how to conduct such an analysis specified that they should use the USG SC-CO2 estimates (https://www.transportation.gov/sites/dot.gov/files/docs/BCARG2016March.pdf ).
- ↑ See Howard and Schwartz (2019) for examples of the use of SC-CO2 estimates in NEPA analyses.
