Response to Comments:
 

Social Cost of Carbon for Regulatory Impact Analysis
 

Under Executive Order 12866 

Interagency Working Group on Social Cost of Carbon, United States Government 

With participation by 

Council of Economic Advisers
 

Council on Environmental Quality
 

Department of Agriculture
 

Department of Commerce
 

Department of Energy
 

Department of Transportation
 

Environmental Protection Agency
 

National Economic Council
 

Office of Management and Budget
 

Office of Science and Technology Policy
 

Department of the Treasury
 

July 2015 

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Social Cost of Carbon: Response to Comments
 

SUMMARY: On November 26, 2013, the Office of Management and Budget (OMB) published a Federal 

Register notice requesting comments on the Technical Support Document (TSD) entitled Technical Update 

of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866. The Social Cost 

of Carbon (SCC) is used to estimate the value to society of marginal reductions in carbon dioxide (CO2) 

emissions. This TSD, issued in November, 2013, explained the derivation of the SCC estimates using three 

integrated assessment models (IAMs) regularly applied in the peer-reviewed scientific literature and 

provided updated values of the SCC that reflected minor technical corrections to the estimates released 

in May of that year. 

OMB requested that comments be submitted electronically to OMB by January 27, 2014 through 

www.regulations.gov. On that date, OMB issued a subsequent notice extending the comment period until 

February 26, 2014. 

This notice responds to the major comments received and discusses how the Interagency Working Group 

(IWG) that developed the SCC estimates will approach future updates to the estimates, based on 

comments received, developments in the academic literature, and advice from external experts. 

SUPPLEMENTARY INFORMATION: Rigorous evaluation of benefits and costs is a core tenet of the 

rulemaking process.1 It is particularly important in the area of climate change. The current estimate of the 

SCC has been developed over several years, using the best science available, and with input from the 

public. 

In February 2010, after considering public comments on interim values that agencies used in a number of 

rules, an interagency working group of technical experts, coordinated by OMB and the Council of 

Economic Advisers (CEA), released updated SCC estimates. The IWG estimated the updated SCC values 

using the most widely cited climate economic impact models that are capable of estimating the SCC. Those 

climate impact models, known as IAMs, were developed by outside experts and published in the peerreviewed literature. The TSD discusses in detail the models, inputs, and assumptions used in generating 

the SCC estimates, and the basis for their selection (2010 TSD). Recognizing that the models underlying 

the SCC estimates would evolve and improve over time as scientific and economic understanding 

increased, the IWG committed in the 2010 TSD to regular updates of these estimates. 

In May of 2013, after all three of the underlying models had been updated and used in the peer-reviewed 

literature, and agencies had received public comments urging them to update their estimates, the IWG 

released revised SCC values. The May 2013 estimates are similar to those used by other governments, 

international institutions, and major corporations. Opportunity for public comment on those estimates 

1 Executive Order 12866 directs that its regulatory principles, which includes assessing the benefits and costs of 

̢̻͟ϣ̻ϟϣϟ ͑ϣ̕ ̴ͅχ̢̻͕͂̚͟ ͕̟͂ ̴ͅϟ Ϋϣ χϟ̟ϣ͑ϣϟ ͂͟ ΫΌ Fϣϟϣ͑χ̴ χ̕ϣ̻φ̢ϣ͕ ̣͂͟ ̟͟ϣ ϣ΋͟ϣ̻͟ ͎ϣ̢̺͑͟͟ϣϟ ΫΌ ̴χΆ χ̻ϟ Ά̟ϣ͑ϣ 

χ̴̢͎͎φχΫ̴ϣ̝̤ ̓http://www.archives.gov/federal-register/executive-orders/pdf/12866.pdf) 

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was previously provided in a number of proposed rulemakings, and any comments received through the 

rulemaking process were, or will be, addressed by the agencies in the normal course of finalizing those 

rules. 

A slightly revised TSD with minor technical corrections was issued in November, 2013 (2013 TSD). The 

2013 TSD was based on the best scientific information on the impacts of climate change available at that 

time. Consistent with the I̹G̠͕ commitment to continued refinement of the SCC estimates to ensure 

agencies appropriately measure the social damages associated with CO2 emissions as they evaluate the 

costs and benefits of rules, on November 26, 2013 OMB requested comments on all aspects of the TSD 

and its use of IAMs to estimate the SCC. OMB noted that it was particularly interested in comments on 

the following topics: 

	 the selection of the three IAMs for use in the analysis and the synthesis of the resulting SCC 

estimates, as outlined in the 2010 TSD; 

	 the model inputs used to develop the SCC estimates, including economic growth, emissions 

trajectories, climate sensitivity, and intergenerational discounting; 

	 how the distribution of SCC estimates should be represented in regulatory impact analyses; and 

	 the strengths and limitations of the overall approach. 

OMB further clarified that it was not requesting comments on the three peer reviewed IAMs themselves; 

rather OMB was requesting comments on their use in developing the SCC estimates. 

1 Introduction 

Rigorous evaluation of benefits and costs is a core tenet of the rulemaking process. Since 1981 executive 

orders have required benefit cost analysis for all significant U.S. Federal regulations, to the extent 

permitted by law (EOs 12291 and 12866). Estimates of the SCC allow the effects of CO2 emission changes 

on society to be counted in benefit cost analysis. Without estimates of the SCC the effect of a change in 

CO2 emissions would be considered qualitatively, but could not be quantified in the bottom-line benefit 

cost estimates. In 2007 the Ninth Circuit Court remanded a fuel economy rule to DOT for failing to 

monetize the benefits of the CO2 emissions reductions in its regulatory impact analysis, noting that ̣̟͟ϣ 

value of carbon emissions reduction is certainly not zero.̤2 

In 2009, the Administration launched a process to determine how best to monetize the net effects 

(comprising both positive and negative effects) of CO2 emissions and sought to harmonize a range of 

different SCC estimates across multiple Federal agencies. This process was conducted by an interagency 

working group made up of Federal agencies likely to issue rules affecting CO2 emissions and EOP offices 

that review such rules. The purpose of this process was to ensure that agencies were using the best 

available information and to promote consistency in the way agencies quantify the benefits of reducing 

CO2 emissions, or costs from increasing emissions, in regulatory impact analyses. At the start of the 2009 

2 http://cdn.ca9.uscourts.gov/datastore/opinions/2007/11/14/0671891.pdf 

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effort, the IWG conducted a preliminary assessment of existing peer-reviewed literature to set interim 

SCC estimates while it worked on a more comprehensive analysis. When agencies began using these 

interim values in rulemakings, they ̴̢͕͂φ̢͟ϣϟ φ̺̺͂ϣ̻͕͟ ̣̻͂ χ̴̴ ͂ϭ ̟͟ϣ ͕φ̢ϣ̢̻͟ϭ̢φ̚ ϣφ̢̻̺͂͂φ̚ χ̻ϟ ϣ̢̟͟φχ̴ 

̢͕͕ ͅϣ͕ Ϋϣϭ͂͑ϣ ϣ͕͟χΫ̴̢̢͕̟̻̕ ̢̺͎͑͂ ̈́ϣϟ ϣ̢͕̺͟χ͟ϣ͕ ϭ͂͑  ͕ͅϣ ̢̻ ϭ ͟ͅ ͑ͅϣ ͑ ̴ͅϣ̺χ̢̱̻͕̝̤̕3 

In February 2010, after considering public comments on the interim values and conducting additional 

technical work, the IWG released improved SCC estimates. These improved SCC estimates were developed 

using the three most widely cited climate economic impact models. Those climate impact models were 

developed by outside experts and are the most widely used and widely cited models in the economics 

literature that link physical impacts to economic damages of CO2 emissions. The National Academies of 

Science (NAS) identified these three models as "the most widely used impact assessment models" in a 

2010 report (NAS, 2010). 

With the release of the 2010 SCC estimates the IWG noted that there remained a number of limitations 

to the analysis and committed to updating the estimates as the science and economic understanding of 

climate change and its impacts on society improves over time. In particular, a goal was set to revisit the 

SCC estimates ̣within two years or at such time as substantially updated models become available̝̤ 

Subsequent to the release of the 2010 TSD, all three of the models used in the development of the SCC 

estimates were updated by their (academic) developers, in part, to reflect more recent information on 

the potential impacts of climate change. The three models remain the most widely cited models capable 

of estimating the SCC. 

Since the publication of the interim estimates in 2009, the I̹G̠͕ SCC estimates have been used in 34 

proposed rulemakings that provided opportunity for public comment. Federal agencies and OMB have 

continued to review public comments on the SCC estimates that are received through the notice and 

comment rulemaking process. Public comments received on proposed rulemakings using the 2010 SCC 

estimates, among other comments, urged the IWG to update the SCC estimates to reflect the newest 

versions of the models being used in the peer-reviewed scientific literature. 4 In response to these 

comments and consistent with the 2010 commitment to periodically revise the SCC estimates, in 2013 the 

IWG released an update to the SCC estimates that maintained the same methodology underpinning the 

previous estimates, but applied the most current versions of the three IAMs. 

That same year, in response to public and stakeholder interest in the SCC estimates, OMB announced it 

would provide an additional opportunity, in addition to those available in proposed rulemakings, for public 

comment on the SCC estimates. Over the 90-day comment period5

, OMB received 140 unique sets of 

comments and over 39,000 form letter submissions through two letter writing campaigns. The comments 

covered a wide range of topics including the technical details of the modeling, the aggregation and 

3 For example, the proposed rulemaking for Model Year 2012-2016 Light-Duty Vehicle Greenhouse Gas Emissions
 

Standards. http://www.gpo.gov/fdsys/pkg/FR-2009-09-28/pdf/E9-22516.pdf.
 4 See Docket ID: EPA-HQ-OAR-2010-0660-10002 (p 4); EPA-HQ-OAR-2010-0660-10888 (p 26); EPA-HQ-OAR-2010­

0799-9519 (p 10). Documents are available in www.regulations.gov. 5 OMB originally provided a 60-day comment period but that was subsequently extended, in response to stakeholder
 

requests, for an additional 30 days.
 

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presentation of the results, and the process by which the SCC estimates were derived. The form letters 

contained a short paragraph supporting the 2013 update. The unique comment letters offered a wide 

range of perspectives on the process, methodology, and results, including both support and opposition. 

Commenters also provided constructive recommendations for potential opportunities to improve the SCC 

estimates in future updates. In this context, the IWG is reconfirming its commitment to periodic review 

and update of the methodology and estimates to ensure that they continue to reflect the best available 

science and economics. 

The science underlying the assessment and valuation of climate change impacts is constantly evolving. 

Since the publication of the initial SCC estimates in 2010, the representation of the science and economic 

consequences of climate change in the three IAMs has improved. The 2013 SCC technical update allowed 

the SCC estimates to reflect these improvements. However, as explained in the 2013 TSD, this update was 

limited in scope to those improvements available in more recent versions of the IAMs. As such, there 

remain additional opportunities for technical improvements to the SCC estimates that should be 

considered for future updates. 

As noted above, commenters provided a wide range of perspectives and technical input on how to further 

refine the SCC estimates. To help synthesize the technical information and input reflected in the 

comments, and to add additional rigor to the next update of the SCC, the IWG plans to seek independent 

expert advice on technical opportunities to improve the SCC estimates, including many of the approaches 

suggested by commenters and summarized in this document. Specifically, the IWG plans to ask the 

National Academies of Sciences, Engineering, and Medicine to examine the technical merits and 

challenges of potential approaches to improving the SCC estimates in future updates. Input from the 

Academies, informed by public comments and the peer-reviewed literature, will help to ensure that the 

SCC estimates used by the federal government continue to reflect the best available science and 

methodologies. 

The !φχϟϣ̢̺ϣ͕̠ review will take some time, during which Federal agencies will have a continued need for 

estimates of the SCC to use in benefit-cost analysis. After careful evaluation of the full range of comments 

and associated technical issues detailed below, the IWG continues to recommend the use of the current 

SCC estimates 6 in regulatory impact analysis until revisions based on the many thoughtful public 

comments we have received and the independent advice of the Academies can be incorporated into the 

estimates. We believe the current estimates continue to represent the best scientific information on the 

impacts of climate change available in a form appropriate for incorporating the damages from incremental 

CO2 emissions changes into regulatory analyses. 

6 Concurrently with this document, the IWG is releasing a minor technical revision to the estimates, which is 

explained in a technical addendum below. The current SCC estimates are contained in the Technical Support 

Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 

12866 (Revised July 2015) which is available at http://whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-finaljuly-2015.pdf. 

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The remainder of this Response to Comments document provides topic specific summaries of the 

comments received followed by a response. The comments have been categorized into the following 

topics, which are addressed in turn: 

 Choice of Integrated Assessment Models and Damage Functions 

 Climate Science 

 Socio Economic and Emissions Scenarios 

 Discount Rates 

 Aggregation of Results and Selection of Final Estimates 

 Consideration of Uncertainty 

 Use of Global vs. Domestic SCC Estimates 

 Other Technical Areas of Comment 

 Process by which the SCC Estimates were Developed 

These nine major topic sections are further divided into brief summaries of specific comment areas, each 

followed by a response. Subsequently, there is a brief technical addendum explaining two minor revisions 

to the TSD. 

2 Choice of Integrated Assessment Models and Damage Functions 

Many commenters addressed the IAMs used to estimate the SCC. Several commenters recommended 

improvements to the existing IAMs and their damage functions, which monetize the damages associated 

with the physical impacts of climate change. Finally, a few commenters discussed the value to society of 

the goods and services whose production is associated with CO2 emissions. 

(1) T̟ϣ I̹G̠͕ φ̢̟͂φϣ ͂ϭ I!͕̉  ͕ͅϣϟ ͂͟ ϣ̢͕̺͟χ͟ϣ ̟͟ϣ ̣ 

A number of commenters were generally supportive of the choice of the three IAMs used in developing 

the SCC. For example, a letter signed by several φ̺̺͂ϣ̻͟ϣ͕͑ ̻͂͟ϣϟ ̟͟χ͟ ̟͟ϣ͕ϣ I!͕̉ χ͑ϣ ̣͑ϣχ͕̻͂χΫ̴Ό Ϋχ͕ϣϟ 

̻͂ φ ͑͑ͅϣ̻͟ ͕φ̢ϣ̢̻͟ϭ̢φ χ̻ϟ ϣφ̢̻̺͂͂φ ̱̻͂Ά̴ϣϟ̕ϣ̤ χ̻ϟ χ͑ϣ ̣Ά̢ϟϣ̴Ό φ̢͟ϣϟ χ̻ϟ χφφϣ͎͟ϣϟ ̢̻ ̟͟ϣ χφχϟϣ̢̺φ 

φ̺̺͂ ̢̻͟ͅΌ̝̤ ̻̐ϣ φ̺̺͂ϣ̻͟ϣr said the models reflect ̣the best available, peer-reviewed science to tally 

the benefits and costs of specific regulations with impacts on CO2 emissions. The IAMs include benefits 

χ̻ϟ φ͕͕͂͟ ̟͟χ͟ ̟χ ̈́ϣ Ϋϣϣ̻ ͐ ͅχ̢̻͟ϭ̢ϣϟ ͂͟ ϟχ͟ϣ̝̤ 

Other commenters voiced concern that the economic damages estimated by the IAMs are too uncertain 

to be useful for policy analysis. Several of these commenters included quotations from Pindyck (2013) and 

argue that the current IAMs and their damage functions lack sufficient theoretical or empirical 

foundations. For example, one commenter stated ̟͟χ͟ ̣̞ ̩̟ϣ ̴͕͕͂ ϭ ̻ͅφ̢̻͕͂͟ ̢̻ ̜!GE χ̻ϟ F̭̊D̚ ̟͟ϣ ̟͂͟ϣ͑ 

two models used by the Interagency Working Group, are more complex but equally arbitrary ... there is 

no pretense that the equa̢̻͕͂͟ χ͑ϣ Ϋχ͕ϣϟ ̻͂ χ̻Ό ̟͟ϣ͂͑Ό̝̤ !̻̟͂͟ϣ͑ φ̺̺͂ϣ̻͟ϣ͑ wrote, ̣The outputs of the 

three integrated assessment models (IAMs) are dependent on arbitrary and subjective assumptions used 

for data inputs.̤ 

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Some commenters suggested that one or more of the models should be rejected. For example, some cited 

Dayaratna and Kreutzer (2013) in arguing ̟͟χ͟ ̟͟ϣ DIE ̺͂ϟϣ̴ ̢͕ ̣ϭ̴χΆϣϟ ΫϣΌ̻͂ϟ  ͕ͅϣ ϭ͂͑ ̴̢͎͂φΌ̺χ̢̱̻̝̤̕ 

Others χ͑̕ ͅϣϟ ̟͟χ͟ Ϋ̟͂͟ ̜!GE χ̻ϟ DIE ͕̟͂ ̴ͅϟ Ϋϣ ̢̺͂͟͟ϣϟ Ϋϣφχ ͕ͅϣ Ϋ̟͂͟ ̢̻φ̴ ͅϟϣ ̣little-to-no CO2 

fertilization benϣϭ̢̤͟ in estimating agricultural damages. Another commenter suggested all three models 

be rejected Ϋϣφχ ͕ͅϣ ̣̞ DICE and PAGE are too aggregated to represent research on climate impacts in 

χ̻Ό ϟϣ͟χ̴̢̛ ̟͟ϣΌ ͂ϭϭϣ͑ ̴̻͂Ό ̟͟ϣ̢͑ ϟϣ ̈́ϣ̴͎͂ϣ͕̠͑ ̕ ͅϣ͕͕ϣ͕ χΫ͂ ͟ͅ ̟͂Ά ͂͟ ͑ϣϟ ͅφϣ ̟͟ϣ  ̈́χ͕̚͟ ̺ ̴̷̢͟ͅϟ̢̺ϣ̢̻͕̻͂χ̴ 

array of climate damages to a few summary, monetized impacts̤̚ χ̻ϟ ̣FUND ̞ attempts a higher level 

of disaggregation, but produces damage results that are too low to be consistent with current climate 

͕φ̢ϣ̻φϣ̝̤ 

Finally, a few commenters suggested that other IAMs should be considered for any future SCC updates. 

