Policymakers use the social cost of greenhouse gases in a wide range of contexts. Federal agencies routinely use the social cost of greenhouse gases to monetize climate impacts in cost-benefit analysis. With increasing frequency, the federal government is also using the metric to value emissions from energy permitting, budgeting, and procurement. Numerous states also apply the social cost of greenhouse gases in various processes including electricity ratemaking, resource compensation, and setting emissions caps.

Cost-benefit analysis compares the costs of a policy with its benefits. For a policy that reduces greenhouse gases emissions, climate benefits can be monetized by multiplying the expected emissions reductions by the social cost of greenhouse gases. The federal government and some state governments routinely use the social cost of greenhouse gases in cost-benefit analysis for regulations that affect climate change, such as those curbing emissions in the energy and transportation sectors.

Some federal agencies have begun applying the social cost of greenhouse gases in fossil fuel permitting or leasing. To capture the climate costs of a particular permitting decision, you can multiply the projected emissions by the social cost of greenhouse gases. This enables policymakers to compare climate costs to economic benefits and provides a useful tool for assessing whether the permitting or leasing decision serves the public interest. For more information, see here.

Some states use the social cost of greenhouse gases to determine at what level a nonpolluting resource such as solar, wind, or nuclear should be compensated for the emissions it avoids. This calculation requires measuring the emissions avoided and multiplying it by the social cost of greenhouse gases. For more information, see here. Some state public utilities commissions use the social cost of greenhouse gases when determining electricity rates. This similarly involves calculating the incremental emissions from different electricity sources and multiplying them by the social cost of greenhouse gases.

The federal government is currently investigating the potential to use the social cost of greenhouse gases in procurement and budgeting decisions. The idea is conceptually simple: In essence, regulators could calculate the climate costs from particular procurement and budgeting options using the social cost of greenhouse gases, add it to the sticker prices of those options, and then determine which option is cheapest from a societal perspective (incorporating both the climate and the monetary costs). For more information, see here.