Climate Risks and Carbon Prices: Revising the Social Cost of Carbon

The authors challenge the U.S. government's 2010 estimate of a $21 Social Cost of Carbon (SCC), arguing it underestimates climate risks. By adjusting the DICE model to include higher climate sensitivity, more severe damage estimates at both low and high temperatures, and a lower discount rate, the authors find the SCC could reach $893 in 2010 and $1,500 by 2050. They conclude that if these higher risks are plausible, the SCC exceeds the cost of maximum feasible abatement, making a precautionary approach to rapid emission elimination the most cost-effective strategy.

• The U.S. federal government's 2010 estimate of the Social Cost of Carbon (SCC) at $21 is considered too low because it omits major climate risks and underestimates the impact on future generations.
• A re-analysis using the DICE model shows that the SCC could be significantly higher, potentially reaching $893 in 2010 and $1,500 in 2050 under worst-case scenarios.
• The authors identify four primary uncertainties that drive higher SCC estimates: climate sensitivity, low-temperature damages, high-temperature damages, and the discount rate.
• The original DICE model's high-temperature damage estimates are criticized as a drastic understatement; the authors incorporate Martin Weitzman's suggestion that losses could reach 50% of world GDP at 6°C and 99% at 12°C.
• The authors argue that a lower discount rate, such as 1.5% (approximating the Stern Review), gives greater importance to future generations and results in a higher SCC compared to the government's 3% rate.
• The FUND model is described as an outlier that is less transparent and uses dated information, projecting that warming would create net global benefits in agriculture that offset other damages.
• The marginal cost of reducing emissions at the maximum technically feasible rate is estimated between $150 and $500 per ton by 2050.
• When the SCC exceeds the cost of maximum feasible abatement, traditional cost-benefit analysis becomes redundant, and the focus should shift to a cost-effectiveness analysis of the fastest possible emission elimination.
• The authors suggest that the U.S. should adopt an approach similar to the UK, where a quantitative long-term emissions target is set and the carbon price is based on the marginal cost of abatement (MAC) rather than the SCC.

APA

Ackerman, F., & Stanton, E. A. (2011). Climate Risks and Carbon Prices: Revising the Social Cost of Carbon. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/Economics_of_climate_policy/sei-climate-risks-carbon-prices-2011-full.pdf

Chicago

Ackerman, F., and E. A. Stanton. Climate Risks and Carbon Prices: Revising the Social Cost of Carbon. Stockholm Environment Institute, 2011. https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/Economics_of_climate_policy/sei-climate-risks-carbon-prices-2011-full.pdf.

Wikipedia

{{cite report |last1=Ackerman |first1=F. |last2=Stanton |first2=E. A. |title=Climate Risks and Carbon Prices: Revising the Social Cost of Carbon |publisher=Stockholm Environment Institute |date=2011 |url=https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/Economics_of_climate_policy/sei-climate-risks-carbon-prices-2011-full.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ackerman2011climate, author = {Ackerman, F. and Stanton, E. A.}, title = {{Climate Risks and Carbon Prices: Revising the Social Cost of Carbon}}, institution = {Stockholm Environment Institute}, year = {2011}, url = {https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/Economics_of_climate_policy/sei-climate-risks-carbon-prices-2011-full.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }