This student paper was produced for the Energy Policy Practicum (Rosner/Topel, 2017)
The social cost of carbon is the present value of future harm caused by an incremental ton of carbon dioxide emissions. It is difficult to estimate the social cost of carbon, because carbon emissions, climate change, and economic harm are related through complex processes that are not fully understood. Additionally, the rate at which to discount future harm is contentious and critical to the magnitude of the present value. We evaluate several approaches to estimating the social cost of carbon, including the 2013 U.S. Government estimate of $42 per metric ton of CO2 (in 2020). We discuss the political economy and feasibility of several carbon policy options. We conclude that despite, and because of, the uncertainty in climate science and economics, it is prudent to adopt a carbon policy that is sufficient to induce some transition to cleaner practices today, because of the long lives of carbon infrastructure and the persistence of energy consuming behaviors. The ideal policy is a uniform global carbon tax, because it would minimize emissions leakage around the world and provide more cost certainty for firms.