Are the federal IWG numbers still the best?

Perhaps, but they are severe underestimates of the true costs of climate change. 

The IWG first released its climate-damage estimates in 2010 and updated them several times. The IWG’s estimates were peer-reviewed and based on the best available science that existed at the time of their development. Criticisms from opponents of climate policy claiming that these valuations are unscientific or inflate the costs of climate damage are entirely misguided.

In fact, it is now widely recognized that the IWG estimates severely underestimate the true costs of climate change. In November 2022, the federal Environmental Protection Agency (EPA) released a comprehensive update to the SC-GHG applying the most up-to-date science and economics. Those valuations are undergoing peer review and expected to be finalized in 2023 or 2024.  

For now, it is reasonable for policymakers to rely on either the IWG estimates or EPA’s draft estimates. When policymakers apply the IWG numbers, however, they should recognize them as underestimates and strongly consider applying the higher-end estimates that the IWG provided.

Because the EPA estimates have not yet been finalized, this page focuses primarily on the IWG estimates.

How were the IWG numbers developed?

A federal court ruling spurred the development of the SCC.  A 2008 ruling by the U.S. Court of Appeals for the Ninth Circuit required the federal government to account for the economic effects of climate change in a regulatory impact analysis of fuel efficiency standards. 3 As a result, President Obama convened the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) in 2009 to develop an SCC value for use in federal regulatory analysis.

The SCC was developed through an academically rigorous, regularly-updated, and peer-reviewed process. The SCC values were developed using the three most widely cited climate economic impact models that link physical impacts to the economic damages of carbon dioxide emissions. All of these models—DICE, FUND, and PAGE 4 —have been extensively peer reviewed in the economic literature. 5 The analytical methods that the IWG applied to its inputs were also peer-reviewed, and the IWG’s methods have been extensively discussed in academic journals. 11

The IWG’s analytical process in developing the SCC was transparent and open, designed to solicit public comment and incorporate the most recent scientific analysis. The IWG was composed of scientific and economic experts from the White House, Environmental Protection Agency, and Departments of Agriculture, Commerce, Energy, Transportation, and Treasury, to develop a rigorous method of valuing carbon dioxide reductions resulting from regulations. 12  In February 2010, the IWG released estimated SCC values.13 It subsequently updated those values in 2013 and 2016 based on updates to the climate-damage models. (In 2016, the IWG also released estimates of the social cost of methane and social cost of nitrous oxide.) 

The IWG valuations were praised by the U.S. Government Accountability Office, the National Academies of Sciences, and a wide range of outside experts. Their use in federal policymaking was also upheld by the U.S. Court of Appeals for the Seventh Circuit. 

After the Trump administration disbanded the IWG, the Biden administration reconvened it in 2021. In 2021, the IWG readopted its 2016 SC-GHG estimates on an interim basis (adjusted for inflation). The IWG also began the process of comprehensively updating the SC-GHG values. 

While the IWG process continues, the Environmental Protection Agency released a comprehensive draft update to the SC-GHG applying the most up-to-date science and economics. Those valuations are undergoing peer review and expected to be finalized in 2023 or 2024.

How have the IWG numbers been used to date?

The IWG numbers have been used extensively in federal regulatory analysis, on more than one hundred occasions since the first estimates were published in 2010. 22 The federal government has also used the SC-GHG estimates in a wide range of other contexts, including environmental review and procurement analysis. 

Beyond the federal government, numerous states and several foreign government have adopted the IWG climate-damage estimates for use in their own policymaking.

In 2023, the government of Canada became the first foreign country to adopt EPA’s 2022 draft updated estimates for use in its own policymaking.

Who has endorsed the IWG numbers?

The IWG climate-damage estimate have been endorsed or supported by the National Academies of Sciences, the Government Accountability Office, and the federal courts. 

For instance, the Government Accountability Office found in 2014 that the IWG estimates are consensus-based, rely on peer-reviewed academic literature, disclose relevant limitations, and are designed to incorporate new information via public comments and updated research. 24 Andin 2016, the U.S. Court of Appeals for the Seventh Circuit held the IWG estimates used are reasonable to use in federal policymaking. 27

Nonetheless, an emerging consensus now recognizes that the IWG estimate are substantial undervaluations. EPA’s draft updated estimates are meant to build upon the IWG’s success by incorporating the latest available science and economics.

How will the numbers be updated?

In November 2022, the the Environmental Protection Agency released a comprehensive draft update to the SC-GHG applying the most up-to-date science and economics. Those valuations are undergoing peer review and expected to be finalized in 2023 or 2024.