̣̺͂ϣ̢̺͟ϣ͕ ̢̟͕͟ Άχ͕ χ ̕ϣ̻ϣ̢͑φ ͕ ̕̕ͅϣ̢͕̻͂͟ ͕ ͅφ̟ χ͕ ̣ ͎ͅϟχ͟ϣ͕ ͂͟ ̟͟ϣ ̣ ͕̟͂ ̴ͅϟ χ̴͕͂ φ̢̻͕͂ϟϣ͑ ̟͂͟ϣ͑ ̺͂ϟϣ̴͕ 

that are similarly peer reviewed and based on the state of the art of climate-ϣφ̢̻̺͂͂φ ̺͂ϟϣ̴̢̻̝̤̕ ! ̺͂ϟϣ̴ 

that was mentioned by a few commenter͕ Άχ͕ ̟͟ϣ ̴̹͂͑ϟ χ̻̱̠͕ E̻ ̢̻̺̈́͑͂ϣ̻͟χ̴ I̺͎χφ͟ χ̻ϟ ̣ ͕͟ͅχ̢̻χΫ̴̢̢͟Ό 

Applied General Equilibrium (ENVISAGE) Model. One commenter suggested the use of the model, Climate 

and Regional Economics of Development (CRED). 

A few commenters criticized the TSD for failing to adequately explain or justify the choice of models 

and/or inputs used to run the models. For example, one commenter wrote, ̣̞ χϟϣ͐ ͅχ͟ϣ ̮ ̢͕͟ͅϭ̢φχ̢̻͂͟ ̢͕ 

not currently proviϟϣϟ ϭ͂͑ ͕̺͂ϣ χ͕͎ϣφ͕͟ ͂ϭ ̟͟ϣ ̺͂ϟϣ̴̢̻̝̕ ̞ F͂͑ ϣ΋χ̴̺͎ϣ̚ ̮ ̢͕͟ͅϭ̢φχ̢̻͂͟ ̢͕ ̴χφ̢̱̻̕ ϭ͂͑ ... use 

of an average 550 ppm scenario, constant discount rates, EMF-22 versus other published scenarios, FUND 

and PAGE probabilistic modeling, and a variety of 2013 revision͕ ͂͟ ̟͟ϣ ̢̻ϟ̢ ̢̈́ϟ ͅχ̴ ̺͂ϟϣ̴͕ ̞̤ !̻̟͂͟ϣ͑ 

φ̺̺͂ϣ̻͟ϣ͑ φ̢͟ϣϟ χ βεΘβ D̝̝ ̢͑φ ̢͟ͅ ̭̝̣̝ ͂ ͑͟ͅ ͂ϭ !͎͎ϣχ̴͕ ϟϣφ̢̢͕̻͂ ̟͟χ͟ χ̻ χ̕ϣ̻φΌ ̣̺ ͕͟ͅ ͎͑͂ ̢̈́ϟϣ χ 

φ̴̺͎͂ϣ͟ϣ χ̻χ̴Ό̢͟φ ϟϣϭϣ̻͕ϣ ͂ϭ ̢͕͟ ̺͂ϟϣ̴ ͅχ̻ϟ͆ ͑ϣ͕͎̻͂ϟ ͂͟ ϣχφ̟ ͂Ϋ̮ϣφ̢̻͂͟ Ά̢̟͟ χ ͑ϣχ͕̻͂ϣϟ ͎͑ϣ͕ϣ̻͟χ̢̻̤͂͟ 

and must demonstratϣ ̣͑χ̢̻͂͟χ̴ φ̻̻͂ϣφ̢̻͕͂͟ Ϋϣ͟Άϣϣ̻ ϭχφ͟ ͅχ̴ ̢̻͎ ͕̚͟ͅ ̺͂ϟϣ̴̢̻̕ χ͕͕ ̢̺͎̻͕͂̚͟ͅ ̺͂ϟϣ̴̢̻̕ 

͑ϣ͕ ̴͕͟ͅ χ̻ϟ φ̻͂φ̴ ̢͕̻͕͂ͅ ϟ͑χΆ̻ ϭ̺͑͂ ̟͕͂͟ϣ ͑ϣ͕ ̴͕̝̤͟ͅ A third commenter cited the Administrative Procedure 

Act (APA)̚ χ͑̕ ̢̻̕ͅ ̟͟χ͟ ̟͟ϣ ̣ ͕ͅϣ ͂ϭ ̟͟ϣ ̣ estimates in rulemaking will not meet the requirements of the 

APA as interpreted by the courts because the IWG and OMB have not provided a rational connection or 

͕ ͅϭϭ̢φ̢ϣ̻͟ ̮ ̢͕͟ͅϭ̢φχ̢̻͂͟ ϭ͂͑ ̟͟ϣ ̺͂ϟϣ̴͕̚ ϟχ͟χ ̢̻͎ ͕͟ͅ χ̻ϟ χ͕͕ ̢̺͎̻͕͂͟ͅ  ͕ͅϣϟ ͂͟ φ͑ϣχ͟ϣ ̟͟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕̝̤ 

Response 

The IWG agrees with those commenters who believe the choice of the three IAMs̻DICE, FUND, and 

PAGE̻was the most appropriate for the purpose of estimating the SCC. The IWG made this determination 

when it began developing the SCC estimates in 2009-2010. DICE, FUND, and PAGE are the most widely 

used and widely cited models in the economic literature that link physical impacts to economic damages 

for the purposes of estimating the SCC. As stated in the 2010 TSD: 

These models are frequently cited in the peer-reviewed literature and used in the IPCC 

χ͕͕ϣ͕͕̺ϣ̻̝͟ ̞ ̩̟ϣ͕ϣ ̺͂ϟϣ̴͕ χ͑ϣ  ͕ͅϣϭ ̴ͅ Ϋϣφχ ͕ͅϣ ̟͟ϣΌ φ̺͂Ϋ̢̻ϣ φ̴̢̺χ͟ϣ ͎͑͂φϣ͕͕ϣ͕̚ ϣφ̢̻̺͂͂φ 

growth, and feedbacks between the climate and the global economy into a single modeling 

ϭ͑χ̺ϣΆ̱̝͂͑ ̞ ̟̐͟ϣ͑ I!͕̉ ̺χΌ Ϋϣ͟͟ϣ͑ ͑ϣϭ̴ect the complexity of the science in their modeling 

frameworks but do not link physical impacts to economic damages. 

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In addition, the National Academies of Science (NAS) identified these three models as "the most widely 

used impact assessment models" in a 2010 report (NAS, 2010). Furthermore, in a comprehensive 

literature review and meta-analysis conducted in 2008, the vast majority of the independent impact 

estimates that appeared in the peer-reviewed literature were derived from FUND, DICE, or PAGE (Tol, 

2008). 

While the development of the DICE, FUND and PAGE models necessarily involved assumptions and 

judgments on the part of the modelers, the damage functions are not simply arbitrary representations of 

̟͟ϣ ̺͂ϟϣ̴ϣ͕̠͑ ̢̢͎̻̻͕͂͂ χΫ͂ ͟ͅ φ̴̢̺χ͟ϣ ϟχ̺χ̕ϣ͕̝ Rather they are based on a review by the modelers of the 

currently available literature on the effects of climate change on society. The conclusions that the 

modelers draw from the literature, and the bases for these conclusions are documented, and all three 

models are continually updated as new information becomes available. While we recognize that there are 

limitations with these models, including some of those discussed in Pindyck (2013), nonetheless IAMs 

provide valuable information for regulatory impact analysis. In a recent article in the peer-reviewed 

literature, Weyant (2014) addressed this issue as follows: 

̴̢̹̟ϣ ̢̜̻ϟΌφ̱̠͕ ͂Ϋ͕ϣ͑ ̈́χ̢̻͕͂͟ χΫ͂ ͟ͅ ̟͟ϣ ϣ̢̢̺͎͑φχ̴ Άϣχ̱̻ϣ͕͕ϣ͕ ͂ϭ I!͕̉ ͂͑ φχ̴φ ̴ͅχ̢̻͕͂͟ ͂ϭ ̟͟ϣ ̣ 

are worthy of careful study, the conclusion that IAMs are therefore useless fundamentally 

misconceives the enterprise. IAMs and the SCC are conceptual frameworks for dealing with highly 

complex, non-linear, dynamic, and uncertain systems. The human mind is incapable of solving all 

the equations simultaneously̚ χ̻ϟ ̺͂ϟϣ̴̢̻̕ χ̴̴͂Ά͕ ̺χ̢̱̻̕ ̣Iϭ̞̚ ̟͟ϣ̻̞̤ χ̻χ̴Ό͕ϣ͕ ͂ϭ ̟͟ϣ ̢̺͎χφ͕͟ 

of different factors. The models have provided important insights into many aspects of climatechange policy. 

The IWG thus believes that it was appropriate to base the SCC estimates on the DICE, FUND and PAGE 

models. Moving forward, the IWG will continue to follow and evaluate the latest peer reviewed literature 

applying IAMs. The IWG will seek external expert advice on the technical merits and challenges of using 

additional models (e.g., CRED, ENVISAGE) to estimate the SCC and/or removing existing models from the 

ensemble (DICE, FUND, and PAGE) used to estimate the SCC. 

Finally, the IWG disagrees with the comment that insufficient justification has been provided for the 

models, data inputs, and assumptions used to estimate the SCC. The IWG has regularly and repeatedly 

provided detailed explanations and justifications for the data, assumptions, and models used to estimate 

the SCC. The 2010 TSD thoroughly detailed each of these aspects, justified their use, and elucidated their 

limitations. The 2013 TSD provided a detailed explanation of updates and revisions made to the SCC. The 

additional OMB public comment solicitation provided a further opportunity for the public to comment on 

the data, assumptions, and models used in developing the SCC estimates; in this Response to Comment 

the IWG is responding to those comments received. Thus, the IWG has provided clear, transparent analytic 

defenses of its estimates, explained the rational connections that underlie these estimates, and 

responded to public comments. 

The 2010 TSD provides a complete explanation of the entire modeling exercise, including a description of 

the chosen integrated assessment models (IAMs) and why they were selected, how the harmonized 

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modeling decisions were developed, how the sources of the data inputs were selected, and how the 

model results were aggregated to the final four point estimates that are used in regulatory analysis. For 

example, Section III A. of the TSD describes, in detail, the structure and connections within the IAMs (DICE, 

FUND, and PAGE), and the features that make them relevant and appropriate for estimating the SCC. As 

described in the 2010 TSD, after critical evaluation the IWG concluded that it is reasonable to use these 

three models from the peer-reviewed literature for the purpose of estimating the SCC. Section III of the 

2010 TSD also describes, in detail, other relevant modeling inputs adopted by the IWG, the basis for the 

specific inputs used, and how these inputs are connected to the modeling and estimates of the SCC. For 

ϣ΋χ̴̺͎ϣ̚ ͕ϣϣ ̣ϣφ̢̻͂͟ III D̝ ͂ϭ ̟͟ϣ γαβα ̩̣D ϭ͂͑ ϟ̢͕φ ̢͕͕̻͂ͅ χΫ͂ ͟ͅ ̟͟ϣ I̹G̠͕ χ̻χ̴Ό̢͕͕̚ ϟϣ ̈́ϣ̴͎̺͂ϣ̻̚͟ χ̻ϟ 

application of the distribution for the equilibrium climate sensitivity parameter; Section III E. for discussion 

χΫ͂ ͟ͅ ̟͟ϣ I̹G̠͕ χ̻χ̴Ό̢͕͕̚ ͕ϣ̴ϣφ̢̻͂̚͟ χ̻ϟ̚ χ̴̢͎͎φχ̢̻͂͟ ͂ϭ ͕͂φ̢͂ϣφ̢̻̺͂͂φ χ̻ϟ ϣ̢̢̺͕͕̻͕͂ ͕φϣ̻χ̢̛͕͑͂ χ̻ϟ 

̣ϣφ̢̻͂͟ III F̝ ϭ͂͑ ϟ̢͕φ ̢͕͕̻͂ͅ χΫ͂ ͟ͅ ̟͟ϣ I̹G̠͕ ̴̢͟ϣ͑χ͟ ͑ͅϣ ͕ϣχ͑φ̟̚ χ̻χ̴Ό̢͕͕̚ χ̻ϟ ͕ϣ̴ϣφ̢̻͂͟ ͂ϭ ϟ̢͕φ͂ ̻͟ͅ ͑χ͟ϣ͕̝ I̻ 

addition, in Section V of the 2010 TSD the IWG described potential limitations of the analysis and made 

φ̴ϣχ͑ ̟͟ϣ ͑ϣ͕ ̴̢̻̕͟ͅ ̴̢̢̺͎φχ̢̻͕͂͟ ϭ͂͑ ̟͟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕̚ Ϋχ͕ϣϟ ̻͂ ̟͟ϣ I̹G̠͕ φ̢̢͑͟φχ̴ ϣ΋χ̢̺̻χ̢̻͂͟ ͂ϭ ̟͟ϣ 

models and their underlying assumptions. 

(2) Recommendations for improving the current IAMs or damage functions 

Many commenters suggested improvements to one or more of the models before future SCC updates. 

Many of these commenters believe that the current SCC estimates underestimate the damages induced 

by climate change because of incomplete or missing treatment of a number of damage categories. 

Suggestions for additional damage categories include: ocean acidification, spillover effects from displaced 

persons, increased variability in weather patterns, wildfires, ̣catastrophic̤ damages stemming from 

exceedance ͂ϭ  ̈́χ̢͑͂ ͕ͅ ̢̢̣͎͎̻̕͟ ̢͎̻͕̤͂̚͟ ̴͕͕͂ ͂ϭ ͕͎ϣφ̢ϣ͕ χ̻ϟ ̟χΫ̢͟χ͟ ϟ̢ ̈́ϣ̢͕͑͟Ό̚ φ ̴͟ͅ ͑ͅχ̴ ̢̺͎χφ͕̚͟ ̟ϣχ̴̟͟ 

effects from increased air pollution, and impacts on global security, among others. Commenters also 

questioned whether the models adequately addressed linkages between the damage categories. One 

Commenter suggested the use of the aggregate damage function introduced by Weitzman (2010) as an 

alternative specification relating mean temperature change and GDP loss. 

Commenters disagreed about whether the IAMs overestimate or underestimate CO2 fertilization effects 

in the agriculture and forestry sectors. F͂͑ ϣ΋χ̴̺͎ϣ̚ ̻͂ϣ φ̺̺͂ϣ̻͟ϣ͑ Ά͑͂͟ϣ ̣only one of the three IAMs 

used by the IWG has any substantial impact from CO2 fertilization, and the one that does, underestimates 

the effect by approximately 2-δ ̢̺͟ϣ͕̤̚ ͑ϣϭϣ͑ϣ̻φ̢̻̕ Idso (2013). However another commenter argued that 

̣̟͟ϣ ̺͂ϟϣ̴͕ ϟ͂ ̻͂͟ ͑ϣϭ̴ϣφ͟ ͑ϣφϣ̻͟ ͑ϣ͕ϣχ͑φ̟ ̻͂ χ̢͑̕φ ̴͟ͅ ͑ͅχ̴ φ̟χ̻̕ϣ͕̚ Ά̢̟φ̟ ͕ ̕̕ͅϣ͕͟s that CO2 fertilization 

is overestimated, particularly in the FUND model, and that much, if not all, of the fertilization benefits 

may be cancelled out by negative impacts on agriculture̝̤ 

Response 

To date, the IWG has accepted the models as currently constituted, and omitted any damages or beneficial 

effects that the model developers themselves do not include. The IWG recognizes that none of the three 

IAMs fully incorporates all climate change impacts, either positive or negative. Some of the effects 

referenced by commenters (e.g., ̣catastrophic̤ effects, disease, and CO2 fertilization) are explicitly 

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modeled in the damage functions of one or more of the current models (although the treatment may not 

be complete), and the model developers continue to update their models as new research becomes 

available. In fact, the IWG undertook the 2013 revision because of updates to the models, which include 

new or enhanced representation of certain impacts, such as sea level rise damages. In addition, some of 

the categories mentioned by commenters are currently speculative or cannot be incorporated into the 

damage function for lack of appropriate data. Using an ensemble of three different models was intended 

to, at least partially, address the fact that no single model includes all of the impacts. We recognize that 

there may be effects that none of the three selected models addresses (e.g., impacts from ocean 

acidification) or that are likely not fully captured (e.g. catastrophic effects). 

The IWG also recognizes that the impacts of climate change on agriculture is an area of active research 

and that methodological and data challenges persist. As a result there is uncertainty as to the magnitude 

of these impacts and the role of interactions between changes in the climate and other factors, such as 

CO2 fertilization, temperature, precipitation, ozone, pests, etc. Additionally, these effects are likely to vary 

widely across regions and crops. However, with high confidence the IPCC (2013) stated in its Fifth 

Assessment Report (AR5) that ̣[b]ased on many studies covering a wide range of regions and crops, 

̻ϣ̕χ̢͟ ̈́ϣ ̢̺͎χφ͕͟ ͂ϭ φ̴̢̺χ͟ϣ φ̟χ̻̕ϣ ̻͂ φ͎͑͂ Ό̢ϣ̴ϟ͕ ̟χ ̈́ϣ Ϋϣϣ̻ ̺͂͑ϣ φ̺̺̻͂͂ ̟͟χ̻ ̢̢͎͕͂͟ ̈́ϣ ̢̺͎χφ͕̝̤͟ As 

̻͂͟ϣϟ χΫ͂ ̈́ϣ̚ ̟͟ϣ I̹G̠͕ χ͎͎͑͂χφ̟ ͂͟ ϟχ͟ϣ ̟χ͕ Ϋϣϣ̻ to rely on the damage functions included in the three 

IAMs by their developers. 

The IWG agrees that it is important to update the SCC periodically to incorporate improvements in the 

understanding of greenhouse gas emissions impacts and will continue to follow and evaluate the latest 

science on impact categories that are omitted or not fully addressed in the IAMs. Also, the IWG will seek 

external expert advice on the technical merits and challenges of potential approaches to update the 

damage functions in future revisions to the SCC estimates. 

(3) Value of goods and services whose production is associated with CO2 emissions 

Some commenters felt that the SCC estimates should include the value to society of the goods and services 

whose production is associated with CO2 emissions. Many of these commenters mentioned goods 

͎͑͂ϟ ͅφϣϟ  ̢͕̻̕ͅ ϭ̴̢͕͕͂ ϭ ͅϣ̴͕̚ ͕ ͅφ̟ χ͕ ̴̣͎χ̢͕͟φ͕̚ φ̟ϣ̢̺φχ̴͕̚ ̢̻͑͂̕͟ϣ̻ ϭϣ̴̢̢͑͟Αϣ͑̚ ͕͟ϣϣ̴̚ χ̴ ̢̺̻ͅ ̺̚ͅ ͕Ό̻̟͟ϣ̢͟φ 

͑ ͅΫΫϣ͑ ϭ͂͑ ̢͑͟ϣ͕̚ ̴̕χ͕͕̚ ͎̟χ̺͑χφϣ ̢͟ͅφχ̴͕̚ χ̻ϟ ͎χ͎ϣ̝̤͑ ̻̐ϣ φ̺̺͂ϣ̻͟ϣ͑ χ͑̕ ͅϣϟ ϭ͂͑ ̢̻φ̴ ͅϟ̢̻̕ ̟͟ϣ Ϋϣ̻ϣϭ̢͕͟ ͂͟ 

̣͑egions that depend on employment from energy intensive industry, regions dependent on fossil fuels 

for heating, cooling, food production and other components associated with preserving their standard of 

living and regions that are in need of low cost fossil fuels to enable the economic development improving 

their standard of living̝̤ Similarly, other commenters focused on the negative consequences of regulating 

CO2 emissions, such as the potential effect on energy prices, economic growth, or international 

competitiveness. One commenter suggested t̟ϣ ̢̻φ̴ ̢͕̻͂ͅ ͂ϭ ̣̞ ̟͟ϣ ͕͂φ̢χ̴ φ͕͕͂͟ χ̻ϟ ϣφ̢̻̺͂͂φ 

dislocations that could result from carbon reduction policies that would eliminate fuel options such as 

coal, the social costs associated with higher electricity prices, and the economic and security risks 

a͕͕͂φ̢χ͟ϣϟ Ά̢̟͟ ϣ̴ϣφ̢͑͟φ ͑ϣ̴̢χΫ̴̢̢͟Ό ͎͑͂Ϋ̴ϣ̺͕̝̤ 

Response 

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Rigorous evaluation of benefits and costs is a core tenet of the rulemaking process. The IWG agrees that 

these are important issues that may be relevant to assessing the impacts of policies that reduce CO2 

emissions. However, these issues are not relevant to the SCC itself. The SCC is an estimate of the net 

economic damages resulting from CO2 emissions, and therefore is used to estimate the benefit of reducing 

those emissions. 

A rule that affects CO2 emissions may also affect the production or consumption of goods and services, in 

which case it could create costs and benefits for businesses and households that either produce or use 

those goods and services. These costs and benefits are important to inφ̴ ͅϟϣ ̢̻ χ̻ χ̻χ̴Ό̢͕͕ ͂ϭ ̟͟ϣ ͑ ̴ͅϣ̠͕ 

impacts, but are not a result of changes in CO2 emissions. The SCC is not a measure of social welfare from 

the consumption of goods and services whose production results in CO2 emissions, or other positive or 

negative externalities associated with the production of those goods and services.7 In other words, the 

SCC is just one component of a larger analysis that includes consideration of many other potential impacts, 

including labor market changes, energy security, electricity reliability, and changes in emissions of other 

pollutants, among others. 

3 Climate Science 

Comments on the climate science components of the modeling fall into three broad areas: the 

specification of the equilibrium climate sensitivity parameter, the formulation and parameterization of 

other physical science components in the IAMs, and uncertainty in climate science and climate modeling. 

In addition, a number of the commenters generally encouraged continued updating of the SCC to maintain 

the best scientific understanding of the relevant earth system processes as new findings emerge. 

(1) Climate Sensitivity 

The equilibrium climate sensitivity (ECS) parameter is a measure of the climate̠s responsiveness to 

increased concentrations of greenhouse gases in the atmosphere. Specifically, the ECS is the long-term 

increase in the annual global-average surface temperature from a sustained doubling of the atmospheric 

CO2 concentration relative to pre-industrial levels. Several commenters supported the IWG approach of 

calibrating the distribution of Roe and Baker (2007) to the IPCC (2007) Fourth Assessment Report (AR4) 

consensus statement on the ECS. However, many commenters, including many of those that approve of 

̟͟ϣ I̹G̠͕ Ϋχ̢͕φ χ͎͎͑͂χφ̟̚ suggest updating this modeling input. The majority of these commenters 

suggest incorporating new research published since the 2010 TSD was released. Some commenters noted 

that in its Fifth Assessment Report the IPCC has revised its discussion of the likely range of climate 

sensitivity compared to AR4 (IPC 2013). Other commenters pointed to individual papers, such as Otto et 

al. (2013), which present lower and more constrained probability density functions (pdfs) than either the 

AR4 or AR5 consensus statements, ̢̻ ͕ ͎͎͂͑͟ͅ ͂ϭ ̟͟ϣ φ̺̺͂ϣ̻͟ϣ͕̠͑ ͕ ̕̕ͅϣ̢͕̻͂͟ ̟͟χ͟ ̟͟ϣ ͎ϟϭ  ͕ͅϣϟ ΫΌ ̟͟ϣ 

IWG was biased high. Some commenters suggested that certain recent papers (e.g., Loehle, 2014; Otto et 

7 Similarly, the SCC does not capture benefits to society from goods and services that reduce CO2 emissions, or other 

co-benefits from reducing emissions such as reduced particulate matter pollution. Those benefits are treated 

elsewhere in a benefit cost analysis. 

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al., 2013; Aldrin et al., 2012) may be especially informative because they rely on recent historical 

temperature measurements. A couple of commenters suggested that the mean of the climate sensitivity 

pdf used by the IWG was too low, because the climate models do not take into account poorly understood 

climate system feedbacks and tipping points. 

Response 

The IWG is aware that this is an active area of research and remains committed to updating the SCC 

estimates to incorporate new scientific information and accurately reflect the current state of scientific 

uncertainty regarding the ECS. While we agree with commenters that the ECS distribution, along with 

other climate modeling inputs to the SCC calculation, should be updated periodically to reflect the latest 

scientific consensus, care must be exercised in selecting an appropriate range of estimates for this 

important parameter. Many studies estimating climate sensitivity have been published, based on a variety 

of approaches (instrumental record, paleoclimate observations, models, etc.). These individual studies 

report differing values and provide different information. Picking a single study from the high or low end 

of the range, or even in the middle, will exclude relevant information. A valid representation of uncertainty 

regarding climate sensitivity should be obtained from a synthesis exercise such as that done by the IPCC 

that considers the full range of relevant studies. 

At the time the 2013 SCC update was released, the most authoritative statement about ECS appeared in 

̟͟ϣ I̜̠͕ !̟ε̝ ̢̣̻φϣ ̟͟χ͟ ̢̺͟ϣ̚ χs several commenters noted, the IPCC issued a Fifth Assessment Report 

that updated its discussion of the likely range of climate sensitivity compared to AR4. The new assessment 

reduced the low end of the assessed likely range (high confidence) from 2°C to 1.5°C, but retained the 

high end of the range at 4.5°C. Unlike in AR4, the new assessment refrained from indicating a central 

estimate of ECS. This assessment is based on a comprehensive review of the scientific literature and 

reflects improved understanding, the extended temperature record for the atmosphere and oceans, and 

new estimates of radiative forcing. 

Several of the post-AR4 studies highlighted by some commenters were cited in the AR5 assessment. In 

particular, both Aldrin et al. (2012) and Otto et al. (2013) were cited in both Chapter 10 and Chapter 12 of 

the AR5 Working Group I assessment. Eight of the authors of Otto et al. (2013), including the lead author, 

Άϣ͑ϣ χ ̟͕͂͑͟ͅ ͂ϭ ̟χ͎͟ϣ͑ βγ ϭ͂͑ !̟ζ̠͕ ̹orking Group I and one was a lead author for the chapter. Hence 

it is clear that the IPCC considered Otto et al. (2013) in its synthesis of literature on the ECS. More broadly, 

the AR5 climate sensitivity distribution likely incorporates much of the literature identified by the 

commenters. The IWG will continue to follow and evaluate the latest science on the equilibrium climate 

sensitivity and seek external expert advice on the technical merits and challenges of potential approaches 

prior to updating the ECS distribution in future revisions to the SCC estimates, including (but not limited 

to) using the AR5 climate sensitivity distribution for the next update of the SCC. 

(2) Other Physical Science Components of the Integrated Assessment Models 

We define the physical science components of the models to include the modeling of physical impacts, 

such as changes in mean global temperature or sea level rise. This definition excludes the functions in the 

models that translate those physical endpoints into economic damages, which is addressed above in the 

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discussion of damage functions. Some commenters expressed approval of the physical science 

components of the models but others criticized specific components as being overly simplified or 

incomplete. For example, some commenters suggested that IAMs under-represent the potential for 

future damages by concentrating on changes in annual and global mean climate indicators, when changes 

in variability, or interactions between changes in the mean and natural variability, could be key 

components in determining future damages. Others noted the need for more explicit representation of 

the potential for low-͎͑͂ΫχΫ̴̢̢͟Ό̚ ̢̟̟̕ ̢̺͎χφ͟ ̣φχ͟χ͕͎̟͑͂͟ϣ͕,̤ with one commenter calling for better 

modeling of ̺ ̴̴̢͎͟ͅϣ ̢̢̣͎͎̻̕͟ ̢͎̻͕̤͂͟ χ͟ ͟he climatic thresholds indicated by the most recent scientific 

literature. Another commenter suggested that the IAMs assign too high a probability to ̣catastrophic̤ 

χ̻ϟ ϣ΋͑͟ϣ̺ϣ ϣ ̈́ϣ̻͕̚͟ ͕ ͅφ̟ χ͕ ̣͂φϣχ̻ φ̢͑φ ̴ͅχ̢̻͂͟ ͕̟ ͟ͅϟ͂Ά̻̚ φχ͟χ̢͕͎̟͑͂͟φ ͕ϣχ ̴ϣ ̈́ϣ̴ ̢͕͑ϣ̚ χ̻ϟ ͑unaway climate 

change.̤ 

The comments regarding the representation of the carbon cycle were mixed. One commenter suggested 

that the highly simplified carbon cycles in the IAMs may lead to an underestimation of atmospheric CO2 

concentrations over time because they do not adequately capture the feedback of climate change on the 

strength of carbon sinks, citing Kopp and Mignone (2012). Other commenters suggested that the ocean 

uptake of CO2 has actually been greater than predicted and thus the models may be overestimating 

atmospheric CO2 concentrations. 

A few commenters suggested that changes in the temperature response functions across model versions 

are unsupported by evidence or research.8 For example, two commenters suggested that a change in the 

triangular probability distribution of the transient climate response function in PAGE was largely 

subjective and lacked adequate supporting citations. Another noted that, in the FUND model, the 

increased rate of temperature change for any given climate sensitivity was inconsistent with recent 

observations, which the commenter suggests show the rate of warming to be slower than predicted. One 

commenter suggested that the version of the DICE model used may overestimate sea level rise relative to 

AR5 projections or ϣ̢͕̺͟χ͟ϣ͕ ͎̮͑͂ϣφ͟ϣϟ ΫΌ ̟͟ϣ ̉!GI φ̴̢̺χ͟ϣ ̺͂ϟϣ̴ Ϋϣφχ ͕ͅϣ ͂ϭ DIE̠͕ ͑ϣ̴̢χ̻φϣ ̻͂ χ̻ 

outdated semi-empirical methodology that uses models of reduced complexity in conjunction with 

statistical relationships between sea level and climate forcing.9 Finally, one commenter suggested that 

the entire physical climate and greenhouse gas concentration functions in the IAMs should be replaced 

by functions from other models. The commenter mentions the more detailed representations such as 

MAGICC, SNEASY, or BEAM, which would have simultaneous implications for the carbon cycle, sea level 

rise, and/or temperature response rates.10 

Response 

8 While the ECS determines the long-͟ϣ̺͑ ̺χ̢̻̕͟ ͅϟϣ ͂ϭ ̟͟ϣ φ̴̢̺χ͟ϣ̠͕ ͑ϣ͕͎̻͕͂ϣ ͂͟ φ̟χ̻̕ϣ͕ ̢̻ χ̺͕͎̟͂͟ϣ̢͑φ 

φ̻͂φϣ̻͑͟χ̢̻͕͂͟ ͂ϭ GHG͕̚ ̟͟ϣ I!̠͕̉ ͟ϣ̺͎ϣ͑χ͟ ͑ͅϣ ͑ϣ͕͎̻͕͂ϣ ϭ ̻ͅφ̢̻͕͂͟ ̺͂ϟϣ̴ ̟͟ϣ ̻ϣχ͑-term dynamics of how the 

climate responds to increasing atmospheric concentrations. 

9 MAGICC is the Model for the Assessment of Greenhouse Gas Induced Climate Change. For more information see 

Meinshausen et al. (2011). 

10 For more information on the SNEASY model see Urban and Keller (2010). For more information on the BEAM 

model see Glotter et al. (2014). 

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A key objective of the IWG was to draw from the insights of the three models while respecting the 

different approaches to linking GHG emissions and monetized damages taken by modelers in the 

published literature. After conducting an extensive literature review, the interagency group selected three 

sets of input parameters (climate sensitivity, socioeconomic and emissions trajectories, and discount 

rates) to use consistently in each model. All other model features were left unchanged, relying on the 

̺͂ϟϣ̴ ϟϣ ̈́ϣ̴͎͂ϣ͕̠͑ Ϋϣ͕͟ ϣ̢͕̺͟χ͟ϣ͕ χ̻ϟ ̮ ͅϟ̺̕ϣ̻͕͟, as informed by the then-current literature. While the 

IAMs are periodically updated, the rapid pace of research in the area of climate science means that at any 

given time there may be new research that has not yet been incorporated into one or more models. Thus, 

while a given model may not always reflect the most recent research regarding any given climate 

subsystem, the IWG concluded that, at the time, the IAMs collectively represented the state of the science 

by bringing all these systems together into a single framework. 

A benefit of using an ensemble of three models is that they cover a range of potential outcomes as 

expressed in the literature. For example the three models used collectively span a range of carbon cycle 

and climate change responsiveness that reflects the uncertainty in the literature. 

With regards to comments on the temperature response function, the past 15 years of observed 

atmospheric temperatures cannot be compared directly to climate model simulations because (1) 

observed temperatures were influenced by volcanic eruptions that were not included in simulations 

because the timing and spatial distribution of eruptions are not known in advance; and (2) the last 15 

years of atmospheric temperatures have been strongly influenced by natural climate variability due to 

oceanic fluctuations, such as the El Niño Southern-Oscillation; models include this variability, but no 

attempt is made to synchronize the ̺͂ϟϣ̴͕̠ timing of this variability with observed variability. In other 

words, while the models incorporate variability around a trend over time, they cannot predict how that 

variability affects measured temperatures in a specific year. 

Regarding the criticisms by commenters of the sea level rise projections in DICE, the IWG recognizes that 

sea level rise projections are also an area of ongoing research. One key issue involves projections of melt 

from the Greenland and West Antarctic ice sheets. The IPCC AR5 report notes there is a possibility of sea 

̴ϣ ̈́ϣ̴ ̢͕͑ϣ ̣͕ ͅΫ͕͟χ̢̻͟χ̴̴Ό χΫ͂ ̈́ϣ̤ ̟͟ϣ̢͑ Ϋϣ͕͟ ϣ̢͕̺͟χ͟ϣ of a likely range because of uncertainties regarding the 

response of the Antarctic ice sheet (AR5 Working Group I, Chapter 13). In AR5 the IPCC also discusses 

semi-empirical methods, stating a low confidence in projections based on such methods, which calibrate 

a mathematical model against observations rather than projecting individual processes. However, the 

IPCC did not entirely discount these methods. Further supporting the use of semi-empirical methods, the 

U.S. National Climate Assessment uses an average of the high end of semi-empirical projections in order 

͂͟ ϟϣϭ̢̻ϣ ̟͟ϣ̢͑ ̣I̻͟ϣ̺͑ϣϟ̢χ͟ϣ-H̢̟̤̕ ̣φϣ̻χ̢͑͂ ̜̓χ̢͕͑͑ ϣ͟ χ̴̝, 2012). Therefore, it is reasonable for one out 

of three models used by the IWG to include some reliance upon semi-empirical methods. 

The IWG is aware that more sophisticated yet still relatively simplified climate models, such as MAGICC, 

could be used to replace the highly simplified climate science components of the three IAMs. However, 

given the range of climate models available and the technical issues associated with such a change, 

replacing the climate modules or other structural features of the IAMs requires additional investigation 

before it can be applied to SCC estimation. The IWG will continue to follow and evaluate the latest science 

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on climate modeling and seek external expert advice on the technical merits and challenges of potential 

approaches to updating this component of the IAMs in future revisions to the SCC estimates. 

