CHAPTER 14. MONETIZATION OF EMISSION REDUCTIONS BENEFITS 

TABLE OF CONTENTS

14.1 INTRODUCTION ......................................................................................................... 14-1

14.2 MONETIZING CARBON DIOXIDE EMISSIONS..................................................... 14-1

14.2.1 Social Cost of Carbon........................................................................................ 14-1

14.2.2 Monetizing Carbon Dioxide Emissions............................................................. 14-2

14.3 DEVELOPMENT OF SOCIAL COST OF CARBON VALUES................................. 14-2

14.3.1 Current Approach and Key Assumptions.......................................................... 14-2

14.3.2 Limitations of Current Estimates....................................................................... 14-4

14.4 VALUATION OF OTHER EMISSIONS REDUCTIONS ........................................... 14-5

14.5 RESULTS ...................................................................................................................... 14-5

LIST OF TABLES

Table 14.2.1 Annual SCC Values for 2010-2050 from 2010 Interagency Report (in 

2007$ per Metric Ton)....................................................................................... 14-3

Table 14.2.2 Annual SCC Values for 2010–2050 from 2013 Interagency Update (in 

2007$ per Metric Ton of CO2)........................................................................... 14-4

Table 14.4.1 Estimates of Global Present Value of CO2 Emissions Reduction under 

TSLs for Commercial Clothes Washers ............................................................ 14-6

Table 14.4.2 Estimates of Domestic Present Value of CO2 Emissions Reduction under 

TSLs for Commercial Clothes Washers ............................................................ 14-7

Table 14.4.3 Estimates of Present Value of NOX Emissions Reduction under TSLs for 

Commercial Clothes Washers............................................................................ 14-8

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CHAPTER 14. MONETIZATION OF EMISSION REDUCTIONS BENEFITS 

14.1 INTRODUCTION

As part of its assessment of the effects of potential energy conservation standards for 

commercial clothes washers, the U.S. Department of Energy (DOE) estimated the monetary 

benefits of the reduced emissions of carbon dioxide (CO2) and nitrogen oxides (NOX) that would 

be expected to result from each trial standard level (TSL) considered for commercial clothes 

washers. This chapter summarizes the basis for the monetary values assigned to emissions and 

presents the modeled benefits of estimated reductions. 

14.2 MONETIZING CARBON DIOXIDE EMISSIONS

One challenge for anyone attempting to calculate the monetary benefits of reduced 

emissions of CO2 is what value to assign to each unit eliminated. The value must encompass a 

broad range of physical, economic, social, and political effects. Analysts developed the concept 

of the social cost of carbon (SCC) to represent the broad cost or value associated with 

producing—or reducing—a quantifiable amount of CO2 emissions.

14.2.1 Social Cost of Carbon 

The SCC is an estimate of the monetized damages associated with an incremental 

increase in carbon emissions in a given year. The SCC is intended to include (but is not limited 

to) changes in net agricultural productivity, human health, property damages from increased 

flood risk, and the value of ecosystem services. SCC estimates are provided in dollars per metric 

ton of carbon dioxide. A value for the domestic SCC is meant to represent the damages in the 

United States resulting from a unit change in carbon dioxide emissions, whereas a global SCC is 

meant to reflect the value of damages worldwide.

Under section 1(b)(6) of Executive Order 12866,

1 agencies must, to the extent permitted 

by law, “assess both the costs and the benefits of the intended regulation and, recognizing that 

some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a 

reasoned determination that the benefits of the intended regulation justify its costs.” The purpose 

of the SCC estimates required by the Executive Order is to enable agencies to incorporate the 

monetized social benefits of reducing CO2 emissions into cost-benefit analyses of regulatory 

actions. The estimates are presented with an acknowledgement of the many uncertainties 

involved and with a clear understanding that they will need updating in response to increasing 

knowledge of the science and economics of climate impacts.

As part of the interagency process that developed the SCC estimates, technical experts 

from numerous agencies met regularly to explore the technical literature in relevant fields, 

discuss key model inputs and assumptions, and consider public comments. The primary objective 

of the process was to develop a range of SCC values using a defensible set of assumptions 

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regarding model inputs that was grounded in the scientific and economic literature. In this way, 

key uncertainties and model differences transparently and consistently inform the range of SCC 

estimates developed for use in the rulemaking process.

