How we view the costs of future climate change, and more importantly how we quantify them, may soon be changing. A much-anticipated new report, just released by the National Academy of Sciences, recommends major updates to a federal metric known as the “social cost of carbon” —  and its suggestions could help address a growing scientific concern that we’re underestimating the damages global warming will cause.

The social cost of carbon is an Obama-era metric first addressed by a federal working group in 2009. The basic premise is simple: Scientists agree that climate change will have all kinds of impacts on human societies, including natural disasters and effects on human health, productivity and agricultural output, all of which have economic consequences. The social cost of carbon, then, refers to the monetary cost of emitting a single ton of carbon dioxide into the atmosphere, given that these emissions will further contribute to global warming. The value has been used to aid in cost-benefit analyses for a variety of federal environmental rules. Currently, it’s set at about $36 per ton of carbon dioxide.  

The method developed by the original working group relies on a set of three models which translate current carbon emissions into future temperature increases, factor in the damages that may be caused by the resulting climatic changes in the future and then translate these damages into dollars. The report recommends a new framework that unbundles the various steps of the calculation process and addresses them in separate modules, all of which feed into and inform each other. The report suggests that, over the next two-to-three years, these modules be shaped to rely on the most relevant and up-to-date science in each area — and it also suggests that estimates of the social cost of carbon be updated every five years.

These recommendations address a growing concern in the scientific community that our increasing scientific understanding of the consequences of climate change isn’t adequately represented in the current methodology. In fact, climate scientists and economists alike have begun to argue that the current models may actually be underestimating the social cost of carbon. There are several major ways the new report’s recommendations could cause this to happen, said Richard Revesz, a law professor and dean emeritus of the New York University School of Law, who also served as a reviewer on the new report. For one thing, accounting for certain climate damages that were omitted in the older models could drive the value up, he said. A second factor involves the report’s approach to the use of discounting. When calculating the social cost of carbon, applying a higher discount rate causes the cost to decrease, and vice versa. Critics who favor a lower social cost of carbon have sometimes argued that the current discount rate used by the federal government — 3 percent, in most cases — is too low. “The report endorses the use of declining discount values, where the declining rates respond to uncertainty around a number of factors,” Revesz said. “As for negative impacts that happen far into the future, those models would lead to substantially lower discount rates, and lower discount rates would lead to higher values for the social cost of carbon.” “The impacts of carbon dioxide are felt globally, regardless of where the emissions occur,” noted Richard Newell, president and chief executive of Resources for the Future and co-chair of the committee that authored the report, at a Wednesday press conference to present the new report. “In addition, climate impacts in other countries may affect the U.S. in a more indirect fashion.”  

 “If the metric is revised, then the incoming administration would have an obligation to explain why it’s departing from the current approach,” Revesz said. Any changes made without adequate scientific justification would likely be struck down in court. And given that the new academy report is likely to be recognized as the “gold standard for scientific evaluation of the social cost of carbon,” he said, it would be difficult to justify any changes that dramatically depart from its recommendations.  Still, despite the transition team’s criticism of the current metric, how the new administration will choose to approach it once in office remains to be seen.  “This report is a blueprint of actions that should be taken in the near term and actions that should be taken in the longer term,” Revesz said, adding that the most responsible action would be to “follow the prescription of the report.”