 Good afternoon. My name is Alex Reich and I'm pleased to welcome you to the National Academies of Sciences, Engineering, and Medicine and to the third event of our new monthly webinar series, Climate Conversations Pathways to Action. The National Academies provide independent objective advice to inform policy with evidence, spark progress and innovation, and confront challenging issues for the benefit of society. In keeping with this mission, we're excited to host these conversations about issues relevant to national policy action on climate change. Our conversation today will be recorded and made available on this webpage tomorrow. We won't be taking questions from the audience, but we would appreciate your feedback and your ideas for future conversations, which I invite you to share after the event in the survey linked just above this video. Above, you'll also find links to register for two upcoming virtual events. One is our May 20th climate conversation on Solar Geoengineering, moderated by Frank Sezno and featuring National Academy of Sciences President Marsha McNutt and Chris Field, the chair of last month's National Academies Report on Solar Geoengineering. The other event is the first ever Nobel Prize Summit, which the National Academy of Sciences is organizing on April 26th to 28th. The Nobel Summit focuses on three key areas critical to the future of humanity, finding climate change and biodiversity loss, reducing inequality and advancing technological innovation. If you don't see a link there, you can refresh the page or do a search for Nobel Prize Summit. But today, on what in any other year would be tax day in the U.S., we're thinking about climate change in the context of costs and benefits. Specifically, we're going to have a conversation about the social cost of carbon. It's important for addressing climate change and considerations for how it can advance equitable and economically sound policies. And as recent events so clearly demonstrate, our country has a long way to go on many fronts in the journey toward equity and justice. And we hope today's conversation can be part of a broader discussion about how we move towards action on the key areas critical to our humanity, both in the present and the future. We're honored to be joined by Justin Warland, the Washington, D.C.-based senior correspondent for time covering climate change and the intersection of policy, politics, and society. Justin will introduce our conversationalists and moderate events. Thank you again for joining the National Academies for Climate Conversations. Justin, it's all yours. Well, thank you, Alex, for the introduction. I'm really thrilled to be here moderating this conversation. I'm going to break it up into two parts. The first part is sort of the grounding so that everybody can have an understanding of what we're talking about, the social cost of carbon and some of the related questions related to that. The second part will dive into some of the questions that are surrounding the social cost of carbon today. I've called it social cost of carbon in 2021. So some of the surrounding concerns, how do we think about it in the context of questions about the current science and questions about equity and justice and other things that have dominated the conversation as of late? I will note that neither of our conversationalists are experts on environmental justice, but nonetheless, I hope it will be an insightful conversation. With that, I'd like to introduce them. First, we have Richard Newell, who's the president and CEO of Resources for the Future, which is an independent nonprofit research institution that looks at energy, environment, and natural resources and looks at the economics behind that. He was the chair of the 2017 National Academy's report, valuing climate damages, updating estimation of the social cost of carbon dioxide, which I believe you can see at a link above the video. And we have Rachel Cletus, who is the policy director with the Climate and Energy Program at the Union of Concerned Scientists. She leads the program's efforts to design effective and equitable climate policy. Thank you to both of you for joining. Just to start, I think it would be great to hear a bit from each of you about how you got involved in this space. We can start with Richard. Oh, sure. Well, thanks. It's really a pleasure to be in this conversation. I'm an economist, and I've been working on issues related to climate policy for about three decades now. So pinpointing exactly when I first got engaged in issues specifically around the social cost of carbon, I think probably goes back to the 1990s when Bill Nordhaus really wrote some of his early articles around thinking about the climate problem from an economic perspective. It's one in the Nobel Prize just more recently. So I've also been working on issues like studying long-term discounting. How do we think about valuing impacts on society that occur in the not only the near but the distant future? So that's another element that's brought me to this issue. And then the first part of the Obama administration, I was at the Department of Energy. And in that capacity, I was involved in what's called the Interagency Working Group on the Social Cost of Carbon, which will probably come to later. And then finally, as you alluded to, I was engaged in the National Academy of Sciences Study on Social Cost of Carbon. And then at RFF, since I've been at resources for the future last few years, we've been leading an initiative around implementing the recommendations of the National Academy. So I've been kind of early days in the 1990s, but I've been working pretty consistently around these issues for a while now, I guess. Right. Great. Well, Rachel. Justin, that's great to be here. And thank you so much to the NAS for setting up this panel. My work at the Union of Concerned Scientists is very interdisciplinary in nature. I happen to be an economist by training. Justin, you're misfortune to be here with two economists today. But I work