14.2.2 Monetizing Carbon Dioxide Emissions

When attempting to assess the incremental economic impacts of carbon dioxide 

emissions, the analyst faces several serious challenges. A report from the National Research 

Council2 points out that any assessment will suffer from uncertainty, speculation, and lack of 

information about (1) future emissions of greenhouse gases, (2) the effects of past and future 

emissions on the climate system, (3) the effects of changes in climate on the physical and 

biological environment, and (4) the translation of those environmental impacts into economic 

damages. As a result, any effort to quantify and monetize the harms associated with climate 

change raises serious questions of science, economics, and ethics and should be viewed as 

provisional. 

Despite the limits of both quantification and monetization, SCC estimates can be useful 

in estimating the social benefits of reducing CO2 emissions. An agency can estimate the benefits 

from reduced (or costs from increased) emissions in any future year by multiplying the change in 

emissions in that year by the SCC values appropriate for that year. Then the net present value of 

the benefits can be calculated by multiplying each of the future benefits by an appropriate 

discount factor and summing across all affected years. This approach assumes that the marginal 

damages from increased emissions are constant for small departures from the baseline emissions 

path, an approximation that is reasonable for policies that have effects on emissions that are 

small relative to cumulative global carbon dioxide emissions.

14.3 DEVELOPMENT OF SOCIAL COST OF CARBON VALUES

In 2009, an interagency process was initiated to develop a preliminary assessment of how 

best to quantify the benefits from reducing carbon dioxide emissions. To provide consistency in 

how benefits are evaluated across Federal agencies, the Administration sought to develop a 

transparent and defensible method, specifically designed for the rulemaking process, to quantify 

avoided climate change damages from reduced CO2 emissions. The interagency group did not 

undertake any original analysis. Instead, it combined SCC estimates from the literature to use as 

interim values until a more comprehensive analysis could be conducted. The outcome of the 

preliminary assessment was a set of five interim values: global SCC estimates for 2007 (in 

2006$) of $55, $33, $19, $10, and $5 per ton of CO2.

3 Those interim values represented the first 

sustained interagency effort within the U.S. government to develop an SCC for use in regulatory 

analysis. The results of that preliminary effort were presented in several proposed and final rules.

14.3.1 Current Approach and Key Assumptions

After the release of the interim values, the interagency group reconvened regularly to 

improve the SCC estimates. Specifically, the group considered public comments and further 

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explored the technical literature in relevant fields. The interagency group relied on three 

integrated assessment models commonly used to estimate the SCC. The models are known by 

their acronyms of FUND, DICE, and PAGE. Those three models frequently are cited in the peerreviewed literature and were used in the most recent assessment of the Intergovernmental Panel 

on Climate Change. Each model was given equal weight in developing SCC values.

Each model takes a slightly different approach to calculating how increases in emissions 

produce economic damages. A key objective of the interagency process was to enable a 

consistent exploration of the three models while respecting the different approaches taken by the 

key modelers in the field. An extensive review of the literature identified three sets of input 

parameters for the models: climate sensitivity; socioeconomic and emissions trajectories; and 

discount rates. A probability distribution for climate sensitivity was specified as an input to all 

three models. In addition, the interagency group used a range of scenarios for the socioeconomic 

parameters and a range of values for the discount rate. All other model features were left 

unchanged, relying on the model developers’ best estimates and judgments.

The interagency group selected four SCC values for use in regulatory analyses. Three 

values are based on the average SCC from the three integrated assessment models, at discount 

rates of 2.5 percent, 3 percent, and 5 percent. The fourth value, which represents the 95th

percentile of the SCC estimate across all three models at a 3-percent discount rate, is included to 

represent larger-than-expected effects from temperature changes farther out in the tails of the 

SCC distribution. The values increase in real terms over time. Additionally, the interagency 

group determined that a range of values from 7 percent to 23 percent should be used to adjust the 

global SCC to calculate domestic effects, although preference is given to consideration of the 

global benefits of reducing CO2 emissions. Table 14.2.1 presents the values in the 2010 

interagency group report.