We agree with the commenters who suggested the IAMs do not fully capture the impacts associated with 

changes in climate variability and weather extremes. For example, as discussed in the 2010 TSD, the 

calibrations in FUND and DICE do not account for increases in climate variability that may occur and would 

affect the agricultural sector. Similarly, we agree that ̟͟ϣ ̺͂ϟϣ̴͕̠ ϭ ̻ͅφ̢̻͂͟χ̴ ϭ̺͕͂͑ ̺χΌ ̻͂͟ χϟϣ͐ ͅχ͟ϣ̴Ό 

φχ͎͟ ͑ͅϣ ͎͂͟ϣ̢̻͟χ̴̴Ό ϟ̢͕φ̢̻̻͂͟ ͂ͅ ͕ͅ ̢̢̣͎͎̻̕͟ ̢͎̻̤͂͟ Ϋϣ̟χ ̢̈́͂͑ ̢̻ Eχ̟͑͟ ͕Ό͕͟ϣ̺͕̝ I̻ ϭχφ̚͟ large-scale earth 

system feedback effects (e.g., Arctic sea ice loss, melting permafrost, large scale forest dieback, changing 

ocean circulation patterns) are not modeled at all in one IAM, and are imperfectly captured in the others. 

This limitation of the three IAMs is discussed extensively in the 2010 TSD, and again in the 2013 update. 

The SCC estimate associated with the 95th percentile of the distribution based on the 3 percent discount 

rate is included in the recommended range partly to address this concern. The IWG will continue to follow 

and evaluate the latest science on climate variability and potential tipping points, and seek external 

expert advice on the technical merits and challenges of potential approaches to improve the 

representation of these components of the modeling in future revisions. 

(3) Uncertainty in Climate Science 

A number of commenters discussed limitations in the current state of climate science and climate 

modeling generally. Some expressed skepticism about the link between anthropogenic CO2 emissions and 

climate change. Others suggested that the SCC estimates are unreliable because climate modeling in 

general is unreliable and too uncertain for use in regulatory analysis. These commenters suggested that 

the climate models are flawed, have not been properly validated, can disagree with each other, and have 

biased projections. In many cases these commenters suggested that a recently observed reduction in the 

rate of surface temperature warming is evidence that the current generation of climate models should 

not be used to estimate the SCC. One commenter suggested ̟͟χ͟ ̟͟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕ ϟ̻̠͂͟ χϟϣ͐ ͅχ͟ϣ̴Ό ͟χ̱ϣ 

into account the potential of a significantly cooler future climate absent GHG emissions, while another 

suggested that mainstream climate scientists have not appropriately considered the prediction of a grand 

solar minimum that could lead to a cooling cycle. 

Some commenters voiced general criticisms of the IWG approach to the ECS due to the uncertainty about 

the shape of the climate sensitivity distribution and the sensitivity of the SCC estimates to the specification 

of the ECS distribution. One commenter suggested that the IPCC has not made progress in reducing 

uncertainty about climate sensitivity and therefore the IPCC consensus should not be used. Several 

commenters objected to the IWG use of the Roe and Baker (2007) distribution for the ECS. One of these 

commenters cited Pindyck (2013), stating that feedback loops within the climate system are largely 

unknown and therefore the shape of the distribution is unknown. The commenter suggested that Roe and 

χ̱ϣ̠͕͑ χ͕͕ ̢̺͎̻͂͟ͅ of a normally distributed climate feedback factor may not be theoretically correct, 

and suggested the use of alternative distributions. The commenter was particularly concerned that the 

use of a right-skewed distribution for the ECS would lead to an overestimate of the mean SCC if the ECS 

distribution would be more appropriately modeled as symmetric, though another commenter suggested 

that the Roe and Baker approach correctly captured the right-skewed nature of the distribution. 

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Response 

Links between CO2 and temperature are established beyond question by laboratory measurements, 

physical theory, paleoclimate observations, instrumental observations, and observations of other planets. 

Climate change and its impacts, such as sea level rise, have been exhaustively documented, and 

synthesized internationally by the IPCC and domestically by the U.S. National Climate Assessment. Based 

on the wide acceptance of these conclusions in the scientific community, the IWG believes that: (1) 

anthropogenic emissions of greenhouse gases are causing atmospheric levels of greenhouse gases in our 

atmosphere to rise to levels unprecedented in human history; (2) the accumulation of greenhouse gases 

in our atmosphere is exerting a warming effect on the global climate; (3) there are multiple lines of 

evidence, including increasing average global surface temperatures, rising ocean temperatures and sea 

levels, and shrinking ice in glaciers, ice sheets, and the Arctic, all showing that climate change is occurring, 

and that the rate of climate change in the past few decades has been unusual in the context of the past 

1000 years; (4) there is compelling evidence that anthropogenic emissions of greenhouse gases are the 

primary driver of recent observed increases in average global temperature; (5) atmospheric levels of most 

greenhouse gases are expected to continue to rise for the foreseeable future; and (6) risks and impacts to 

public health and welfare are expected to grow as climate change continues, and that climate change over 

this century is expected to be greater compared to observed climate change over the past century. 

While there are inherent uncertainties associated with modeling climate systems over long time spans, 

the general circulation models (GCMs) upon which estimates of ECS and other climate science research 

are based have been extensively evaluated. For example, since 1989 the DOE has had a large program 

(The Program for Climate Model Diagnosis and Intercomparison) dedicated to evaluating these models. 

Predictions of future solar activity are highly uncertain. However, even if a new solar minimum of the 

magnitude of the Maunder minimum (the solar low during the Little Ice Age) were to occur, its cooling 

tendency would be much less than the warming tendency from human greenhouse gases (e.g., Feulner 

and Rahmstorf, 2010). 

The ECS parameter is a useful parameter for s ̺̺ͅχ̢͑Α̢̻̕ ̟͟ϣ ͕͑͟ϣ̻̟̕͟ ͂ϭ ̟͟ϣ φ̴̢̺χ͟ϣ ͕Ό͕͟ϣ̺̠͕ ͑ϣ͕͎̻͕͂ϣ 

to accumulating GHG concentrations in the atmosphere. However, it is influenced by many highly complex 

and uncertain natural processes, some of which adjust over very long periods of time. Therefore, 

persistent uncertainty about the ECS is not surprising. Furthermore, persistent uncertainty does not 

suggest an absence of useful information. However, the IWG does not agree that progress has not been 

made in reducing this uncertainty. Over the last 30 years the scientific community has elucidated many 

χ͕͎ϣφ͕͟ ͂ϭ ̟͟ϣ φ̴̢̺χ͟ϣ ͕Ό͕͟ϣ̺̠͕ ͑ϣ͕͎̻͕͂ϣ ͂͟ GHG͕ χφφ ̺ͅ ̴ͅχ̢̻̕͟ ̢̻ ̟͟ϣ χ̺͕͎̟͂͟ϣ͑ϣ. ̴̢̹̟ϣ ̟͟ϣ !̟ζ ̴̢̣̱ϣ̴Ό̤ 

range is slightly larger than that of AR4, the assessment presented greater confidence in the tails. AR5 

found that climate sensitivity is very unlikely to be greater than 6°C̚ Ά̟ϣ͑ϣχ͕ !̟ε ͕͟χ͟ϣϟ ̟͟χ͟ ̟͟ϣ ̴̣χφ̱ ͂ϭ 

strong constraints limiting high climate sensitivities prevents the specification of a 95th percentile bound.̤ 

Similarly, while the AR5 and the I̜̠͕ ̓γααβ̈́ Third Assessment Report (TAR) bounds look similar, the TAR 

bounds were presented as a range without estimated probabilities. 

In response to the commenter citing Pindyck on climate feedbacks and the shape of the ECS distribution, 

we agree that potential climate feedbacks and their strength are uncertain. However, the IWG chose a 

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distribution from the peer-reviewed literature based on its evaluation of the scientific literature and the 

relationship between this distribution and IPCC range of the ECS. Regarding the skewness of the calibrated 

ECS distribution, this characteristic is common among the many approaches that have been used to study 

the ECS distribution and is not unique to the theoretical approach used by Roe and Baker to define the 

functional form of their distribution. Consistent with the AR4 discussion on limiting the distribution to a 

range considered possible by experts, such as from 0°C to 10°C, the IWG truncated the distribution at 10o

C 

(Hegerl 2007, p 719). 

4 Socioeconomic and Emissions Scenarios 

Several commenters discussed the socioeconomic-emissions scenarios that are used as inputs for the 

I!͕̝̉ ̻̐ϣ φ̺̺͂ϣ̻͟ϣ͑  ̢̈́͂φϣϟ ̕ϣ̻ϣ͑χ̴ ͕ ͎͎͂͑͟ͅ ϭ͂͑ ̟͟ϣ I̹G̠͕ χ͎͎͑͂χφ̟̚ ̢̻̻͂̕͟ ̟͟χ͟ ̟͟ϣ ̣ ͕ͅϣ ͂ϭ ẺF-22 

[scenarios] ͑ϣ͎͑ϣ͕ϣ̻͕͟ χ φχ͑ϣϭ ̴̴ͅΌ φ̢̻͕͂ϟϣ͑ϣϟ χ̻ϟ ͕φ̢ϣ̢̻͟ϭ̢φχ̴̴Ό ϟϣϭϣ̢̻͕Ϋ̴ϣ ϟϣφ̢̢͕̻̝̤͂ ̟̐͟ϣ͑ φ̺̺͂ϣ̻͕͟ φχ̻ 

be grouped into three main categories: the socioeconomic-emissions scenarios should be updated; 

concerns with the selected scenarios, including potential inconsistencies with other aspects of the 

modeling; and future updates of the scenarios should include a formal uncertainty analysis. 

(1) The socioeconomic-emissions scenarios should be updated 

A number of commenters recommended that the scenarios be updated to reflect newer modeling results. 

̣̺͂ϣ φ̺̺͂ϣ̻͕͟ ͕ ̕̕ͅϣ͕͟ϣϟ ̟͟χ͟ ̟͟ϣ ̣ ͕̟͂ ̴ͅϟ Ϋϣ ϣ̢͕̺͟χ͟ϣϟ  ̢͕̻̕ͅ ̟͟ϣ ͕φϣ̻χ̢͕͑͂ ̢̻ ̟͟ϣ I̜̠͕ F̢ϭ̟͟ 

Assessment Report. In some cases the comments specifically suggested use of the representative 

concentration pathways (RCPs) and the associated shared socioeconomic pathways (SSPs) that were 

developed to identify a range of future socioeconomic scenarios that could lead to the RCPs. In other 

cases the commenters did not specify which AR5 scenarios should be used. In addition to the development 

of the RCP/SSP scenarios, the IPCC supported the AR5 assessment through an open call for qualified 

scenarios produced since the publication of AR4. The result of the open call was a database of more than 

1,200 scenarios from 32 models that represe̻͟ Ϋ̟͂͟ ̣Ϋ ̢͕̻ͅϣ͕͕-as- ͕ͅ ͅχ̴̤ ̓!̭̈́ χ̻ϟ ̴̢͎͂φΌ φχ͕ϣ͕̚ Ά̢̟φ̟ 

were used extensively by Working Group III. 

Response 

OMB guidance in Circular A-4 requires benefits and costs to be computed relative to a baseline that 

͑ϣ͎͑ϣ͕ϣ̻͕͟ ̣the best assessment of the way the world would look absent the proposed action̝̤ ̩̟ϣ I̹G 

determined that BAU socioeconomic scenarios best reflect this approach. While the IWG agrees that, all 

else equal, the baseline used for the SCC calculation should be updated periodically to reflect the latest 

projections of BAU scenarios, the RCP/SSP scenarios used in support of AR5 may not be easily adaptable 

for use in SCC modeling. 

To understand why, it is important to note some key differences between the criteria used by the IWG to 

select socioeconomic-emissions scenarios and what the RCP/SSP scenarios represent and how they were 

developed. Each scenario in the EMF-22 exercise used by the IWG was clearly identified as reflecting a 

reference case BAU or a specific CO2 stabilization scenario. Lacking data on the probabilities of specific 

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scenarios, the IWG chose four BAU scenarios and one scenario representing stabilization at 550 ppm CO2­

e and weighted them equally in its analysis. The IWG acknowledges that this is not a precise 

characterization of the baseline but believes it is a reasonable approach at present, in light of data 

limitations. 

Some of the AR5 scenarios differ from these scenarios in ways that make them difficult to adapt to the 

SCC context. An ad-hoc group was formed in anticipation of AR5 to develop new scenarios to support 

climate impacts, adaptation, and vulnerability research. The initial work focused on the development of 

RCPs, which represent a wide range of potential radiative forcing pathways over the 21st century. The SSPs 

are a series of human development pathways that could lead to radiative forcing pathways described by 

the RCPs. The RCPs are not based on a fixed future path of key socioeconomic parameters, which means 

that multiple SSPs are associated with an RCP. No assessment was made as to the likelihood of any 

particular RCP being realized, but some of the scenarios clearly would require large-scale global mitigation 

efforts to be achieved and U.S. involvement in these efforts may be necessary for their success. 

In other words, the developers did not assign likelihoods that the various scenarios would achieve the 

RCPs in the absence of policy interventions, which means that it is not clear which scenarios could 

reasonably serve as BAU projections. Therefore, using the RCP/SSP scenarios would require the IWG to 

conduct an assessment of which RCP/SSPs represent BAU scenarios, or of the probability that each 

scenario occurs in a BAU case. The IWG believes that data are currently lacking to conduct such an 

assessment. 

The IWG will continue to follow and evaluate the latest science on socioeconomic-emissions scenarios 

and seek external expert advice on the technical merits and challenges of potential approaches to update 

these scenarios in future revisions to the SCC estimates. 

(2) Concerns with the selected scenarios, including potential inconsistencies with other aspects of the 

modeling 

A number of commenters felt the explanation of the selected socio-economic and emissions scenarios 

was inadequate in both the 2010 and 2013 TSDs and highlighted potential inconsistencies between the 

GDP, population, emissions, and non-CO2 radiative forcing trajectories, and in their application to the SCC 

estimates. For example, one commenter suggested that a better rationale is needed for the choice of the 

scenarios from the EMF exercise. Other commenters suggested that the scenario assuming immediate 

and substantial global mitigation efforts is an implausible BAU scenario. Similarly, another commenter 

suggested that policy scenarios are not appropriate for SCC estimation because using emission scenarios 

that assume future abatement and mitigation efforts may introduce a downward bias when using the SCC 

as a benchmark for evaluating the very abatement and mitigation efforts that are assumed to be in place 

in the future. Other commenters suggested that extrapolation of the scenario variables from 2100 to 2300 

may not have properly accounted for correlations among the variables; one commenter noted that work 

is underway to extend the AR5 SSPs out to 2300 along the extended RCPs and that use of such scenarios 

may improve consistency of the scenarios past 2100. Commenters also noted that treating certain 

variables as exogenous to the IAMs might introduce inconsistences if other relevant variables or 

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assumptions differ between the models used to develop the scenarios and the IAMs using them as inputs 

to estimate the SCC. Other commenters suggested that the average annual global GDP per capita growth 

rate in the scenarios is too high compared with long term historic growth rates observed in the United 

States, and that the IWG should have rejected the EMF scenarios because the EMF exercise is not part of 

χ ͎ ͅΫ̴̢φ ͎͑͂φϣ͕͕ χ̻ϟ ̟͟ϣ ẺF ͕φϣ̻χ̢͕͑͂ χ͑ϣ ̣ϣ΋͑͟ϣ̺ϣ ͂ ̴̢͟ͅϣ͕̤͑ ͑ϣ̴χ̢͟ ̈́ϣ ͂͟ ͑ϣφϣ̻t Energy Information 

Administration forecasts. 

Response 

The rationale for using the EMF-22 scenarios is explained in the 2010 TSD. In addition to the fact that they 

were recent, peer-reviewed, and publicly available, they had the key advantage that GDP, population, and 

emissions trajectories are internally consistent for each model and scenario evaluated. As noted in the 

2010 TSD, t̟ϣ ͕φϣ̻χ̢͕͑͂  ͕ͅϣϟ ̣span a wide range, from the more optimistic (e.g. abundant low-cost, lowcarbon energy) to more pessimistic (e.g. constraints on the availability of nuclear and renewables̝̤̈́ 

Regarding the inclusion of a scenario associated with stabilization of atmospheric concentrations of GHGs 

at 550 ppm CO2-e, the 2010 TSD clearly notes that this is ̣̻͂͟ ϟϣ̢͑ ̈́ϣϟ ϭ̺͑͂ χ̻ assessment of what policy 

is optimal from a benefit-φ͕͂͟ ͕͟χ̻ϟ̢͎̻̝͂͟ ̟χ̟͟ϣ͑̚ ̢͟ ̢͕ ̢̻ϟ̢φχ̢͟ ̈́ϣ ͂ϭ ̻͂ϣ ̢͎͕͕͂Ϋ̴ϣ ϭ ͟ͅ ͑ͅϣ ͂ ͟ͅφ̺͂ϣ̝̤ As noted 

above, OMB guidance in Circular A-4 states that the correct baseline for regulatory impact analysis is an 

χ̕ϣ̻φΌ̠͕ Ϋϣ͕͟ assessment of the state of the world without the regulation, and specifically states that this 

may include the potential for new domestic and foreign policies that would occur absent the regulation. 

Including a scenario representative of future mitigation actions is consistent with this guidance, as long as 

those future policy actions are expected to occur with or without the regulation under examination. As 

explained in the 2010 TSD, the IWG aimed to select scenarios that span most of the plausible range of 

outcomes for the socioeconomic variables. Given the level of uncertainty in these trajectories, the IWG 

felt that it was appropriate to consider a trajectory with significant global mitigation, assuming that this is 

a distinct possibility even in the absence of U.S. actions. Because there were five scenarios, and each 

received equal weighting, the stabilization scenario received 20% of the total probability weight. 

Regarding potential inconsistencies between scenarios and IAMs, given the nature of estimating the SCC 

and available data/resources, a full harmonization along all possible dimensions of the three IAMs used 

to estimate the SCC with the four models used to develop the scenarios was not possible. Therefore, the 

IWG chose to harmonize the models with respect to the scenario variables to which SCC estimates are 

most sensitive (GDP, population, and emissions) using common techniques in the literature. The scenarios 

used were developed by highly respected international modeling groups and published in the peerreviewed literature. In terms of potential inconsistencies across scenario variables past 2100, an effort 

was made to account for some basic correlations among scenario variables in the post-2100 extrapolation. 