with a team of climate scientists and other experts on this issue of climate change from this very interdisciplinary perspective. And what I remember about first thinking about these issues is back in grad school, it was around the time of the 1992 real summit. And I was just starting grad school and I was shocked that climate change wasn't front and center in my training as an economist in graduate school. It was only after leaving and joining the nonprofit sector that I really started to find my feet working with others in other disciplines. And it's been for me a journey of coming back to this work in different ways and really looking at how the economics profession has really grown. Richard has been a big part of that, really broadening the perspective and bringing in this kind of interdisciplinary effort to think about what is one of the biggest challenges that humanity faces today. In my work, some of the things we look at are, for example, the impacts of sea level rise and extreme heat in the United States. And we're looking out within fairly near-term time horizons at some very significant costs that are coming our way. And just the reality that climate costs are all around us right now. We're watching these devastating hurricane seasons, extreme heat waves. Last year the U.S. had $22 billion plus extreme weather and climate related events here in the U.S. And that doesn't even take into account what's happening globally around flooding and storms and heat waves. So this is sort of the broad perspective in terms of the social cost of carbon. I remember being in 2009, the first public meeting around this issue was held at a hotel in D.C. And I remember being in some basement conference room with my colleague who's a climate scientist just really excited for this new frontier of research and the opportunity that it could bring to improve our climate policies. Well, great. Well, that's interesting to hear that background. Rachel, I wonder if you could just introduce us to or for those in the audience who, you know, we want to make sure this conversation is accessible, introduce us to the concept of a social cost and specifically, you know, what is the social cost of carbon? Yeah. So at its core, the social cost of carbon is a pretty simple concept. The idea is that we know that carbon emissions from burning fossil fuels and from tropical deforestation are causing climate change. And the other thing that we know is that these emissions are coming from activities, production and consumption activities where the people who are producing the emissions are not bearing the full costs of their actions. Those costs, those costs that come in the form of these climate impacts we were talking about are spread out to society at large. And that means in the terminology of economists, we have an externality. We have a market failure here where the individual decisions are not reflecting the full social costs. And ultimately, that means we're getting more carbon emissions than it's good for society at large. So that's the concept kind of in a nutshell. And the social cost of carbon essentially is an economic metric that's trying to set basically a monetized cost for additional ton of carbon dioxide that's emitted into the atmosphere. And in those costs, what we're trying to capture is all of these costs, these costs to society at large. And that's where it really needs to meld starting with climate models that are looking at how emissions get translated into cumulative emissions in the atmosphere, drive temperature changes. Those temperature changes are driving different kinds of climate risks. How those risks are affecting society in different ways than drives the cost. And we know that we can't really monetize everything. So we're capturing a snapshot of what those costs are. But that's what the social cost of carbon is trying to do. Now, of course, we'll have a further conversation about appropriate and inappropriate ways to use it. But just very simply, that's what it's trying to do. Right. Well, Richard, maybe could you just provide us with a little bit of histories on the social cost of carbon, leading us up not inclusive of the Biden administration, but up to 2020. Specifically, I'd like to hear about its role in policymaking, the report that you chaired that we talked a bit about earlier, and then how it was thought about in the both Obama and Trump administrations. Yeah, sure. So the concept of the social cost of carbon goes back a long time. And I would say that this really Bill Nord has the 1990s that brought a lot of attention to bringing an economic lens to the understanding of climate change and also to potential solutions to climate change. I think, though, when most people think about the social cost of carbon, in particular this conversation, it's in the context of federal policymaking. So in that context, you really should first go back to the Reagan administration, and I will make this quick, I promise. So every administration since the Reagan administration has had guidelines in the form of executive orders that require executive branch agencies to quantitatively assess, to measure quantitatively with numbers the benefits and costs of major regulations they propose. So that's the impetus for why the federal government requires the monetization of a social cost of carbon. So now fast forward. So before 2008, the value in quantitative economic terms of reducing the damages from climate change was not included in this kind of analysis called regulatory impact analysis. It was the implication that is that it was assigned a value of zero. But then in 2008, which is this is now near the end of the Bush administration, a court looked at an automobile fuel economy standard, a regulatory analysis for that, and said in so many words, the damages from climate change are subject to a lot of uncertainty. We understand that, but surely it's not exactly zero. Okay. And so from that point on, since 2008 on, the federal government has been required to quantify