4

Table 14.2.1 Annual SCC Values for 2010-2050 from 2010 Interagency Report (in 2007$

per Metric Ton)

Year

Discount Rate (%)

5 3 2.5 3

Average Average Average 95th Percentile

2010 4.7 21.4 35.1 64.9

2015 5.7 23.8 38.4 72.8

2020 6.8 26.3 41.7 80.7

2025 8.2 29.6 45.9 90.4

2030 9.7 32.8 50.0 100.0

2035 11.2 36.0 54.2 109.7

2040 12.7 39.2 58.4 119.3

2045 14.2 42.1 61.7 127.8

2050 15.7 44.9 65.0 136.2

The SCC values used for the analysis of the effects of potential standards for commercial 

clothes washers were generated using the most recent versions of the three integrated assessment 

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models that have been published in the peer-reviewed literature, as described in the 2013 update 

from the interagency working group (revised November 2013).4 Table 14.2.2 shows the updated 

sets of SCC estimates in 5-year increments from 2010 to 2050. The full set of annual SCC 

estimates for 2010–2050 is presented in appendix 14-B of this TSD. The central value that 

emerges is the average SCC across models at a 3-percent discount rate. To capture the 

uncertainties involved in regulatory impact analysis, however, the interagency group emphasizes 

the importance of including all four sets of SCC values.

Table 14.2.2 Annual SCC Values for 2010–2050 from 2013 Interagency Update (in 2007$

per Metric Ton of CO2)

Year

Discount Rate (%)

5 3 2.5 3

Average Average Average 95th Percentile

2010 11 32 51 89

2015 11 37 57 109

2020 12 43 64 128

2025 14 47 69 143

2030 16 52 75 159

2035 19 56 80 175

2040 21 61 86 191

2045 24 66 92 206

2050 26 71 97 220

14.3.2 Limitations of Current Estimates

The interagency group recognizes that current models are imperfect and incomplete. 

Because key uncertainties remain, current SCC estimates should be treated as provisional and 

revisable. Estimates doubtless will evolve in response to improved scientific and economic 

understanding. The 2009 National Research Council report2 points out the tension between 

producing quantified estimates of the economic damages from an incremental ton of carbon and 

the limits of current modeling efforts. Several analytic challenges are being addressed by the 

research community, some by research programs housed in many of the Federal agencies 

participating in the interagency process. The interagency group intends to review and reconsider 

SCC estimates periodically to incorporate expanding knowledge of the science and economics of 

climate impacts, as well as improvements in modeling.

In summary, in considering the potential global benefits resulting from reduced CO2

emissions, DOE used the values from the 2013 interagency report, applying the GDP price 

deflator to adjust the values to 2013$. For the four SCC values, the values of emissions in 2015 

were $12.0, $40.5, $62.4, and $119 per metric ton avoided (values expressed in 2013$). DOE 

derived values after 2050 using the relevant growth rates for 2040–2050 in the interagency 

update.

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DOE multiplied the CO2 emissions reduction estimated for each year by the SCC value 

for that year under each discount rate. To calculate a present value of the stream of monetary 

values, DOE discounted the values in each of the four cases using the same discount rate that had 

been used to obtain the SCC values in each case.

14.4 VALUATION OF OTHER EMISSIONS REDUCTIONS

DOE considered the potential monetary benefits of reduced NOX emissions attributable to 

the TSLs considered for commercial clothes washers. As noted in chapter 13, new or amended 

energy conservation standards would reduce NOX emissions in those States that are not affected 

by emissions caps. DOE estimated the monetized value of NOX emissions reductions resulting 

from each TSL based on estimates of environmental damage found in the scientific literature. 

Estimates suggest a wide range of monetary values, from $476 to $4,893 per ton (in 2013$).5

DOE calculated monetary benefits using a median value for NOX emissions of $2,684 per short 

ton (in 2013$), at real discount rates of 3 percent and 7 percent.

DOE continues to evaluate appropriate values for monetizing avoided SO2 and Hg 

emissions. DOE did not monetize those emissions for this analysis.

14.5 RESULTS

Table 14.4.1 presents the global values of CO2 emissions reductions for each considered 

TSL. 

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Table 14.4.1 Estimates of Global Present Value of CO2 Emissions Reduction under TSLs 

for Commercial Clothes Washers

TSL

SCC Case*

5% discount

rate, average*

3% discount

rate, average*

2.5% discount

rate, average*

3% discount rate,

95th percentile*

Million 2013$

Primary Energy Emissions

1 24.3 110.7 175.4 342.0

2 26.7 121.9 193.3 376.8

3 52.9 240.9 381.9 744.4

4 48.8 222.1 352.1 686.2

Upstream Emissions

1 2.1 9.5 15.0 29.3

2 2.3 10.8 17.1 33.3

3 4.2 19.5 31.0 60.4

4 3.7 17.1 27.1 52.8

Full-Fuel-Cycle Emissions

1 26.4 120.2 190.5 371.3

2 29.1 132.7 210.4 410.1

3 57.1 260.4 413.0 804.8

4 52.5 239.2 379.2 739.0

* For each of the four cases, the corresponding global SCC value for emissions in 2015 is $12.0, 

$40.5, $62.4, and $119 per metric ton (2013$).