For example, extrapolations were based on GDP per capita growth, which implicitly correlates population 

and GDP growth, rather than GDP levels or growth alone. Similarly, extrapolations were based on CO2 

emissions intensity with respect to GDP, which correlates emissions and GDP growth, rather than CO2 

emissions levels or growth alone. 

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Consistent with historical observations, it is expected that growth rates of rapidly developing economies 

will exceed those of already developed economies in the near term. Scenarios with projections of global 

economic growth that exceed recent trends in developed economies are consistent with this expectation. 

The chosen scenarios capture a wide range of potential future states of the world, but were not intended 

to represent a comprehensive accounting of the full range of uncertainty, and therefore it is possible that 

future outcomes will fall outside of this range. The IWG acknowledges that the projection of the scenarios 

beyond 2100 has greater uncertainty than shorter-term projections and will continue to monitor the 

literature, including the development of extended RCP/SSP scenarios, for ways to improve the estimated 

trajectories and improve internal consistency. 

(3) Future updates should include a formal uncertainty analysis of socio-economic and emissions 

scenarios. 

Multiple commenters noted that the SCC estimates are not based on a detailed accounting of uncertainty 

over future socioeconomic and emissions conditions, and suggested that in future updates, the estimates 

should more formally address such uncertainty. It was also suggested that the equal weighting of the five 

selected scenarios might be inconsistent with their actual probabilities; for example, some commenters 

felt that given current policies the scenario leading to stabilization of atmospheric GHG concentrations at 

550 ppm CO2-e by 2100 is unlikely to have the same probability as the four BAU scenarios 

Response 

The IWG acknowledges that the SCC estimates do not include a formal, probabilistic assessment of 

uncertainty. Rather, the IWG attempted to span a reasonable range of uncertainty by including a range of 

estimates for key input variables, including climate sensitivity, socioeconomic trajectories, and discount 

rates. As noted in the 2010 TSD, the IWG considered formally assigning probability weights to different 

socioeconomic scenarios, but this proved challenging to do in an analytically rigorous way given the dearth 

of information on the likelihood of a full range of future socioeconomic pathways. In this situation, the 

IWG determined that, because no basis for assigning differential weights was available, the most 

transparent way to present a range of uncertainty was simply to weight each of the five scenarios equally 

for the consolidated estimates. The TSD also presented the results for each scenario separately, to show 

how the SCC estimates varied across the scenarios. 

The IWG will continue to follow and evaluate the latest science on incorporating formal uncertainty 

analysis over socioeconomic-emissions scenarios, and will seek external expert advice on the technical 

merits and challenges of potential approaches to incorporate scenario uncertainty in future revisions to 

the SCC estimates. 

5	 Discount Rates 

Numerous commenters discussed the discount rates used to estimate the SCC. Their comments can be 

grouped into three main categories: it would be appropriate to include a 7 percent discount rate in the 

range used to estimate the SCC; the central SCC estimate should be based on a discount rate lower than 

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3 percent or on a rate that declines over time; and a Ramsey framework should be used to endogenously 

determine the discount rates. 

(1) It would be appropriate to include a 7 percent discount rate in the range used to estimate the SCC. 

Most commenters who made this comment φ̢͟ϣϟ ̠͕̐̉ ̢͑φ ̴ͅχ͑ !-4, which identifies 3 percent and 7 

percent as appropriate discount rates for regulatory impact analysis conducted pursuant to Executive 

Order 12866. A few commenters offered more specific rationales for using a higher discount rate. One 

commenter noted that in the United States market interest rates of around 7 percent per year have 

typically been associated with per capita GDP growth rates of around 1.5 percent per year, and the socioeconomic scenarios used in estimating the SCC assume per capita GDP growth rates at least this high. 

Another commenter noted that low discount rates place relatively more weight on outcomes further in 

the future, which are more uncertain than near term outcomes. Several commenters indicated that a 7 

percent discount rate is appropriate because it represents a better estimate of the opportunity cost of 

capital investments that would be displaced under compliance with a potential regulation to mitigate CO2 

emissions. 

Response 

OMB guidance in Circular A-4 recommends that discount rates of 3 percent and 7 percent be used in 

regulatory impact analysis. The 7 percent rate is an estimate of the average before-tax real rate of return 

to private capital in the U.S. economy. It is a broad measure that reflects the returns to real estate and 

small business and corporate capital and is meant to approximate the opportunity cost of capital in the 

United States. The 3 percent rate is an estimate of the real rate at which consumers discount future 

consumption flows to their present value, often referred to as the social rate of time preference or the 

consumption rate of interest. As stated in the 2010 TSD, in a market with no distortions, the return to 

savings would equal the private return on investment, and the market rate of interest would be the 

appropriate choice for the social discount rate. In the real world, however, risk, taxes, and other market 

imperfections drive a wedge between the risk-free rate of return on capital and the consumption rate of 

interest. 

While most regulatory impact analysis is conducted over a time frame in the range of 20 to 50 years, OMB 

guidance in Circular A-4 recognizes that special ethical considerations arise when comparing benefits and 

costs across generations. Although most people demonstrate time preference in their own consumption 

behavior, it may not be appropriate for society to demonstrate a similar preference when deciding 

between the well-being of current and future generations. Future citizens who are affected by such 

choices cannot take part in making them, and today's society must act with some consideration of their 

interest. Even in an intergenerational context, however, it would still be correct to discount future costs 

and benefits generally (though perhaps at a lower rate than for intragenerational analysis), due to the 

expectation that future generations will be wealthier and thus will value a marginal dollar of benefits or 

costs less than the current generation. Therefore, it is appropriate to discount future benefits and costs 

relative to current benefits and costs, even if the welfare of future generations is not being discounted. 

Estimates of the discount rate appropriate in this case, from the 1990s, ranged from 1 to 3 percent. After 

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reviewing those considerations, Circular A-4 states that if a rule will have important intergenerational 

benefits or costs, agencies should consider a further sensitivity analysis using a lower but positive discount 

rate in addition to calculating net benefits using discount rates of 3 and 7 percent. 

The IWG examined the economics literature and concluded that the consumption rate of interest is the 

correct concept to use in evaluating the net social costs of a marginal change in CO2 emissions, as the 

impacts of climate change are measured in consumption-equivalent units in the three IAMs used to 

estimate the SCC. This is consistent with OMB̠͕ guidance in Circular A-4, which states that when a 

regulation is expected to primarily affect private consumption̻for instance, via higher prices for goods 

and services--it is appropriate to use the consumption rate of interest to reflect how private individuals 

trade-off current and future consumption. 

As explained in the 2010 TSD, after a thorough review of the discounting literature, the IWG chose to use 

three discount rates to span a plausible range of constant discount rates: 2.5, 3, and 5 percent per year. 

The central value, 3 perce̻̚͟ ̢͕ φ̢̻͕͕͂͟ϣ̻͟ Ά̢̟͟ ϣ̢͕̺͟χ͟ϣ͕ ͎͑͂ ̢̈́ϟϣϟ ̢̻ ̟͟ϣ ϣφ̢̻̺͂͂φ͕ ̴̢͟ϣ͑χ͟ ͑ͅϣ χ̻ϟ ̠͕̐̉ 

Circular A-4 guidance for the consumption rate of interest. The upper value of 5 percent represents the 

possibility that climate damages are positively correlated with market returns, which would suggest a rate 

higher than the risk-free rate of 3 percent. Additionally, this discount rate may be justified by the high 

interest rates that many consumers use to smooth consumption across periods. The low value, 2.5 

percent, is included to incorporate the concern that interest rates are highly uncertain over time. It 

represents the average rate after adjusting for uncertainty using a mean-reverting and random walk 

approach as described in Newell and Pizer (2003), starting at a discount rate of 3 percent. Further, a rate 

below the riskless rate would be justified if climate investments are negatively correlated with the overall 

market rate of return. Use of this lower value also responds to the ethical concerns discussed above 

regarding intergenerational discounting. 

The IWG recognizes that disagreement remains in the academic literature over the appropriate discount 

rate to use for regulatory analysis of actions with significant intergenerational impacts, such as CO2 

emissions changes that affect the global climate on long time scales. The IWG will continue to follow and 

evaluate the latest science on intergenerational discounting and seek external expert advice on issues 

related to discounting in the context of climate change. 

(2) The central SCC estimate should be based on a discount rate lower than 3 percent or a rate that 

declines over time. 

Several commenters noted that uncertainty about future economic growth rates implies that future 

benefits and costs should be discounted to the present at a rate lower than what would be appropriate in 

the absence of uncertainty. Some comments also recommended that the pure rate of time preference, 

one component of the discount rate, be set to zero to ensure that the welfare of all generations is given 

equal weight in the analysis. One commenter suggested that expected future benefits and costs should 

be discounted at a rate that is the sum of two components: the risk-free rate of return, which is typically 

associated with the interest rate on short-tϣ̺͑ ͂̕ ̈́ϣ̻̺͑ϣ̻͟ Ϋ̻͂ϟ͕̚ χ̻ϟ χ ̢̣͕̱͑ ͎͑ϣ̢̺ ̺̤ͅ Ϋχ͕ϣϟ ̻͂ ̟͟ϣ 

correlation between the benefits of the policy and the growth rate of the broader economy (including 

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both market and non-market goods and services). Some commenters indicated that lower discount rates 

͕̟͂ ̴ͅϟ Ϋϣ  ͕ͅϣϟ χ͕ χ ͕͂͑͟ ͂ϭ ̟ϣϟ̕ϣ χ̕χ̢̻͕͟ ̟͟ϣ ̢͕̱͑ ͂ϭ ̣φ̴̢̺χ͟ϣ φχ͟χ͕͎̟͑͂͟ϣ͕̝̤ Other commenters 

recommended a declining discount rate; they emphasized discount rate uncertainty and cited research 

by Weitzman (2001), Newell and Pizer (2003), and Arrow et al. (2013) on this topic, noting that these 

studies show that under persistent uncertainty about the discount rate, and/or economic growth, the 

maximization of expected net present value implies a discount rate that declines over time. 

Response 

As noted above, the IWG selected a range of discount rates from 2.5 to 5 percent; a review of the literature 

and the reasoning that led to the selection of this range are discussed in detail in the 2010 TSD. Several of 

the issues raised by commenters were explicitly considered and were part of the rationale for the selected 

range. 

The TSD discusses both descriptive and prescriptive approaches to selecting discount rates. A descriptive 

approach reflects a positive (non-normative) perspective based on observations of ͎ϣ̴͎͂ϣ̠͕ χφ͟ ͅχ̴ φ̢̟͂φϣ͕ 

(e.g., savings versus consumption and allocation of savings over more and less risky investments). The 

prescriptive approach adds a normative component and incorporates judgments that decision makers 

believe should be reflected in the policy choices that the discount rate is intended to inform. For example, 

some have argued on ethical grounds that in the Ramsey formula̻which dissects market rates into three 

components, the pure rate of time preference (͑̈́̚ ͑͂̕Ά̟͟ ͑χ͟ϣ ͂ϭ ͎ϣ͑-capita consumption (g), and 

φ͂ϣϭϭ̢φ̢ϣ̻͟ ͂ϭ ͑ϣ̴χ̢͟ ̈́ϣ ̢͕̱͑ χ ̈́ϣ̢͕̻͑͂ ̻̓̀̈́the ͑ φ̺͎̻͂͂ϣ̻͟ ͕̟͂ ̴ͅϟ Ϋϣ set to zero so that the welfare of all 

generations is valued equally. After considering a range of plausible values from the literature for g and 

̀̚ ̟͟ϣ I̹G φ̻͂φ̴ ͅϟϣϟ ̟͟χ͟ ͕ϣ̢̻̕͟͟ χ  ̈́ϣ͑Ό ̴͂Ά ͑ ̓e.g., 0.1 percent per year) could yield rates in the range 

of 1.4 to 3.1 percent. 

The TSD also discussed uncertainty and its effects on discount rates. The certainty equivalent values of 

the future benefits of reducing current CO2 emissions will be lower than the expected value if the benefits 

and future consumption are positively correlated, assuming people are risk averse on average. This in turn 

implies that when discounting expected future benefits a discount rate that accounts for uncertainty 

should exceed a riskless rate. As explained in the TSD, this consideration was part of the logic for setting 

the upper end of the selected range at 5 percent. 

T̟ϣ I̹G χ̴͕͂ φ̢̻͕͂ϟϣ͑ϣϟ ̟͟ϣ ̢͕͕ ͅϣ ͂ϭ ̣φ̴̢̺χ͟ϣ φχ͟χ͕͎̟͑͂͟ϣ͕̝̤ ̩͂ ̟͟ϣ ϣ΋͟ϣ̻͟ ̟͟χ͟ such outcomes may not 

be adequately represented in the IAMs, the central tendency estimates from these models may not 

capture the full range of potential damages from CO2 emissions. For this reason, in addition to the three 

mean SCC estimates using discount rates of 2.5, 3 and 5 percent, the IWG recommended including a rate 

based on the 95th percentile damage estimate (with a 3 percent discount rate) for the upper end of the 

range of plausible SCC estimates. 

Finally, with respect to declining discount rates, the IWG agrees that this is an important area of emerging 

research. However, no widely-accepted declining discount rate schedule has yet been developed. Some 

key technical issues warrant careful consideration before adopting a declining discount rate schedule, 

such as determining how to update the discount rate schedule as uncertainty is resolved over time and 

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ensuring that the use of declining discount rates does not lead to the possibility of time-inconsistent 

choices. A recent workshop sponsored by the federal government resulted in a paper in Science authored 

by thirteen prominent economists who concluded that a declining discount rate would be appropriate to 

analyze impacts that occur far into the future (Arrow et al., 2013). However, additional research and 

analysis is still needed to develop a methodology for implementing a declining discount rate and to 

understand the implications of applying these theoretical lessons in practice. The IWG will continue to 

follow and evaluate the latest science on the use of declining discount rates in intergenerational contexts 

and seek external expert advice on issues related to discounting in the context of climate change. 

(3) A Ramsey framework should be used to determine the discount rates. 

Some commenters supported use of a Ramsey framework for determining discount rates and noted that 

the original developers of the IAMs used by the IWG routinely use a Ramsey framework in their own 

applications of their models. A Ramsey framework, derived from a representative agent who maximizes 

the sum of discounted utility under specific assumptions, relates the consumption discount rate to the 

elasticity of the marginal utility of consumption, the growth rate of per capita consumption, and the pure 

rate of time preference. Some commenters also stated that the socioeconomic scenarios used to calculate 

the SCC imply growth rates of per capita consumption that change over time, so under the Ramsey 

framework the discount rates also should change endogenously over time based on the economic growth 

rates assumed in the underlying socio-economic scenarios. 

Response 

The IWG agrees that a Ramsey framework can be useful in informing the selection of an appropriate range 

of discount rates for estimating the SCC. As noted above, this was one of the approaches considered by 

the IWG in the selection of the 2.5, 3, and 5 percent range. 

The IWG considered this framework ϣ΋̴̢͎φ̴̢͟Ό ̢̻ ϣ΋̴̢͎̻͂͑̕ ̟͟ϣ ̴̢̢̺͎φχ̢̻͕͂͟ ͂ϭ ͕ϣ̢̻̕͟͟ ̟͟ϣ ͑ ͟ϣ̺͑ (pure rate 

of time preference) at or near zero to give equal weight to the welfare of all future generations. As 

explained above, this analysis was part of the basis for selecting the lower end of the range. However, 

after reviewing several approaches to estimating specific parameters, the IWG noted that there is no 

consensus in the literature on the appropriate approach for selecting specific values for the components 

of the Ramsey equation. For this reason, the IWG used this analysis to inform its choice of a range of 

discount rates, but concluded that the Ramsey equation alone should not determine a specific choice of 

discount rate. 

The IWG agrees that the Ramsey framework could, in theory, support a formulation where discount rates 

change over time. In a paper summarizing the aforementioned workshop on discounting, thirteen 

prominent economists indicated that the Ramsey framework ̣͎͑͂ ̢̈́ϟϣ͕ χ  ͕ͅϣϭ ̴ͅ ϭ͑χ̺ϣΆ̱͂͑ ϭ͂͑ ̢̢̟̻̱̻̕͟ 

χΫ͂ ͟ͅ ̢̻͟ϣ͑̕ϣ̻ϣ͑χ̢̻͂͟χ̴ ϟ̢͕φ͂ ̢̻̻̤̕͟ͅ Ϋ ͟ͅ also pointed out that there is disagreement in the literature 

about what individual parameters in the Ramsey framework represent (̀, in particular), which makes it 

difficult to select defensible values (Arrow et al., 2012). As noted above, the IWG believes it is premature 

to use the Ramsey framework as the sole basis for deriving discount rates, either fixed or variable, but did 

24 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

consider the Ramsey literature in deriving the range of 2.5 to 5 percent for use in estimating the SCC. The 

IWG will continue to evaluate new research on the Ramsey framework and its applicability to SCC 

estimation and seek external expert advice on issues related to discounting in the context of climate 

change. 

6 Aggregation of Results and Selection of Final Estimates 

A number of comments are related to the aggregation of model results and the selection of the final range 

of SCC estimates. These comments can be grouped into three main categories: concerns with averaging 

of SCC estimates, the use of means rather than medians as a measure for the central tendency of the SCC 

estimates, and the use of low and high end estimates in regulatory analyses. 

(1) Concerns with averaging of SCC estimates 

Some commenters were concerned that pooling the SCC estimates across scenarios and models ignores 

variability and uncertainties in the estimates. While one commenter explicitly stated that the IWG 

synthesized model outputs appropriately, several other commenters expressed concern that pooling the 

results across models and scenarios masks significant differences between models and inappropriately 

implies ̟͟χ͟ ̟͟ϣ ̣͑͟ ͅϣ̤  ̈́χ̴ ͅϣ ͂ϭ the SCC falls within the range of estimates calculated by the three models. 

