States Are Using Social Cost of Carbon in Energy Decisions, Despite Trump's Views

The climate metric, maligned by the Trump administration, helps build the cost of future climate harms into state electricity plans and markets.

The social cost of carbon was an arcane but important tool in the federal climate toolbox until President Donald Trump targeted it in his sweeping March 2017 executive order to weaken climate actions.

Now, states are taking up the metric.

Policymakers and regulators in several states, including New York, Minnesota, Illinois, and Colorado, are using the social cost of carbon to measure and reduce CO2 impacts from their power grids.  Some are using it to compensate rooftop solar panel owners who feed low-carbon power in the grid.  Others use it to incentivize nuclear power and renewable energy.  Their efforts, aimed at reducing planet-warming greenhouse gas emissions, come as Congress and the Trump administration try to restrict its use.

"It's been striking to see the progress on this front even as the Trump administration has tried to undermine the use of a social cost of carbon," said Rachel Cleetus, chief economist and manager of the climate program at the Union of Concerned Scientists.

Put simply, the social cost of carbon is a dollar estimate of the future damages from droughts, sea level rise, heat waves, and other climate impacts wrought by each ton of carbon dioxide released to the atmosphere.  Climate change caused by planet-warming CO2 emitted by fossil fuel power plants will diminish ecosystems, damage infrastructure, and harm people's health, but until there is a price on carbon, most of those costs will not be paid by power generators or passed on to their consumers.  Instead they will be borne by the environment and the public.

By calculating a cost in today's dollars for these impacts, and using it when regulating energy investments and implementing climate policies, the states can put cleaner energy sources on a more level playing field with fossil fuels.  Wind and solar farms, nuclear power, and energy conservation efforts are often less expensive than harmful alternatives when the damage potential of fossil fuels is taken into account.

Many corporations use a similar approach by incorporating a "shadow carbon price," which bakes the future costs of climate change into their decision-making, Cleetus notes.  Putting a price on carbon adds to today's cost of polluting power plants, helping companies to more accurately evaluate how expensive these long-term investments could be in the future, especially if stronger climate policies down the road lead to plant shutdowns before they reach the end of their lifespan.

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