After calculating global values of CO2 emissions reductions for each 

considered TSL, DOE calculated domestic values as a range of from 7 percent 

to 23 percent of the global values. Results for domestic values are presented in 

Table 14.4.2.

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Table 14.4.2 Estimates of Domestic Present Value of CO2 Emissions Reduction under 

TSLs for Commercial Clothes Washers

TSL

SCC Case*

5% discount

rate, average*

3% discount

rate, average*

2.5% discount

rate, average*

3% discount rate,

95th percentile*

Million 2013$

Primary Energy Emissions

1 1.7 to 5.6 7.7 to 25.5 12.3 to 40.4 23.9 to 78.7

2 1.9 to 6.1 8.5 to 28.0 13.5 to 44.5 26.4 to 86.7

3 3.7 to 12.2 16.9 to 55.4 26.7 to 87.8 52.1 to 171.2

4 3.4 to 11.2 15.5 to 51.1 24.6 to 81.0 48.0 to 157.8

Upstream Emissions

1 0.1 to 0.5 0.7 to 2.2 1.1 to 3.5 2.1 to 6.7

2 0.2 to 0.5 0.8 to 2.5 1.2 to 3.9 2.3 to 7.7

3 0.3 to 1.0 1.4 to 4.5 2.2 to 7.1 4.2 to 13.9

4 0.3 to 0.9 1.2 to 3.9 1.9 to 6.2 3.7 to 12.1

Full-Fuel-Cycle Emissions

1 1.8 to 6.1 8.4 to 27.6 13.3 to 43.8 26.0 to 85.4

2 2.0 to 6.7 9.3 to 30.5 14.7 to 48.4 28.7 to 94.3

3 4.0 to 13.1 18.2 to 59.9 28.9 to 95.0 56.3 to 185.1

4 3.7 to 12.1 16.7 to 55.0 26.5 to 87.2 51.7 to 170.0

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, 

$62.4, and $119 per metric ton (2013$).

Table 14.4.3 presents the present value of cumulative NOX emissions reductions for each 

TSL. Monetary values are calculated using the average dollar-per-ton values assigned to NOX

emissions at 7-percent and 3-percent discount rates.

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Table 14.4.3 Estimates of Present Value of NOX Emissions Reduction under TSLs for 

Commercial Clothes Washers

TSL

3% discount rate 7% discount rate

Million 2013$

Primary Energy Emissions

1 5.0 2.5

2 5.6 2.7

3 10.5 5.1

4 9.4 4.6

Upstream Emissions

1 6.2 3.0

2 7.1 3.3

3 12.7 6.0

4 11.1 5.3

Full-Fuel-Cycle Emissions

1 11.2 5.4

2 12.7 6.1

3 23.2 11.2

4 20.4 9.9

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REFERENCES

1 Presidential Documents–Executive Order 12866–Regulatory Planning and Review. 58 

FR, 51735 (October 4, 1993). (Last accessed June 28, 2014.) 

<http://www.archives.gov/federal-register/executive-orders/pdf/12866.pdf>

2 National Research Council. Hidden Costs of Energy: Unpriced Consequences of Energy 

Production and Use. 2010. National Academies Press. Washington, D.C. (Last accessed 

June 28, 2014.) <http://www.nap.edu/catalog.php?record_id=12794> 

3 Interagency Working Group on Social Cost of Carbon. Technical Support Document:

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

February 2010. United States Government. Washington, D.C. (Last accessed June 28, 

2014.) <http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/SocialCost-of-Carbon-for-RIA.pdf> 

4 Interagency Working Group on Social Cost of Carbon. Technical Support Document:

Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under 

Executive Order 12866. May 2013. United States Government. Washington, D.C. (Last 

accessed June 28, 2014.) 

<http://www.whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_r

ia_2013_update.pdf> [This, too, links to a TSD--add?

5 U.S. Office of Management and Budget (OMB). 2006 Report to Congress on the Costs 

and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal 

Entities. 2006. Washington, D.C. (Last accessed June 28, 2014.)

<http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_c

b_final_report.pdf>

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