One commenter argued that pooling the results across models and scenarios should be abandoned given 

the uncertainty around the factors that drive the estimates. 

Response 

Both the 2010 TSD and the 2013 TSD update present information about the full distribution of SCC 

estimates within and across possible combinations of the three models and five socioeconomic-emissions 

scenarios, for each of three discount rates (45 combinations in total) (see tables A2-A4 in Appendix A of 

the TSDs). Additional summary statistics for the distributions of the SCC estimates are also provided for 

each of the three models (see Table A5 in Appendix A). The IWG believes that the information presented 

in the TSDs is sufficiently disaggregated to reflect the variability of the SCC estimates across models, input 

assumptions, and discount rates. In addition, the IWG has provided the full set of Monte Carlo modeling 

results (10,000 model runs for each combination, for a total of 450,000 observations per emissions year) 

to outside researchers upon request and will continue to do so. 

As discussed in the 2010 TSD, using the full distribution of the SCC estimates from the 45 scenarios would 

be impractical in a regulatory impact analysis. To produce a range of plausible estimates that still reflects 

the uncertainty about the SCC estimates, the results from the various model and scenario combinations 

(150,000 observations per emissions year for each of the three discount rates) were pooled to produce 

three separate probability distributions for the SCC for emissions in a given year, one for each assumed 

discount rate (2.5, 3 and 5 percent). Three point estimates were then derived from these pooled 

distributions representing the mean at each discount rate. The IWG considers this approach for presenting 

expected SCC values across a range of discount rates to be appropriate for representing the central 

tendency of the SCC estimates across scenarios. The fourth value, the 95th percentile of the pooled 

25 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

distribution using a 3 percent discount rate, is included to represent higher-than-expected economic 

impacts from climate change further out in the tail of the SCC distribution - i.e., impacts that may have 

lower probability of occurring but relatively high damages. For purposes of representing the uncertainties 

involved, the TSDs emphasized the importance of considering and presenting the full range of these four 

estimates in regulatory impact analysis. 

The IWG agrees that the modeling of uncertainty in our analysis, including the uncertainty explicitly 

represented in the IAMs, may not capture the full range of uncertainty of ̟͟ϣ ̣͑͟ ͅϣ̤  ̈́χ̴ ͅϣ ͂ϭ ̟͟ϣ ̣. This 

concern is common to most quantitative assessments of uncertainty. By definition, the modeling of 

uncertainty requires a model, and therefore cannot capture the uncertainty associated with model 

selection. However, the IWG does not agree that pooling results across models implies that the estimates 

capture the full range of uncertainty, nor did the IWG make such a claim in the TSDs. Rather, the IWG 

attempted to capture a reasonable range of uncertainty using information available in the peer-reviewed 

literature and the uncertainty analysis built into the models themselves. Using three models rather than 

one helps address, but does not eliminate, uncertainty associated with model choice. 

(2) Use of means rather than medians as a measure of the central tendency of the SCC estimates 

A few commenters suggested that the median of the distribution of SCC estimates rather than the mean, 

as used by the IWG, would be a more appropriate measure of the central tendency of the SCC estimates. 

Another commenter suggested using both the mean and the median, along with presenting other 

distributional information (e.g., variances, low and high end percentile estimates, and other 

characteristics of distributions). 

Response 

The choice of the mean or the median as a measure of central tendency depends on the context. In 

skewed distributions, such as for ̟͟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕̚ ̟͟ϣ ̺ϣϟ̢χ̻ Ά̴̴̢ ͂ϭ͟ϣ̻ ̢̕ ̈́ϣ χ ̺͂͑ϣ ̣͟Ό̢͎φχ̴̤ ͂ ͟ͅφ̺͂ϣ̚ 

while the mean will give full weight to the tails of the distribution. In some cases, the typical outcome is 

of most interest. For example, in describing household incomes the median is most often used because 

the focus is on understanding the income of the typical household, and using the mean might distort this 

picture by giving undue weight to a small number of very wealthy households. In the climate change 

context, however, sound decision-making requires consideration of not only the typical or most likely 

outcomes, but also less likely outcomes that could have very large (or small, or even negative) damages 

(the tails of the distribution). Use of the median to represent the SCC in a regulatory impact analysis would 

not necessarily lead to the most efficient policy choice that uses resources wisely to mitigate potential 

climate impacts (e.g., maximize the expected net benefits). In this case, the IWG believes that the mean 

is the appropriate measure of central tendency. 

(3) Use of low and high end estimates in regulatory analyses 

Several commenters suggested that both lower and upper end estimates should be part of the final range 

of estimates used in regulatory analyses. Specifically, they believe the range should include a 5th percentile 

estimate, in addition to the 95th percentile estimate from the pooled distribution using the 3 percent 

26 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

discount rate. In contrast, one commenter suggested that, because the models do not presently account 

for high-end risks, RIAs should compensate by using only the most conservative estimates reported by the 

IWG (i.e., the 95th percentile estimate using the 3 percent discount rate). Another commenter similarly 

suggested using only the worst case (highest) estimate out of all the simulation results in place of the 

mean estimate. 

Response 

Along with the four selected SCC estimates for each emissions year, the IWG presented more detailed 

information about the full distribution of SCC estimates for emissions in the year 2020. Specifically, the 

2013 TSD reports information on the full distribution of the SCC estimates for emissions in year 2020 for 

each model, scenario, and discount rate combination , including the low-end percentiles (i.e., 1st, 5th and 

10th percentiles).11 In addition, as noted above, complete distributions for all emissions years are available 

upon request. While the IWG did not present a summary 5th percentile estimate (i.e., pooling results 

across the models and scenarios) for use in regulatory impact analysis, for reasons discussed below, the 

model and scenario specific statistics for 2020 provide a general sense of how the 5th percentile relates to 

the mean. Furthermore, as we note above the IWG has provided the full set of Monte Carlo modeling 

results to outside researchers upon request and will continue to do so. This information may be used to 

calculate a full set of 5th percentile summary statistics that are comparable to the 95th percentile estimates 

provided in the TSDs. 

As the 2010 TSD discusses, the SCC estimates derived from the three integrated assessment models have 

several significant limitations that could lead to a substantial underestimation of the SCC. These 

limitations include the incomplete treatment and monetization of non-catastrophic damages, the 

incomplete treatment of potential ̣catastrophic̤ damages, and uncertainty in extrapolation of damages 

to high temperatures. The IPCC Fourth Assessment Report, which was the most current IPCC assessment 

χ ̈́χ̴̢χΫ̴ϣ χ͟ ̟͟ϣ ̢̺͟ϣ ͂ϭ ̟͟ϣ I̹G̠͕ γααε-2010 review, discussed these limitations and concluded that it 

Άχ͕ ̣ ̈́ϣ͑Ό ̴̢̱ϣ̴Ό ̟͟χ͟ ̣͆ͅ  ̻ͅϟϣ͑ϣ̢͕̺͟χ͟ϣ͕̤ φ̴̢̺χ͟ϣ φ̟χ̻̕ϣ ϟχ̺χ̕ϣ͕. Based on the current scientific 

understanding of climate change and its impacts, and on the limitations of the IAMs in quantifying and 

monetizing the full array of potential ̣catastrophic̤ and non-catastrophic damages, the IWG concluded 

that the distribution of SCC estimates may be biased downwards. Since then, the peer-reviewed literature 

has continued to support this conclusion. For example, the IPCC Fifth Assessment report observed that 

SCC estimates continue to omit various impacts that would likely increase damages. The 95th percentile 

estimate was included in the recommended range for regulatory impact analysis to address these 

concerns. 

In addition, as acknowledged in the 2010 TSD, the SCC estimates derived from the three IAMs did not take 

into consideration the possibility of risk aversion. That is, individuals may have a higher willingness-to-pay 

to reduce the likelihood of low-probability, high-impact damages than they do to reduce the likelihood of 

higher-probability, lower-impact damages with the same expected cost. The inclusion of the 95th 

11 The 2010 TSD including information on the full distribution of SCC estimates for the emission year 2010, however 

the 2013 TSD presented this information for the 2020 emissions year as 2010 was then a historical year. 

27 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

percentile estimate in the SCC values was also motivated by this concern. In contrast, the IWG is not aware 

of systematic upward biases in the estimates comparable to the downward biases discussed above. For 

this reason, while the IWG has been fully transparent regarding the entire range of uncertainty reflected 

in the probability distributions, we did not include a 5th percentile estimate in the selected range for 

regulatory impact analysis. 

Regarding the suggestion that only the high end of the range or worst-case scenario should be used in 

regulatory cost-benefit analysis, the IWG disagrees. The recommended range represents the central 

tendency of SCC estimates across three reasonable discount rates, plus a high-end estimate to account 

for missing damage categories and ̣catastrophic̤ outcomes. It is the judgment of the IWG that this 

approach will best inform decision makers and the public about both the rangϣ ͂ϭ ̴̢̣̱ϣ̴Ό̤ ϟχ̺χ̕ϣ͕ χ̻ϟ 

the possibility that actual damages could be much higher. 

7 Consideration of Uncertainty 

The IWG received a number of comments on the analyses and presentation of uncertainty in the TSD, as 

well as comments regarding the implications of uncertainty for the use of the SCC estimates in regulatory 

impact analysis. 

(1) Analysis and presentation of uncertainty 

Several commenters suggested that the IWG was rigorous in addressing uncertainty by conducting Monte 

Carlo simulations with the IAMs to estimate distributions of the SCC over probabilistic specifications of 

the equilibrium climate sensitivity and other uncertain parameters as identified by the model developers. 

Other commenters suggested that key uncertainties merit further exploration and discussion in the TSD. 

Several commenters recommended that additional uncertainty analysis be conducted on key aspects of 

the modeling, such as assumptions regarding the carbon cycle, physical responses to climate change, 

technological change, adaptation, and post-2100 extrapolations of the socioeconomic-emission scenarios, 

among others. One commenter called for a separate section in the TSD that identifies key sources of 

uncertainty, along with a qualitative assessment of the impact those key uncertainties have on the SCC 

estimates, and to the extent feasible, a quantitative assessment as well. Some commenters suggested 

that the references in the 2013 TSD to discussions of uncertainty in the 2010 TSD are inadequate and 

make it difficult for the reader to understand the uncertainty associated with the revised estimates. One 

commenter questioned whether the IWG reported too many significant digits given the degree of 

uncertainty about the estimates. Several commenters also suggested that it would be appropriate to 

shorten the modeling time horizon due to the uncertainty associated with projecting impacts out to 2300. 

Two commenters suggested a time horizon of 2100 to be consistent with the time horizon considered in 

IPCC assessment reports. In addition, several commenters requested that additional graphical information 

be presented, and electronic copies of the results be made publically available. 

Response 

28 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The IWG agrees with the comments that supported the rigor of its uncertainty analysis. Uncertainty is 

inherent in all regulatory impact analysis. It is especially salient in regards to the SCC estimates because 

of their broad spatial and temporal dimensions. In addition to conducting Monte Carlo analysis for a 

subset of key parameters, the IWG included extensive discussion of uncertainty in the TSDs, and the 

documentation for the individual IAMs themselves contains additional discussion of the assumptions and 

uncertainties in the models. The 2010 TSD and the updated 2013 TSD provided visual depictions of the 

distributions of the SCC estimates in addition to detailed statistics including percentiles and higher order 

moments. In addition to the extensive information provided in the TSDs, the IWG has provided the full 

range of model results to outside researchers upon request and will continue to do so. 

The IWG also agrees that the trajectory of socioeconomic-emission scenarios beyond 2100 is uncertain. 

However, as the 2010 TSD notes, because of the long atmospheric lifetime of CO2, using too short a time 

horizon could miss a significant fraction of damages under certain assumptions about the growth of 

marginal damages. Therefore, the IWG ran each model through 2300. The IWG will continue to follow and 

evaluate the scientific literature on long-term scenario development. 

The IWG reported SCC estimates out to one decimal place (i.e., at least two significant digits) in the 2010 

TSD and to the nearest dollar in the 2013 TSD (i.e., two or three significant digits, depending on the year 

and discount rate/statistic). The IWG chose not to use decimal places in the 2013 TSD to avoid the 

impression of artificial precision but will also explore presentation with a consistent number of significant 

digits. The IWG welcomes the recommendations to strengthen the characterization of uncertainty and 

plans to seek external expert advice on the technical merits and challenges of potential approaches to 

improve the characterization and analysis of uncertainty in future updates. 

(2) Implications of uncertainty for the use of the SCC estimates in regulatory impact analysis 

Some commenters suggested the degree of uncertainty in the SCC estimates makes them too speculative 

for use in regulatory analysis. These commenters argued that SCC is an unknown quantity and cannot be 

discerned in meteorological or economic data going back a century or more. Some commenters suggested 

that if non-validated climate parameters, arbitrary damage functions, or below-market discount rates 

were used, analysts could produce almost any result they desire. Another commenter suggested that the 

large variance associated with the distributions of the SCC estimates relative to the mean indicates that 

the estimates are not of sufficient precision to be informative in regulatory analysis. In contrast, other 

commenters stated that uncertainty in benefits estimates does not mean they should be excluded from 

regulatory impact analyses. These commenters pointed out that no benefit or cost estimate is certain and 

both court decisions and executive orders dating back to 1981 have recognized this. To address this, 

agencies have been directed to use best available estimates and acknowledge uncertainties, which they 

suggested is appropriately done in the TSDs. 

Response 

All regulatory impact analysis involves uncertainty. The IWG acknowledges uncertainty in the SCC 

estimates but disagrees that the uncertainty is so great as to undermine use of the SCC estimates in 

regulatory impact analysis. The uncertainty in the SCC estimates is fully acknowledged and 

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8 

comprehensively discussed in the TSDs and supporting academic literature. While uncertainty must be 

acknowledged and addressed in regulatory impact analyses, even an uncertain analysis provides useful 

information to decision makers and the public. For example, if an analysis shows that benefits of a policy 

option consistently do (or do not) justify costs even over a broad range of estimates, this may increase 

confidence in the robustness of this conclusion. Conversely, if choices among parameter estimates within 

a plausible range significantly affect the conclusions of the analysis, this is an important consideration in 

deciding how to weigh the analytical results in the decision making process. The presence of uncertainty 

is thus not a reason to exclude the best available estimates of quantified/monetized benefits, as long as 

it is appropriately characterized. Rather, good regulatory practice requires that agencies use the best 

available scientific, technical and economic information to derive the best estimates of costs and benefits 

that they can, and then communicate to the public the limitations and uncertainties of the analyses. This 

is what the IWG has attempted to do in developing and discussing the SCC estimates. As noted in the 

TSDs, the IWG is committed to periodic updates in the estimates to reflect ongoing developments in our 

understanding of the science and economics of climate change, including the treatment of uncertainty. 

Use of Global vs. Domestic SCC Estimates 

Many commenters discussed the scope of the SCC estimates, and the degree to which damages 

experienced outside U.S. borders should be considered in domestic regulatory analysis. These comments 

can be grouped into two main categories: those that felt that the focus on global damage estimates is 

appropriate, and those that felt that domestic damage estimates received inadequate attention. 

Responses to these comments are provided below. In addition, many commenters stated that domestic 

SCC estimates must be used in RIAs to ensure consistency with OMB Circular A-4 requirements. This issue 

is addressed in Section 10 below. 

(1) The focus on global damage estimates is appropriate. 

A number of commenters supported the IWG's decision to base the SCC estimates on global damages. 

Commenters explained that climate change is a global commons problem because carbon pollution does 

not remain within one country's borders, and that the use of global damages in the SCC is consistent with 

the economic theory of the commons. One commenter further stated that if damage estimates are limited 

to only those within each country's borders, any actions based on those estimates would lead to a 

collective failure to optimally mitigate GHG emissions. Another commenter referred to the importance of 

this effect by stating that the consideration of global damages in domestic rulemaking can be based on an 

expectation of reciprocity from other countries. Several commenters stressed the importance of the use 

of global SCC estimates as a tool in international negotiations. Finally, some commenters offered other 

reasons for considering damages in regions outside of the United States, including liability, national 

security concerns, trade-related "spillover effects", and the principle in international environmental law 

of reducing cross-border harm. 

Response 

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The IWG agrees that a focus on global SCC estimates in RIAs is appropriate. As discussed in the 2010 TSD, 

the IWG determined that a global measure of SCC is appropriate in this context because emissions of most 

greenhouse gases contribute to damages around the world χ̻ϟ ̟͟ϣ Ά̴͂͑ϟ̠͕ ϣφ̢̻̺͂͂ϣ͕ χ͑ϣ ̻͂Ά ̴̢̟̟̕Ό 

interconnected. To reflect the global nature of the problem, the SCC incorporates the full damages caused 

by CO2 emissions and we expect other governments to consider the global consequences of their 

greenhouse gas emissions when setting their own domestic policies. 

The IWG also agrees that if all countries acted independently to set policies based only on the domestic 

costs and benefits of carbon emissions, it would lead to an economically inefficient level of emissions 

reductions which could be harmful to all countries, including the United States, because each country 

would be underestimating the full value of its own reductions. This is a classic public goods problem 

because each countrΌ̠͕ reductions benefit everyone else and no country can be excluded from enjoying 

̟͟ϣ Ϋϣ̻ϣϭ̢͕͟ ͂ϭ ̟͂͟ϣ͑ φ͂ ̢̻͑͟ͅϣ͕̠ reductions, even if it provides no reductions itself. In this situation, the 

only way to achieve an economically efficient level of emissions reductions is for countries to cooperate 

in providing mutually beneficial reductions beyond the level that would be justified only by their own 

domestic benefits. By adopting a global estimate of the SCC, the U.S. government can signal its leadership 

in this effort. In reference to the public good nature of mitigation and its role in foreign relations, thirteen 

̢͎̺̻͑͂ϣ̻͟ χφχϟϣ̢̺φ͕ ̻͂͟ϣϟ ̟͟χ͟ ̟͟ϣ͕ϣ ̣χ͑ϣ φ̺͎͂ϣ̴ling reasons to focus on a global SCC̤ ̢̻ χ ͑ϣφϣ̻͟ χ̢͑͟φ̴ϣ 

on the SCC (Pizer et al., 2014). In addition, as noted by commenters, there is no bright line between 

domestic and global damages. Adverse impacts on other countries can have spillover effects on the United 

States, particularly in the areas of national security, international trade, public health and humanitarian 

concerns. 