in monetized terms the damages from climate change and include that in its policy decisions for new regulations. So that's the end of 2008 is when it started being put into the regulatory process. So soon after that, the Obama administration came into office, they established what has been called an interagency working group. So this is an all of government working group involves Council of Economic Advisors, EPA, Department of Energy, and so on. And they asked the interagency working group to look in depth at this issue of the social cost of carbon and deploy the best available science to establish consistent values for the social cost of carbon that could be used across the whole federal government for all the different agencies. So there would be consistency in how we're valuing greenhouse gas reductions. So they did that. And in 2010, they put out their estimates. They relied primarily on three different integrated assessment models that existed already in the scholarly community. And then over the last next few years during the Obama administration, they did some technical updates to that. They used the social cost of carbon in dozens, if not hundreds of different regulatory analyses. And the estimates have also been used by states for policies in the electric power sector by the Canadian government and also informing a prospective federal legislation for a carbon tax. Okay, so then 2015. By 2015, the federal government, again, still during the Obama administration, asked the national economies to conduct a consensus study to offer recommendations for how the methods underpinning the social cost of carbon could be improved over time. At the time, the interagency working group initially did its work. It made use of the best available evidence in the scientific community. But with the recognition of the evolving science of climate change, increased attention to the issue, there was a sense that, you know, we could do better over time. And so I co-chaired that study with Maureen Cropper and we issued a report in early 2017. So something else happened in early 2017. Early 2017, the Trump administration came into office and they took some very early on some very specific actions related to the social cost of carbon, as they did with a number of other different environmentally related, you know, regulatory approaches. One is that they disbanded the interagency working group. They said that the technical support documents underpinning the social cost of carbon no longer reflected government policy. And then later on that year, in October 2017, they substantially reduced the estimates that had been used. So, you know, the Central Valley and the Obama administration for social cost of carbon was around $45 per ton. And then the Trump administration reduced it to about $1 to $6 per ton. That was by two simple adjustments, simple, but very impactful adjustments. One was by using a higher discount rate. And then the other was by focusing narrowly on the direct impacts of climate on the United States rather than estimates of the global impacts of climate change. So I'll leave it on there. You know, from then until 2020, things have been pretty consistent in the way the social cost of carbon has been done in the federal government. Well, that was a great, you condensed a lot of information in there, valuable information. Rachel, I just want to pick up on a point in there just to ask you to talk a bit about how the social cost of carbon thinks about health impacts, air pollution, effects on ecosystems, etc., things that are beyond climate impacts. Yeah. So as Richard mentioned, the underlying models, they called integrated assessment models, and they're connecting climate systems and climate science with monetizing these costs. And they rely on existing literature. And that's an important thing to keep in mind, because if there isn't research that can help quantify or even identify a certain kind of climate impact, then it's not going to be captured in the social cost of carbon. That's why this needs to be continually updated and improved estimate as our understanding of the science and economics improves. When we think about the current social cost of carbon, it is trying to capture damages across major economic sectors. I mentioned sea level rise, for example, there is now some extensive literature, including research that UCS has done on the impacts of sea level rise on coastal flooding and coastal property values. As flooding worsens, we have more and more homes at risk from this flooding. Our research has found that by the end of the century, about a trillion dollars worth of real estate in the coastal US alone is at risk. So that's the kind of cost that you would be able to capture, infrastructure damages. The public health costs, we're able to capture some of them. We know that extreme heat, for example, has profound impacts on human health, on labor productivity, etc. But there are big pieces of this that putting a number on is very difficult and in some cases inappropriate. Some of the ecosystem costs that we still don't have a clear handle on is ocean acidification, for example. So in addition to the temperature changes, climate change is also driving ocean acidification. And that is affecting marine life and marine ecosystems and ultimately livelihoods of people who depend on those ecosystems. So we know that there are gaps. The other big gap I would mention is that research has tended to concentrate on the relatively rich countries, Europe and the US, we have extensive literature, but we know some of the really grave impacts are occurring in places in the developing world. And we still don't have good global damage estimates for many of those kinds of impacts. Nevertheless, it's really important to do this exercise because otherwise, as Richard said, the default is we're putting a zero number on these carbon emissions. Right. Well, Richard, I want to come back to you and we're I think nearing the end of our sort of opening segment to try to get the