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handle is hein.crs/govesmr0001 and id is 1 raw text is: * Congressionol Research Service Informing the IegisI9tive debate since 1914 0 February 20, 2025 Social Cost of Greenhouse Gases: Background and Recent Developments On January 20, 2025, President Trump issued Executive Order (E.O.) 14154, Unleashing American Energy. This order includes several directives to agencies regarding the use of the social cost of greenhouse gases (SC-GHG), an analytical tool that agencies have used in rulemakings to estimate the benefits of GHG reductions. Federal agencies, including the Environmental Protection Agency (EPA), have used SC-GHG estimates to inform their analyses of proposed federal actions since 2008. Members of Congress have taken divergent views on the adequacy and use of the SC-GHG. Some have questioned whether the SC-GHG methodology is consistent with federal guidance. Others have raised concerns that the estimates are outdated, underestimating climate benefits. E.O. 14154 raises a number of questions regarding (1) the use of SC-GHG estimates in both existing and future federal rulemakings and (2) how agencies may implement the E.O. directives and potentially affect existing and future rulemakings. hats the SC-H The social cost of a specific greenhouse gas (GHG), such as carbon dioxide, is a monetary estimate of the economic impacts associated with emitting an additional (marginal) ton of that GHG. Conversely, this dollar figure represents the benefit of a one-ton reduction in emissions of that GHG. For example, the social cost of carbon dioxide (SCC) includes effects regarding agricultural productivity, property damage from natural disasters, and energy costs, such as heating and air conditioning. Similarly, the social cost of methane (SCM) and the social cost of nitrous oxide (SCN) estimate the monetary value of impacts from marginal changes in methane and nitrous oxide, respectively. Each SC-GHG value is typically presented as dollars per metric ton of a GHG in a given year. In this In Focus, SC-GHG refers collectively to estimates of the SCC, SCM, and SCN. How Is the SC-HG Cacu ated? SC-GHG values are calculated using economic models that translate changes in emissions into economic impacts. As with any scientific or economic analysis, the SC-GHG estimates include both limitations and uncertainties. For example, estimates are limited because underlying models may not include all potentially significant climate change impacts. Uncertainties include the quantification of the physical effects of GHG emissions, socioeconomic factors, projected GHG emissions, translation of physical and climate impacts into economic impacts, and the role of climate change adaptation. Another source of uncertainty is discounting, discussed below. Discount Rate As many impacts of GHG emissions will occur in the future, policy analysts often consider society's willingness to pay in the near term to reduce GHG emissions that would cause damages in the future. Discounting is the analytical process by which costs and benefits in future years are made comparable with costs and benefits experienced today. The discount rate refers to a reduction (i.e., discount) in value that economists apply to estimated future costs or benefits. This application results in a present value estimate of these costs or benefits. The choice of discount rate can significantly increase or decrease values of the SC- GHG. A lower discount rate would give greater value today to future impacts than would a higher discount rate. A high discount rate would recommend applying fewer of today's resources to address GHG emissions impacts in the future. Often, SC-GHG estimates include a range of discount rates for comparison purposes. Geographic Scope Another methodological consideration is whether the SC- GHG should measure global or domestic impacts. Most published estimates of the SC-GHG have measured global impacts; however, some policymakers have called on federal agencies to use domestic values in benefit-cost analysis. Those recommending use of global SC-GHG values have concluded that no clear distinction exists between domestic and global climate change impacts and that a domestic SC-GHG understates the benefits to the United States, because climate impacts that occur outside U.S. borders may affect the welfare of U.S. citizens and residents. Reciprocity-whether U.S. mitigation policies motivate other countries to likewise reduce GHGs-may also justify use of global values, given that reductions by other countries may benefit people within U.S. borders, just as increases can lead to harm. Others disagree with a focus on global values, expressing a view that federal analyses should focus on domestic impacts and skepticism about the likelihood of complete reciprocity. How s the SCG- Used? Federal agencies, namely EPA and the Department of Energy, have primarily used the SC-GHG to estimate the climate impacts of GHG reductions from agency rulemakings. The social cost of each GHG is applied to estimated changes in that gas (e.g., the SCC is applied to projected changes in carbon dioxide emissions). The SC- GHG estimates have been used to measure climate impacts in other federal actions, including oil and gas leasing decisions. In addition, state governments and other organizations have used the SC-GHG in rulemakings and other applications.

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