(2) Domestic damage estimates receive inadequate attention. 

A number of commenters suggested that the use of global damages creates a mismatch between 

estimates of costs and benefits in agency RIAs. Use of a global rather than domestic SCC may overstate 

the net benefits to the United States of reducing emissions, because global benefits are compared to 

domestic costs. A policy that appears cost-justified from a global perspective may not be from a purely 

domestic U.S. perspective. Therefore, these commenters suggest that a global SCC is only appropriate 

when the analysis considers global costs and benefits in the context of a global carbon mitigation program. 

Other commenters indicated that the IWG should update and report domestic climate damages 

separately from global estimates for several reasons, including the public's right to know the domestic 

benefits of domestic regulatory actions. A few comments stated that the IWG should more clearly 

articulate that the SCC includes global damages, which they felt was particularly unclear in the 2013 TSD. 

Finally, commenters also addressed the provisional range of domestic damages that was presented in the 

2010 TSD. Several comments stated that the range discussed in the 2010 TSD for the domestic SCC was 

too high. Two commenters suggested a range for the domestic share of total global damages of 6 to 8.7 

percent based on a paper by Nordhaus (2011). One commenter stated that the methods used to estimate 

the domestic damages as 7 to 23 percent of global damages is too speculative for quantification of the 

SCC. 

31 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Response 

As stated in the prior section, GHG emissions in the United States will have impacts abroad, some of which 

may, in turn, affect the United States. For this reason, a purely domestic measure is likely to understate 

actual impacts to the United States. Also, as stated above, the IWG believes that accounting for global 

benefits can encourage reciprocal action by other nations, leading ultimately to international cooperation 

that increases both global and U.S. net benefits relative to what could be achieved if each nation 

considered only its own domestic costs and benefits when determining its climate policies. 

Further, as explained in the 2010 TSD, from a technical perspective, the development of a domestic SCC 

was greatly complicated by the relatively few region- or country-specific estimates of the SCC in the 

literature, and impacts beyond our borders have spillover effects on the United States, particularly in the 

areas of national security, international trade, and public health. As a result, it was only possible to include 

a̻ ̣χpproximate, provisional̚ χ̻ϟ ̴̢̟̟̕Ό ͕͎ϣφ ̴ͅχ̢͟ ̈́ϣ̤ range of 7 to 23 percent for the share of domestic 

benefits in the 2010 TSD. This range was based on two strands of evidence: direct domestic estimates 

resulting from the FUND model, and an alternative approach under which the fraction of GDP lost due to 

climate change is assumed to be similar across countries. We note that the estimated U.S. share of global 

damages based on the Nordhaus (2011) study cited by several commenters largely falls within the 

provisional range offered in the 2010 TSD. 

In conclusion, the IWG believes that the only way to achieve an efficient allocation of resources for 

emissions reduction on a global basis is for all countries to base their policies on global estimates of 

damages and will therefore continue to recommend the use of global SCC estimates in regulatory impact 

analyses. The IWG will also continue to review developments in the literature, including more robust 

methodologies for estimating SCC values based on purely domestic damages, and explore ways to better 

inform the public of the full range of carbon impacts, both global and domestic. 

9 Other Comments 

̟̐͟ϣ͑ φ̺̺͂ϣ̻͕͟ ̢̻φ̴ ͅϟϣ ̟͕͂͟ϣ ͑ϣ̴χ͟ϣϟ ͂͟ ̴̣ϣχ̱χ̕ϣ̤ χ̻ϟ  ̈́χ̴ ͅχ̢̻͂͟ ͂ϭ φ̟χ̻̕ϣ͕ ̢̻ ̻̻͂-CO2 GHG emissions. 

(1) CO2 e̢̢̺͕͕̻͕͂ ̴̣ϣχ̱χ̕ϣ̤ 

Several commenters suggested that the methods used to estimate climate damages should account for 

"leakage" of emissions in the quantification of the SCC. Specifically, commenters suggested that in cases 

where a new regulation increases domestic operating costs and causes industrial activity to shift to 

jurisdictions with less stringent regulations, net GHG emissions could fall less than predicted, or even 

increase. In these cases, the actual emissions reduction would be lower than indicated in a simple analysis. 

Commenters suggested that this effect be addressed either by the provision of additional guidance to 

agencies conducting RIAs, or in the estimated SCC value itself by adjusting estimated climate damages to 

account for it. 

Response 

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The IWG agrees that this is an important issue for analysts to consider in determining the net CO2 

reductions to be valued in an RIA. However, this does not affect the calculation of the SCC itself, which is 

an estimate of the marginal benefit of a net one-ton reduction in CO2 emissions. The SCC estimates are 

multiplied by estimates of net GHG emissions changes to calculate the value of benefits associated with a 

policy action in a given year. It is in the estimation of net GHG emissions, and not the SCC, that any leakage 

should be accounted for. 

(2) Valuation of changes in non-CO2 GHG emissions 

Several commenters recommended that estimates be developed for valuing changes in the emissions of 

other greenhouse gases, such as methane, HFCs, and black carbon, as soon as possible. One commenter 

specified that the direct modeling approach for estimating the social cost of methane is preferable, but 

even an approximation approach (e.g., based on the use of the global warming potential (GWP) gas 

comparison metric) has merit and would be better than no estimate. The commenter asserted that the 

failure to set a social cost of methane estimate has the effect of eliminating any benefit of methane 

reductions from regulatory consideration and such a failure is arbitrary and capricious. Another 

commenter advocated for the use of both 100 and 20-year GWPs for converting non-CO2 GHG emission 

changes into CO2 equivalents before applying the SCC estimates. 

Response 

The IWG recognizes the importance of quantifying and monetizing the benefits of regulations to the 

extent feasible, and discussing qualitatively any benefits that cannot be quantified. The IWG does not 

agree that benefits that are not monetized are eliminated from regulatory consideration. On the contrary, 

most RIAs include discussion of non-quantified benefits and these may be an important factor in decisionmaking, depending on their projected significance. However, as noted by the commenters, the IWG has 

not established a methodology for valuing the social cost of other GHGs. In the absence of such estimates, 

a few recent rulemakings have included sensitivity analyses in which the GWP gas comparison metrics are 

used to convert non-CO2 emissions reductions to CO2 equivalents, which are then valued using the SCC 

estimates. For example, the 2012 New Source Performance Standards and Amendments to the National 

Emissions Standards for Hazardous Air Pollutants for the Oil and Natural Gas Industry and the 2017-2025 

Light-duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards 

used this approach in sensitivity analyses. 

Although more directly modeled estimates of the climate change benefits of reducing some GHGs (e.g., 

methane) have been presented in the scientific literature, the methodology behind these estimates differs 

from the methodology behind the USG SCC estimates. Assessing the strengths and limitations of alternate 

approaches for estimating economic damages from other GHGs has so far been outside the scope of the 

I̹G̠͕ χ͕͕ϣ͕͕̺ϣ̻͟ ͂ϭ ϣφ̢̻̺͂͂φ ϟχ̺χ̕ϣ͕ ϭ̺͑͂ ̐2 emissions, though the 2010 TSD identified this as an 

area we hope to address in future updates. We also note that a recently published paper (Marten et al., 

2014) develops estimates of the social cost of CH4 and N2O using a methodology that is intended to be 

consistent with the IWG estimates of the SCC. The IWG will continue to follow and evaluate the literature 

on the social cost of non-CO2 GHGs and the feasibility of developing non-CO2 social cost estimates. 

33 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10 Process Related Comments 

Many commenters either voiced support for or criticized particular aspects of the interagency process 

used to develop the SCC estimates. Process issues raised included legal/statutory authority for issuing the 

estimates, consistency with applicable OMB guidance documents, transparency, opportunity for public 

comment, and appropriate use of the estimates. 

(1) Legal/statutory authority for issuing the SCC estimates 

One group of commenters asserted that the legal basis for using the SCC is clear and well-established. 

These commenters highlighted the 2007 Ninth Circuit decision that concluded that a National Highways 

and Transportation Safety Administration rule was arbitrary and capricious for not including a monetized 

estimate of the SCC. The ͂ ͑͟ͅ ̻͂͟ϣϟ ̟͟χ͟ ̣̞Ά̴̢̟ϣ ̟͟ϣ ͑ϣφ͂͑ϟ ͕̟͂Ά͕ ̟͟χ͟ ̟͟ϣ͑ϣ ̢͕ χ ͑χ̻̕ϣ ͂ϭ  ̈́χ̴ ͅϣ͕̚ ̟͟ϣ 

 ̈́χ̴ ͅϣ ͂ϭ φχ͑Ϋ̻͂ ϣ̢̢̺͕͕̻͕͂ ͑ϣϟ ͅφ̢̻͕͂͟ ̢͕ φϣ͑͟χ̴̢̻Ό ̻͂͟ Αϣ̝̤͑͂ 

Other commenters argued that ̠͕̐̉ χdoption of the SCC estimates is arbitrary, capricious, and contrary 

to law because OMB requires all Federal agencies to use its SCC estimates without identifying any legal 

basis or authority for doing so. These commenters argued that because OMB's ̣promulgation̤ of the SCC 

values falls within the APA̠͕ broad definition of a rule, OMB must comply with the procedural and 

substantive requirements laid out in the APA for rulemaking. These commenters further stated that the 

̩̣D͕ ϟ͂ ̻͂͟ ͕̟͂Ά χ ̣͑χ̢̻͂͟χ̴ φ̻̻͂ϣφ̢̻͂͟ Ϋϣ͟Άϣϣ̻ ̟͟ϣ ϭχφ͕͟ ϭ͂ ̻ͅϟ χ̻ϟ ͟he choices made,̤ and that even 

if the three IAM models themselves were entirely sound, the non-public inputs into those models 

would render the SCC estimates arbitrary and capricious. 

Response 

As a preliminary matter, the IWG notes that although the development of the SCC estimates was cochaired by OMB and CEA, the estimates and supporting TSDs were not issued by OMB, but rather through 

a consensus based process involving the entire working group. 

The IWG agrees with commenters who believe that it has legal authority to develop these estimates, and 

was cognizant of the Ninth Circuit decision referenced by these commenters when it decided to do so. 

The IWG does not agree that issuance of the SCC estimates constitutes an APA rule making. The APA 

defin̢̢̻͂͟ ͂ϭ χ ͑ ̴ͅϣ ̢͕ ̣χ̻ χ̕ϣ̻φΌ ͕͟χ͟ϣ̺ϣ̻͟ ͂ϭ ̕ϣ̻ϣ͑χ̴ ͂͑ ͎χ̢͑͟φ ̴ͅχ͑ χ̴̢͎͎φχΫ̴̢̢͟Ό χ̻ϟ ϭ ͟ͅ ͑ͅϣ ϣϭϭϣφ͟ ϟϣ̢͕̻̕ϣϟ 

͂͟ ̴̢̺͎ϣ̺ϣ̻̚͟ ̢̻͟ϣ͎͑͑ϣ̚͟ ͂͑ ͎͑ϣ͕φ̢͑Ϋϣ ̴χΆ ͂͑ ̴̢͎͂φΌ̝̤ ̩̟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕ χ͑ϣ ̻͂͟ ϟϣ̢͕̻̕ϣϟ ͂͟ ̴̢̺͎ϣ̺ϣ̻̚͟ 

interpret, or prescribe law or policy. Rather they are intended to provide guidance to agencies on a 

science-based methodology for estimating the benefits of CO2 reductions in regulatory impact analysis. 

OMB has long-established authority to oversee the regulatory review process, including preparation of 

regulatory impact analyses. ̠͕̐̉ χ ̢̟͂͑͟͟ͅΌ in this area is contained in Executive Orders 12866 and 

13563, among others, and has been acknowledged by Congress in a series of statutes, including the Small 

Business Regulatory Enforcement and Fairness Act, the Congressional Review Act, the Information Quality 

Act, and the Regulatory Right to Know Act. It is fully consistent with this authority for OMB to offer 

guidance to agencies on best practices for conducting regulatory impact analysis, as it did, for example, in 

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issuing Circular A-4. In the present case, OMB determined that it was appropriate to exercise this authority 

through a consensus-based process involving a broad range of agencies that may issue rules affecting CO2 

emissions. 

The TSDs explain in detail the factual and policy basis for all of the various methodological choices involved 

in developing the SCC estimates. The IAMs are documented in the scientific literature. In addition, the 

IWG has assisted interested members of the public in obtaining additional information on the workings of 

the models. It has also provided full technical details of its own use of the models, including output of 

model runs, to interested parties upon request. However, because the SCC estimates are not a rule, as a 

legal matter they are not subject to the arbitrary and capricious standard of the APA. 

(2) Consistency with OMB guidance documents, including the Information Quality Act guidelines, Peer 

Review Bulletin, and Circular A-4 

Some commenters stated that the process used to develop the SCC estimates did not adhere to the OMB 

Information Quality Act (IQA) guidelines. The IQA requires federal agencies to take steps to maximize the 

quality, objectivity, and integrity of the information they disseminate, and to provide a mode of 

redress to correct flawed or incomplete information. These commenters stated that the SCC 

estimates are clearly "influential information" under the Guidelines and as such, must be reproducible 

and transparent with respect to: (1) the source of the utilized data; (2) the various assumptions 

employed; (3) the analytic methods applied; and (4) the statistical assumptions employed. Some 

commenters χ̴͕͂ ͕͟χ͟ϣϟ ̟͟χ͟ ̠͕̐̉ ͑ϣ͕͎̻͕͂ϣ ͂͟ an IQA petition from a group of trade associations was 

inadequate and did not provide any information that was not already in the TSDs. 

Several commenters focused on peer review in particular. These commenters stated that while peer 

review of the models themselves is important, it is not sufficient because the model inputs and 

subsequent manipulation of results (e.g., equal averaging) were not peer reviewed. They believe that the 

IWG must subject the SCC estimates and methodology to peer review to give the public greater 

confidence in the results. Some also stated that the IWG should consider model-specific peer review 

as well. ̢̩̟͕ Ά͂ ̴ͅϟ φ̢̻͕͕͂͟ ͂ϭ χ ͑ϣ ̢̈́ϣΆ ͂ϭ ϣχφ̟ ̺͂ϟϣ̴̠͕ ̟͟ϣ͂͑ϣ̢͟φχ̴  ̻ͅϟϣ̢̢͎̻̻̻͕͑̕ χ̻ϟ methodologies, as 

well as their appropriateness to specific applications. These commenters indicated that while specific 

applications may have been peer reviewed when published in the scientific literature, the models 

themselves were not. 

Additionally, some commenters focused on the degree to which the SCC estimates are consistent with the 

OMB Circular A-4 guidelines for conducting regulatory impact analysis. These commenters stressed that 

the selected discount rates do not comply with Circular A-4 and should be selected through an open 

process including peer review. They noted that while Circular A-4 allows a sensitivity analysis with lower 

ϟ̢͕φ͂ ̻͟ͅ ͑χ͟ϣ͕ Ά̟ϣ̻ χ ͑ ̴ͅϣ Ά̴̴̢ ̟χ ̈́ϣ ̢̣̺͎͂͑͟χ̻͟ ̢̻͟ϣ͑̕ϣ̻ϣ͑χ̢̻͂͟χ̴ Ϋϣ̻ϣϭ̢͕͟ ͂͑ φ͕͕͂͟,̤ ̢͟ ̴̴̢͕͟ ͑ϣ͐ ̢͑ͅϣ͕  ͕ͅϣ 

of 3 percent and 7 percent. They also indicated that the estimates are not consistent with Circular A-4 

guidelines regarding the use of domestic rather than global estimates of regulatory benefits. 

Response 

35 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The IWG does not agree that the TSDs are inconsistent with the IQ Guidelines. ̩͂ ϣ̻͕ ͑ͅϣ ̟͟χ͟ ̟͟ϣ I̹G̠͕ 

methodology is transparent, the TSDs are comprehensive and technically rigorous in explaining the 

sources of data, the assumptions employed, the analytic methods applied, and the statistical assumptions 

employed. To ensure that the results are reproducible, IWG members have provided technical assistance 

and modeling results to external stakeholders upon request. Regarding the IQA petition, OMB responded 

to all of the points raised by petitioners̝ ̩̟ϣ ϭχφ͟ ̟͟χ͟ ̠͕̐̉ ͑ϣ͕͎̻͕͂ϣ  ͕ͅϣϟ ͕̺͂ϣ ̴χ̻̕ ͅχ̕ϣ ϭ̺͑͂ ̟͟ϣ ̩̣D͕ 

͑ϣϭ̴ϣφ͕͟ ̠͕̐̉ ̮ ͅϟ̺̕ϣ̻͟ that these issues were already addressed in the TSDs themselves. 

With regard to peer review, the IWG notes that the assumptions and models employed in generating the 

SCC estimates are all drawn from the peer-reviewed academic literature. To further strengthen the 

robustness of the SCC estimate, the IWG plans to seek external expert advice on technical opportunities 

to improve the SCC estimates in future updates, including many of the approaches suggested by 

commenters and peer-reviewed literature, and summarized in this document. 

