characterization of domestic damages from GHG emissions, as represented by the domestic SC-GHG, is based on the share of damages arising from climate impacts occurring within U.S. borders as represented in current IAMs. This is both incomplete and an underestimate of the share of total damages that accrue to the citizens and residents of the U.S. because these models do not capture the regional interactions and spillovers discussed above. A 2020 U.S. GAO study observed that “[a]ccording to the National Academies, the integrated assessment models were not premised or calibrated to provide estimates of the social cost of carbon based on domestic damages, and more research would be required to update the models to do so. The National Academies stated it is important to consider what constitutes a domestic impact in the case of a global pollutant that could have international implications that affect the United States” (U.S. GAO 2020).
The global nature of GHGs means that damages caused by a ton of emissions in the U.S. are felt globally and that a ton emitted in any other country harms those in the U.S. Therefore, assessing the benefits of U.S. GHG mitigation activities will require consideration of how those actions may affect mitigation activities by other countries since those international actions will provide a benefit to U.S. citizens and residents. A wide range of scientific and economic experts have emphasized the issue of reciprocity as support for considering global damages of GHG emissions (e.g., Kopp and Mignone 2013, Pizer et al. 2014, Howard and Schwartz 2019, Pindyck 2017, Revesz et al. 2017, Carleton and Greenstone 2021). Carleton and Greenstone (2021) discuss examples of how historic use of a global SC-CO2 may have plausibly contributed to additional international action. Houser and Larson (2021) estimate that under the Paris Agreement, other countries pledged to reduce 6.1 to 6.8 tons for every ton pledged by the U.S. Kotchen (2018) offers a theoretical perspective showing that non-Nash game theoretic behavior can lead countries to optimally chose a social cost of carbon higher than their domestic value to encourage additional reductions from other countries. Using a global estimate of damages in U.S. analyses of regulatory and other actions allows the U.S. to continue to actively encourage other nations, including emerging major economies, to take significant steps to reduce emissions.
The IWG found previously and is restating here that because of the distinctive global nature of climate change that analysis of Federal regulatory and other actions should center on a global measure of SC-GHG. This approach is the same as that taken in regulatory analyses over 2009 through 2016. In the 2015 response to comments, the IWG noted that the only way to achieve an efficient allocation of resources for emissions reduction on a global basis is for all countries to base their policies on global estimates of damages (IWG 2015). Therefore, the IWG continues to recommend the use of global SC-GHG estimates in analysis of Federal regulatory and other actions. The IWG also continues to review developments in the literature, including more robust methodologies for estimating SC-GHG values based on purely domestic damages, and explore ways to better inform the public of the full range of carbon impacts, both global and domestic.
3Discounting in Intergenerational Analyses
GHG emissions are stock pollutants, where damages are associated with what has accumulated in the atmosphere over time, and they are long lived such that subsequent damages resulting from emissions today occur over many decades or centuries depending on the specific greenhouse gas under
