Belfer Center, Kennedy School, Harvard Univ. / by Gilbert E. Metcalf and James Stock
This paper considers the role of integrated assessment models (IAMs) in the construction of climate policy. We focus on questions involving the role of IAMs in estimating the social cost of carbon (SCC), how best to handle the considerable scientific uncertainty underlying the IAMs from the perspective of estimating the SCC, and whether an IAM‐based SCC should be abandoned and replaced by expert judgment or another substitute. The perspective we adopt in tackling these questions is rooted in the specific needs of the existing U.S. institutions responsible for making and implementing climate policy, specifically regulatory agencies within the Executive Branch and Congress should it choose to take up climate legislation.
Our discussion has three premises. First, policy makers need a numerical value and an uncertainty range for the SCC for policy evaluation and implementation. Second, whatever the true value of the SCC is, it is not zero. Third, considerable uncertainty surrounds the current state of scientific knowledge about the current and future costs of climate change. The evolving nature of the science and the ultimate goal of informing first‐best policy suggests to us that the official SCC—the SCC used for regulatory analysis by the U.S. Government—should not be thought of as a single number or even a range of numbers, but more broadly as a process that yields updated estimates of those numbers and ranges. Viewed in this way, the ultimate goal of the process is scientific credibility, public acceptance, and political and legal viability.