Circular A-4 is a living document, which may be updated as appropriate to reflect new developments and 

unforeseen issues. OMB was fully involved in the development of the SCC estimates as a working group 

co-φ̟χ̢͑ χ̻ϟ ͕ ͎͎͕͂͑͟ͅ ̟͟ϣ Ά̢̱̻͂͑̕ ͑͂̕ ͎̠͕ͅ ͑ϣφ̺̺͂ϣ̻ϟχ͟ions regarding the discount rate and the focus 

on global damages. The departure from the standard discount rate recommendations in Circular A-4 is 

explained in detail in the TSDs and in Section 5 of this document. Briefly, the use of 7 percent is not 

considered appropriate for intergenerational discounting. There is wide support for this view in the 

academic literature, and it is recognized in Circular A-4 itself. The emphasis on global rather than domestic 

damages is also explained in detail in the TSDs. Beyond the fact that good methodologies for estimating 

domestic damages do not currently exist, basing decisions on only the domestic damages from carbon 

emissions will lead to an inefficient allocation of resources to reducing them, especially if all countries 

adopt a similarly short-sighted approach. An efficient outcome can only be achieved if all countries 

consider the full costs and benefits of their actions; the United States continues to be a leader in working 

to establish such a regime internationally. 

(3) Transparency 

Several commenters asserted that the process of selecting the models and input assumptions, 

including much of the basic information underlying these decisions, has been insulated from public 

scrutiny. Commenters expressed concern that the IWG has not revealed the identity or 

qualifications of its participants, the role of government contractors, or the details of its internal 

processes, including the frequency of meetings and the nature of its deliberations. These 

commenters further suggested that the TSDs discuss only a few selected inputs to the models, 

which, though important, are not the only important inputs. They believe greater transparency is 

also needed regarding the models themselves and the key differences among them. 

Some commenters also suggested that the discussion in the TSD of the 2013 revisions is insufficient for 

understanding and interpreting the changes in the SCC estimates. Additional justification for many of the 

revisions would be helpful (e.g., space heating expenditure reductions, transient temperature responses, 

constant indirect methane radiative forcing effect, saturation, regional scaling factors, probability of a 

36 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

discontinuity, adaptation, CO2 absorption, regional climate modeling). Commenters suggested that 

discussion of uncertainty regarding the revisions would also be helpful. At a minimum, commenters 

suggested it would be reasonable to explain differences across models for similar components (e.g., sea 

level rise, transient temperature response, saturation, and adaptation), noting as a source of confusion 

that the TSDs have references to previous model versions, websites, and working papers, and suggested 

that a clear citation for each of the revisions in each model would be useful. 

Other commenters explicitly noted ways in which they disagreed with the comments above. They 

indicated that ̟͟ϣ γαβα ̩̣D ͕ϣ͕͟ ͂ ͟ͅ ̢̻ ϟϣ͟χ̴̢ ̟͟ϣ I̹G̠͕ ϟϣφ̢̢͕̻͂-making process with respect to how it 

assessed and employed the models, and that the 2013 TSD discusses how the three IAMs used in the 

analysis were updated in the publically-available academic literature over the three-year interim period 

by the independent researchers who developed them, and clarifies that the increase in the SCC estimate 

from 2010 to 2013 resulted solely from updates to the three underlying IAMs. 

Response 

The IWG believes that its process was inclusive, transparent, and appropriately considered public input. 

The TSDs fully document the methodology used to develop the estimates and the considerations that led 

the IWG to adopt this methodology. ̴̢̹̟ϣ ̟͟ϣ ϟϣ͟χ̴̢͕ ͂ϭ ̟͟ϣ I̹G̠͕ ̢̻͟ϣ̻͑χ̴ ͎͑͂φϣ͕͕ϣ͕ Άϣ͑ϣ ̻͂͟ ϟ̢͕φ ͕͕ͅϣϟ 

in the TSDs, this is common for most government (and non-government) documents. Such details were 

̻͂͟ φ̢̻͕͂ϟϣ͑ϣϟ ̕ϣ̺͑χ̻ϣ ͂͟ ̟͟ϣ ͎ ͅΫ̴̢φ̠͕  ̻ͅderstanding of the SCC estimates and the methodology used to 

produce them, but a general overview is provided here. 

In developing the 2010 estimates, the IWG met frequently in the year preceding the release of the 

February 2010 TSD. For the 2013 update, only a few meetings were needed because the group decided 

to make no changes beyond incorporating the most recent versions of the IAMs. The IWG, in particular 

professional economic staff with modeling expertise, oversaw the primary modeling and calculations for 

both the 2010 and 2013 SCC estimates using the most recent versions of the three IAMs available at the 

time. To develop the 2010 estimates, the staff members ran two of the three models and contracted with 

the developer of the third model to perform those runs. The contractor did not participate in any of the 

interagency meetings but rather received instructions for how to conduct the model runs (e.g., 

specification of the three sets of input assumptions as determined by the working group). The staff 

members ran all three models to develop the 2013 estimates. Decision making for both the 2010 and 2013 

processes was by consensus of IWG members. The details of internal discussions are deliberative, but the 

discussions were generally technical in nature and the issues discussed and conclusions reached are well 

documented in the TSDs. Regarding the transparency of the underlying models themselves, the IWG notes 

that they are well documented in the academic literature. 

The Government Accountability Office (GAO) recently completed a review of the process used to develop 

the SCC estimates. GAO concluded that according to IWG participants, all major issues discussed were 

documented in the TSDs, which is consistent with Federal standards for internal control, and the processes 

and methods used were based on the principles of (1) consensus-based decision-making, (2) reliance on 

existing academic literature and modeling, and (3) disclosure of limitations and incorporation of new 

37 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

information through consideration of public comments and revision of the estimates as updated research 

became available.12 

IWG members have also assisted individual requestors in obtaining more detailed information about the 

modeling. For example, one requestor noted ͎ ͅΫ̴̢φχ̴̴Ό ̟͟χ͟ I̹G ̣̺͂ϟelers have been very open, 

φ̴̴͂ϣ̢̕χ̴̚ χ̻ϟ ̟ϣ̴͎ϭ ̴̝̤ͅ13 

Regarding the explanation in the TSD for the 2013 revisions, no changes were made to the input 

assumptions developed by the IWG between the 2010 and 2013 estimates. The only changes were those 

made by the model developers themselves to the underlying models, which are documented in the 

academic literature. To assist the public in understanding these changes, the 2013 TSD provides a brief 

summary of the most important ones, as well as references to the relevant literature where more detailed 

information can be found. As with the 2010 TSD, the IWG did not attempt to evaluate the modeling 

choices made by the modelers. Rather, by selecting the three ̣most widely used impact assessment 

models̤ ̓̊!̣, 2010), the IWG intended to reflect a reasonable range of modeling choices and approaches 

that collectively reflect the current literature on the estimation of damages from CO2 emissions. As 

explained in the 2010 TSD: 

The parameters and assumptions embedded in the three models vary widely. A key objective of 

the interagency process was to enable a consistent exploration of the three models while 

respecting the different approaches to quantifying damages taken by the key modelers in the 

field. An extensive review of the literature was conducted to select three sets of input parameters 

for these models: climate sensitivity, socio-economic and emissions trajectories, and discount 

͑χ͟ϣ͕̞All other model features were left unchanged, relying on the model developers̠ Ϋϣ͕͟ 

e̢͕̺͟χ͟ϣ͕ χ̻ϟ ̮ ͅϟ̺̕ϣ̻͕̞͟The sensitivity of the results to other aspects of the models (e.g. the 

carbon cycle or damage function) is also important to explore in the context of future revisions to 

the SCC but has not been incorporated into these estimates. 

Accordingly, the IWG did not attempt to explain in detail how the damage functions in the models were 

constructed or their strengths and weaknesses, either for the earlier model versions used in the 2010 

estimates or for the updated versions used for the 2013 estimates. Rather, stakeholders who are 

interested in these details are encouraged to consult the model documentation and the related academic 

literature referenced in the TSDs, as well as the model developers themselves. The IWG accepts the point 

that clearer citations to specific model versions and revisions would be helpful and will attempt to address 

this in the next update of the TSD. 

(4) Opportunities for public comment 

While some commenters acknowledged that the public has had multiple opportunities to comment on 

the SCC estimates and TSDs, others felt that the opportunities for public comment have been insufficient. 

A few of these commenters indicated that the public has not been provided sufficient information and 

12 http://www.gao.gov/products/GAO-14-663 13 http://dailysignal.com/2013/11/06/white-house-reopens-the-scc/ 

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asked that additional supplemental and supporting documents be made available to the public for 

comment, including all of the data, models, assumptions, and analyses relied on to arrive at the SCC 

estimates. They suggested that OMB̠͕ responses to FOIA requests implied that there are thousands 

of pages of supporting documents that have not been released to the public. 

Some commenters stated that the continued development of SCC estimates should have strong oversight 

in both the Executive branch and Congress, that there should be continued opportunities for the public 

to comment, and that the analysis should be conducted in an open fashion. 

Response 

The IWG agrees with those commenters who believe the public has had ample opportunities to comment 

on the SCC estimates and methodology. Opportunity for public comment on all aspects of the SCC 

estimates was provided on the interim estimates selected by the IWG and in the numerous proposed rules 

issued by Federal agencies between February 2010 and May 2013 that made use of the estimates. As a 

general practice, agencies request comments on all aspects of the regulatory impact analysis, thereby 

providing ample opportunity for the public to comment on SCC estimates used in these analyses. These 

φ̺̺͂ϣ̻͕͟ ̟ϣ̴͎ϣϟ ̢̻ϭ̺͂͑ ̟͟ϣ I̹G̠͕ ϟϣvelopment of the 2013 revised estimates. In addition, OMB 

provided a stand-alone comment period on the 2013 estimates. This document summarizes the 

comments received and ͎͑͂ ̢̈́ϟϣ͕ ̟͟ϣ I̹G̠͕ ͑ϣ͕͎̻͕͂ϣ. 

Regarding the adequacy of the information provided to the public as a basis for comment, the TSDs 

provide a complete record of the methodology and assumptions used to develop the SCC estimates, 

including references to the academic literature. Independent analysts have sought and received 

information from the IWG allowing them to implement the IWG approach and modify it further if they 

choose. Additional documentation is available in the academic literature on the IAMs themselves. 

With regards to several FOIA requests received by OMB and other IWG members, the only documents 

withheld were deliberative documents that are protected under applicable FOIA exemptions. Most of 

these documents were either intermediate drafts of TSD language or e-mails exchanged among IWG 

participants discussing various aspects of the methodology and results. Such documents are not typically 

provided in the record of agency actions and are not necessary for informed public comment. 

The IWG is committed to providing additional opportunities for public comment when future updates of 

the SCC are released and agrees that analysis should continue to be conducted in an open fashion. 

(5) Use of the SCC Estimates in Regulatory Impact Analysis 

In addition to expressing views about how the SCC estimates were derived, many commenters discussed 

the application of the estimates. Some commenters explicitly endorsed the use of the SCC in rulemaking 

analyses, highlighting that accounting for the economic harms caused by climate change is a critical 

component of sound benefit-cost analyses of regulations that directly or indirectly affect greenhouse gas 

emissions. These commenters stated that without an SCC estimate, regulators would by default be using 

a value of zero for the benefits of reducing carbon pollution, implying that carbon pollution has no costs. 

39 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

They urged the IWG to continuously update the SCC, as new economic and scientific consensus emerges, 

in line with the stated intentions of the IWG. 

Other commenters disagreed with continued use of SCC estimates based on both process and substance 

concerns. On the process side, some commenters asserted that the limitations of the process used to 

generate the estimates (see earlier comments in this section) render them unsuitable for use in regulatory 

impact analysis and requested that the IWG withdraw the TSDs until these process flaws have been 

corrected. Issues specifically highlighted in this area were lack of peer review and inadequate opportunity 

for public comment. Other commenters stated that the SCC estimates are too uncertain for decision 

making, and several requested that the IWG provide more explicit guidance on when and when not to use 

them. For example, several commenters said the TSD should explicitly note that the SCC estimates are 

only for use in benefit-φ͕͂͟ χ̻χ̴Ό̢͕͕ ͂ϭ Fϣϟϣ͑χ̴ ͑ϣ̕ ̴ͅχ̢̻͕͂͟ χ̻ϟ χ͑ϣ ̻͂͟ χ ̢̣͎͑φϣ̤ ̻͂ φχ͑Ϋ̻͂ ͂͑ χ ͎͑͂΋Ό ϭ͂͑ 

the anticipated cost of complying with CO2 regulations; in addition they should not be used in NEPA 

environmental impact statements or state level decision making. One commenter stated that the SCC is 

more suitable for use in international discussions for now. 

Response 

The IWG agrees with those commenters who believe that use of the SCC estimates is an important 

component of regulatory impact analyses of rules that affect CO2 emissions. However, it is not true that 

benefits that cannot be quantified or monetized are assigned zero weight in regulatory impact analysis. 

Although the monetized benefit estimates may not reflect unquantified benefits, the qualitative analysis 

provides important information about these benefits that must be given full consideration in regulatory 

decision-making. OMB guidance directs agencies to quantify benefits and costs of regulations to the 

extent feasible using the best available science and analytic techniques, but also to take non-quantified 

benefits into consideration when determining if the benefits of a regulatory action justify its costs. The 

SCC estimates and supporting TSDs are intended to assist agencies in adopting a consistent approach, 

based on the best available science and economics, for monetizing this important category of benefits. 

The IWG also agrees that the estimates should be updated periodically based on advances in the scientific 

and economic literature and has committed to do so. 

Previous sections have addressed the perceived process flaws that have led some commenters to suggest 

that the estimates not be used until a future update that corrects these perceived flaws is completed. As 

noted, the IWG has accepted the suggestion of increased opportunity for public comment and plans to 

seek external expert advice as it considers futures updates, but does not feel that it is appropriate to 

withdraw the current estimates in the meantime as they represent the best available science in a form 

that is currently usable for monetized benefits estimates. 

Regarding uncertainty, the IWG notes that most if not all benefits estimates in regulatory analyses are 

uncertain. This does not negate the value of the estimates. It does underscore the importance of a full 

and transparent discussion of uncertainty, and the TSDs have provided this (see, for example, Section V: 

Limitations of the Analysis, in the 2010 TSD, and Section IV: Other Model Limitations and Research Gaps, 

in the 2013 TSD). The TSDs are explicit that the estimates were developed for use in regulatory impact 

40 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

analysis. The 2010 ̩̣D ͕͟χ͟ϣ͕ ̟͟χ͟ ̟͟ϣ ̣ ϣ̢͕̺͟χ͟ϣ͕ Άϣ͑ϣ ϟϣ ̈́ϣ̴͎͂ϣϟ ϭ͂͑  ͕ͅϣ ̢̻ ̣cost-benefit analyses of 

regulato͑Ό χφ̢̻͕͂͟ ̟͟χ͟ ̟χ ̈́ϣ ͕̺χ̴̴̚ ͂͑ ̟̺χ̢̻͑̕χ̴̠̚ impacts on cumulative global emissions.̤ The IWG has 

not addressed the use of the SCC estimates outside the regulatory context, such as in NEPA analysis,14 

͕͟χ͟ϣ ̴ϣ ̈́ϣ̴ ϟϣφ̢̢͕̻͂ ̺χ̢̱̻̕̚ χ̻ϟ ̢̣͎͑φ̢̻̤̕ φχ͑Ϋ̻͂ ̢̻ ̟͟ϣ ̺χ̱͑ϣ̴͎͟χφϣ. In addition, the 2010 TSD states, 

̣For policies that have a large (non-marginal) impact on global cumulative emissions, there is a separate 

question of whether the SCC is an appropriate tool for calculating the benefits of reduced emissions; we 

do not attempt to answer that question here.̤ While the concept of an SCC is appropriate for international 

discussions, the IWG recognizes that any use of such estimates beyond the domestic regulatory context 

will require further discussion with our international partners; that said, our current work in this area can 

certainly help to inform such discussions. 

11 Technical Addendum 

As previously noted, the IWG continues to receive feedback from stakeholders through public comments 

on proposed Agency rulemakings that use the SCC in supporting analyses, the additional OMB comment 

period on the SCC, and regular interactions with stakeholders and research analysts implementing the 

methodology used by the IWG to compute the estimates. As a result of our engagement in this continuous 

review process, we recently discovered two areas where minor technical corrections are appropriate. 

First, the DICE model had been run up to 2300 rather than through 2300, as was intended, thereby leaving 

out the marginal damages in the last year of the time horizon. Second, due to an indexing error, the results 

from the PAGE model were in 2008 U.S. dollars rather than 2007 U.S. dollars, as was intended. A revised 

TSD with the corrected estimates (all models run through 2300 and all estimates in 2007 U.S. dollars) has 

Ϋϣϣ̻ ͎͕͂͟ϣϟ ̻͂ ̠͕̐̉ ΆϣΫ̢͕͟ϣ̝ On average the revised SCC estimates are one dollar less than the mean 

SCC estimates reported in the November 2013 TSD. The difference between the 95th percentile estimates 

with a 3% discount rate is slightly larger, as those estimates are heavily influenced by results from the 

PAGE model. The revised (July 2015) TSD includes an addition to the technical appendix (Appendix B) 

explaining these revisions. 

References 

14 On December, 18 2014, the Council on Environmental Quality released draft NEPA guidance on GHG Emissions 

and Climate Change Impacts (https://www.whitehouse.gov/administration/eop/ceq/initiatives/nepa/ghgguidance). The draft guidance states: ̣When an agency determines it appropriate to monetize costs and benefits, 

then, although developed specifically for regulatory impact analyses, the Federal social cost of carbon, which 

multiple Federal agencies have developed and used to assess the costs and benefits of alternatives in rulemakings, 

offers a harmonized, interagency metric that can provide decision makers and the public with some context for 

meaningful NEPA review. When using the Federal social cost of carbon, the agency should disclose the fact that 

these estimates vary over time, are associated with different discount rates and risks, and are intended to be 

updated as scientific and economic understanding improves̝̤ ̩̟ϣ φ̺̺͂ϣ̻͟ ͎ϣ̢͑͂ϟ ϭ͂͑ ̟͟ϣ ϟ͑χϭ͟ ̕ ̢ͅϟχ̻φϣ φ̴͕͂ϣϟ ̻͂ 

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