background here. And one thing that you talked about, which is so crucial is the discount rate. So just again, for anyone in the audience who's unfamiliar, could you explain what is a discount rate and how does that influence the number that comes out of the social cost of carbon? Yeah, really good question, very important question. So what the discount rate does is it is a factor, a multiplier that allows us to add up the and sum up the damages from climate change over time. Right. So if we emit a ton of carbon dioxide emissions or some other greenhouse gas this year, that actually persists in the atmosphere for hundreds of years. Okay. And so the damages from that ton emitted now is going to have implications for a long time into the future. It's going to have damages in each of those future years going out to hundreds of years. Okay. So then if we want to add that up so that we can understand the benefits of taking an action now, but has consequences over hundreds of years, the discount rate is what multiplies on to the damages in each year to help us add that up. It's basically another kind of a price. It's a multiplier that allows us to aggregate. Now you might say, well, why don't we just assume they're all the same? Like why don't we treat the damage in the year 2100 the same as the damage today? And there's really two reasons for that. One is that we know from observing human behavior and introspection that people care more about impacts that happen now or in the near term than they do decades from now or centuries from now. That doesn't mean that the future is not important. It's just not as important as near term impacts. So that it's basically it's kind of a fundamental sense of like impatience that things that happen in the near term matter more than things that happen in the long term. So that's one thing. The second thing is increasing income over time. So the thing that we're adding up here is dollars. It's measured in dollars. And the value of a dollar to people depends upon their income level. It depends on their wealth. And so if I'm a wealthy person, the value of an incremental dollar is less to me than if I'm relatively poorer. And so how the size of the economy, how income changes and grows tends to grow over time is another reason why we would tend to put less weight on a dollar of impact in the future than today. And so for those two key reasons is why we place a somewhat lower value on future impacts. It doesn't mean that it's no value. It means it's lower in this present value. And then finally I'll say, but then that doesn't answer the question. So what discount rate do we use? So what I've laid out is the conceptual underpinnings of why we do it. Really important though, what rate we use is that 3% is a 2%. Is it some other number? Because the consequences for the social cost of carbon are very significant. I want to move to the next section with some of this interesting material, but just to follow up, can you just explain what the difference between 2% and 3% means? Not necessarily in the outcome, but just what does that mean practically? Either of you can, I'd be happy to have explain. Yeah, Justin. So Richard has laid out very well the impact of the idea behind discount rates and obviously using a higher discount rate means that you're essentially putting a lower value on those future damages than if you used a lower discount rate. I do want to mention in the context of climate change, there's some really profound implications of the discount rate you choose. So a lot of traditional economic theory is built on fungible items where you can imagine, you have a little more here, you have a little more there as time goes by. But we're talking about the kind of risk to ecosystems, to frankly the livability of the climate in many parts of the world that is less easily distilled into that kind of a commodity that we can create across timeframes. And the kinds of changes and the rate at which we're changing our climate means that we're leaving future generations already much worse of, even now at just a little over a degree Celsius increase in temperature, we're seeing some impacts that are really devastating. So it is important to think for a moment here about not just climate as a commodity and not just the techno economic aspects of what it takes to address climate change, but that this is a deeply moral problem. It is about the kind of future we're going to leave our children and grandchildren. And so I think there are obviously limits to what we can capture in the models and in the number that the social cost of carbon is. It is a very useful metric. And yet, you know, we should always have the bounds of recognizing with some humility where how far economic frames can take us and where we need to bring in broader frames to think about these deep moral and philosophical questions about the kind of climate we want to leave future generations. Right. Just so I'll just quickly add one like a very specific answer to your question then and build slightly on what Rachel said, you know, the difference in kind of the end estimate from using a 2% rate versus a 3% rate, that may sound like both really small numbers, but if you use a 3% rate and you know, hold all the other elements of the analysis the same, you end up with what is currently used as a central value, which is $51 per ton of carbon dioxide. If I instead like, did everything else the same, but just change the discount rate to 2% would be $125 per ton. Okay, so it more than doubles the value placed on reducing greenhouse gas emissions by that very small change in that number. And it has to do basically with the power of compound interest is the simplest way to think about it. The only thing I'll add to what Rachel said, which was absolutely correct is that this is why we also should look not just at the social cost of carbon, which is a present value. It's a single metric that adds all this up. We should also look at the damages at points in time into the future, the undiscounted