DERs are a growing part of the U.S. electric system and many state electric utility regulators are looking to more accurately compensate them by paying for a variety of the benefits that these resources provide. Most states are currently focusing on energy and distribution-level benefits, but this approach overlooks the environmental and public health impacts of DERs. Even though some states like California and New York have been working on analyses that include environmental attributes of DERs, few regulators have attempted a thorough evaluation of the environmental and public health benefits. Our report, Valuing Pollution Reduction, lays out a practical methodology for calculating the E value, the highlights of which are captured here. Specifically, this issue brief describes how to appropriately value environmental and public health benefits by monetizing the economic, health, and climate damages avoided emissions would have caused. State utility regulators can use the steps described here, weighing tradeoffs between accuracy and administrability, to implement their own program to holistically compensate DERs.
The social cost of carbon (SC-CO2) is an economic metric intended to provide a comprehensive estimate of the net damages – that is, the monetized value of the net impacts, both negative and positive – from the global climate change that results from a small (1-metric ton) increase in carbon-dioxide (CO2) emissions. Under Executive Orders regarding regulatory impact analysis and as required by a court ruling, the U.S. government has since 2008 used estimates of the SC-CO2 in federal rulemakings to value the costs and benefits associated with changes in CO2 emissions. In 2010, the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) developed a methodology for estimating the SC-CO2 across a range of assumptions about future socioeconomic and physical earth systems.
Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2010)
This document presents a summary of the interagency process that developed these SCC estimates. Technical experts from numerous agencies met on a regular basis to consider public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions.
Revised: Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (2013)
While acknowledging the continued limitations of the approach taken by the interagency group in 2010, this document provides an update of the SCC estimates based on new versions of each IAM (DICE, PAGE, and FUND).
Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis (2016)
The Interagency Working Group asked the National Academies of Sciences, Engineering, and Medicine in 2015 to review the latest research on modeling the economic aspects of climate change to inform future revisions to the social cost of carbon estimates presented in this technical support document. In January 2016, the Academies’ Committee on the Social Cost of Carbon issued an interim report that recommended against a near-term update to the social cost of carbon estimates, but included recommendations for enhancing the presentation and discussion of uncertainty around the current estimates. This revision to the TSD responds to these recommendations in the presentation of the current estimates.
Assessment of Approaches to Updating the Social Cost of Carbon: Phase 1 Report on a Near-Term Update
The social cost of carbon (SCC) for a given year is an estimate, in dollars, of the present discounted value of the damage caused by a 1-metric ton increase in CO2 emissions into the atmosphere in that year; or equivalently, the benefits of reducing CO2 emissions by the same amount in that given year. The SCC is intended to provide a comprehensive measure of the monetized value of the net damages from global climate change from an additional unit of CO2, including, but not limited to, changes in net agricultural productivity, energy use, human health effects, and property damages from increased flood risk. Federal agencies use the SCC to value the CO2 emissions impacts of various policies including emission and fuel economy standards for vehicles, regulations of industrial air pollutants from industrial manufacturing, emission standards for power plants and solid waste incineration, and appliance energy efficiency standards.