NCEA Report Urges Policymakers to Reject Flawed "Social Cost of Carbon" as Basis for Energy Decisions
Jonathan Lesser, PhD finds many arbitrary assumptions for social cost of carbon emissions estimates
Federal and state governments use a measurement known as the social cost of carbon (SCC) to quantify the economic damage caused by each additional ton of carbon dioxide (CO2) emitted into the atmosphere. More specifically, policymakers are using SCC estimates to assess the costs and benefits of regulatory actions, including carbon taxes, electrification mandates, and subsidies for wind and solar energy.
However, a report by the National Center for Energy Analytics argues that the assumptions behind SCC values which shape energy policy decisions are flawed, imposing significant economic costs, while having no measurable impact on global climate.
"There will be some winners and losers if policymakers continue to adopt green energy policies without understanding their economic costs. The biggest losers are American consumers who are bearing all the costs of domestic carbon-reduction policies but will receive almost none of the claimed benefits," said energy economist and NCEA senior fellow Jonathan Lesser, PhD. He's also the report's author.
Upon closer examination, Lesser reveals that the economic models underlying SCC estimates are based on uncertain forecasts about the world three centuries from now and arbitrary assumptions about impacts to agriculture and health. Additionally, the newest estimates use far lower discount rates to boost the costs of future assumed impacts centuries from now.
"The uncertainty and arbitrariness of key assumptions lie at the heart of why SCC estimates should be excluded when making informed choices about energy infrastructure," the report stated. "Instead, SCC estimates are being used as a thumb on the scale to bias decisions toward policymakers' preferred outcomes, to the detriment of society at large."
Lesser outlines several economic consequences of misguided SCC policies.
- Higher energy costs: Policies based on inflated SCC values lead to higher electricity and fuel prices, disproportionately affecting lower-income households and energy-intensive industries.
- Weakened industrial competitiveness: Stricter carbon regulations drive manufacturing and industrial production offshore, shifting emissions rather than reducing them.
- Grid reliability risks: An overreliance on intermittent renewables, incentivized by SCC-driven subsidies, threatens grid stability and increases the risk of blackouts.
Instead of relying on questionable SCC calculations, policymakers should prioritize energy strategies that ensure affordability, reliability, and environmental stewardship. This includes advancing nuclear energy as the most viable, long-term solution to reducing emissions. Other options are encouraging market-driven innovation rather than imposing top-down regulations and recognizing the role of natural gas in reducing emissions while maintaining grid stability.
"This does notmean that climate change is imaginary or that a changing climate does not impose costs (and benefits) on society and nature. Instead, it means that policymakers should abandon SCC estimates and base energy infrastructure decisions on more credible and unbiased grounds," the report stated.
The report, "The Social Cost of Carbon: A Problematic Measure for Energy Policy Decisions," is available at energyanalytics.org./cost-of-carbon
About the National Center for Energy Analytics (NCEA):
The National Center for Energy Analytics is a think tank devoted to data-driven analyses of policies, plans, and technologies surrounding the supply and use of energy essential for human flourishing. Through objective analyses of energy policies and their implications, NCEA aims to inform policymakers, industry leaders, and the public on critical energy issues.
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