damages, because particularly when you're dealing with intergenerational impacts that last literally centuries, we should be understanding not just the present value of that, but the impacts on future generations and quantitative analysis can help us there though. Great. Well, this is, I think, a great background to pivot into the second part of this discussion. We heard about the history, dating back to the origin of cost benefit analysis, and as well as some of the challenges. So I think we're in great shape to talk about social cost of carbon in 2021, you know, particularly as environmental justice and equity have risen on the agenda, and also as the science has evolved. And so just to sort of again set the stage a little bit about 2021, Rachel, I don't know, maybe you could start us off just talking a little bit about the science to set that stage. Yeah, so one thing that's very clear is since the Obama-era interagency process first kicked off, we have seen some really sobering signs, both from the National Climate Assessment, the US Federal Agency's National Climate Assessment, that the most recent one of which came out in 2018, as well as from the IPCC, the Intergovernmental Panel on Climate Change, most recent report, the 1.5C report that talked about impacts that would occur globally at 1.5C. And in all cases, what we're starting to see, even for scientists who've studied these issues for decades, it's been starting to see how we're coming up so quickly into this really unprecedented type of climate change already unfolding around us. So that's one very important piece. The science is sobering, there's also much more detail, there's much more spatial detail. And on the environmental justice front, just as in many other aspects of the crises we see, including the COVID-19 crisis and the economic crisis currently being experienced, the climate crisis too is falling disproportionately on communities of color and low income communities here in the US and communities that live on the edge of poverty around the world. And that is because of systemic racism, systemic inequities that are built into our society. And climate is just the latest risk that's coming on top of all that, exacerbating and being exacerbated by those inequities. And so when you think about something like the social cost of carbon, it's a number, it is a number that has a lot built into it, but it's still ultimately a number. And it's not going to be truly representative of how individual communities are experiencing these disproportionate impacts. It is a useful tool to think about societal decisions, but then we also have to really think about policies that are truly just, which would target and prioritize communities that are being exposed to these disproportionate harms. So we've seen the Biden administration come in and hit the ground running from the beginning. So they've, as I think Richard mentioned in his opening remarks, they've re-upped this interagency process. They've set an interim social cost of carbon that reverts to the Obama era one with an adjustment for inflation. So we're at $51 metric down of carbon at 3% discount rate is kind of the approximate rate now. They're going through a process to update the entire science and economics underlying the estimate. And by January 2022, we expect to see an updated number that will continually be updated on a regular basis, hopefully. What we do need to understand though is the moment we're in right now with the gravity of the climate crisis, we're not talking about incremental changing of our energy system and our emissions. We're talking about transformative change. We're talking about things like getting to net zero emissions by mid-century, if not before. Deep cuts in emissions in the near term, at least 50% below 2005 levels by 2030. And how we do it is super important. We can't just be cutting greenhouse gas emissions. We have to be cutting the cumulative burden of air, water, soil pollutants that are falling disproportionately on environmental justice communities. We need to be addressing issues of just trying for cool communities and cool workers as we make this energy. So in this moment, the transformative change we're talking about can't be captured by any single policy or metric. That doesn't mean it's not important. What it does mean is that it has to be accompanied by very deliberate efforts to center justice and equity. And one thing that the Biden administration has said very clearly is they intend to implement what they're calling the Justice 40 Initiative, at least 40% of the benefits of investments flowing to environmental justice communities from all of our policies, including climate policies. So that's the kind of, you know, there's a broader frame here around what the moment calls for. And the moment is calling for really transformative, just and equitable change. The social cost of carbon is an important tool in our toolbox for sure. And I think improvements in it are very, are key. And in this moment, it's so exciting to have an administration that's actually going to center science in how it approaches these issues. That sets the stage very well for this part of the discussion. Richard, I want to come to you. The interagency working group has called to look at a lot of these questions about intergenerational justice, environmental justice, and to evaluate how the social cost of carbon might be adapted to deal with those. Is that workable? What are the modifications that could help with those questions? Yeah, I think that it's, you know, Rachel made a very good point, which is that the social cost of carbon and other greenhouse gases like methane and nitrous oxides, it's a very important metric. And it's an aggregate metric, meaning really what it's capturing is in a small set of numbers impacts globally. Okay, so very important to have that perspective because climate is a global problem and the impacts are pervasive on the planet. The thing is, we also know that local impacts matter a lot. And the more local you go, the more that the things you're measuring and the things you're paying attention to are affecting specific communities. And so we need to couple aggregate metrics like the social cost of carbon with much more specific metrics and analysis and policies that address impacts on particular communities. And the Justice 40 initiative is a great example of the increased attention to that. And that's really building on policies like was passed in the New York Climate Leadership and Community Protection Act, which had a similar stipulation that 40% of the benefits from the actions taken under that act should go to disadvantaged communities. So this raises, this raises not just an important policy challenge, but it raises actually a scientific quantity, an analytical challenge, which is our ability to measure and identify in a clear way the communities that we're directing attention to. So how do we define disadvantaged communities? How do we measure that so that we're sure that the benefits and the actions that we're taking are actually targeted in the right place? So that's one thing. That's a quantitative need there. And the other is, when we do take actions, how do we know who is benefiting from those actions? And not just at a global or a national scale, but at a local scale. So that requires detailed, granular, geographically granular analysis that understands the local impacts of different actions on different, and not just carbon pollution, but even more importantly, local air pollution, water pollution, and so on. That requires methodological advances. And so I think that the challenge to the analytic community, and this is the kind of biological community, it's the air quality modeling community. It's not even primarily, I would say the economic community. We need the tools to do that. And we need to design policies that have the measured impacts that we want. Oh, sorry, go ahead if you're. No, I was, yes. I'll just quickly wrap up, which so I think this is a much broader challenge than the social cost of carbon. I'll just finish up by saying there has been, the good news on the social cost of carbon is there has been an ability to get more specific in terms of climate impacts. Many of the models that have been designed to analyze climate change have been what are called global circulation models. They take up kind of a planetary scale, but they've gotten increasingly good at identifying local impacts. And so we need to downscale our understanding of climate impacts to a more local level. And efforts like the Climate Impacts Lab, which has worked as part of our efforts to implement the NAS recommendations has been effective in that, but it's not just climate impacts, it's also air quality impacts and other local impacts. Just briefly to build on that, the social cost of carbon is going after a very specific set of costs related to the heat trapping emissions, CO2, methane, et cetera. We know that when we burn fossil fuels, we have all these other very harmful pollutants. We're talking about particulate matter, NOx, SOx, mercury, et cetera. And the data show that there is a disproportionate exposure to a range of these pollutants in low income communities and communities of color. And that's why EJ experts, I'm not one, but that's why EJ experts have been calling for very specific targeted policies, not a trickle down kind of approach where you'll deal with climate here and maybe you'll deal with group pollutants as a result, but one that really centers these public health challenges that their communities have been facing. And the one piece, the insight that there too is the cumulative burden of these pollutants. So communities that are seeing burdens from multiple pollutants. And that is important from a climate perspective as well, even in the social cost of carbon frame, what we're running into is compound risks. It's not just that a climate risk and then you estimate its impact. The climate risk is coming like an intensified hurricane coming during COVID-19. So everything is colliding in time and space. Last year, we saw people having to evacuate from the Gulf Coast and other parts of the country in even during this pandemic. We're seeing climate risk themselves collide with air pollution risks. When you think about extreme heat and ozone pollution, for example, or vector-borne diseases. So it is no longer enough to just look at these risks as you can silo. They're really cascading and compounding in ways that are magnifying the risk to people. So I just want to follow up briefly and just ask, it seems like the answer, I mean, given that the task that the interagency working group is supposed to be assessing is whether the social cost of carbon can be updated with these EJ concerns in mind. It seems like the answer might be, well, the social cost of carbon is important, but we have to be thinking about other policies. And it seems like the answer is perhaps, no, to that question. I just want to make sure I want to give one more chance to sort of just pull that out a little more. Well, what I would say is that it is not an adequate metric to be thinking about dealing with the challenges of these long-standing environmental and justice challenges through this one metric. But absolutely improvements to this metric are important because we have not had enough attention on environmental justice in our country at all. And so all of the tools need to be brought to bear. SCC cannot, the social cost of carbon cannot carry this on its own, but if we can have some spatially disaggregated metrics that help us understand how at a more localized level, just like the climate science itself is getting more spatially disaggregated, we need to try to understand what is happening in very specific places, even if it doesn't affect the ultimate social cost of carbon number, which is a much more aggregate metric. It does help us when we do more research and understand this local disaggregation. The other piece I would just say is that if to the extent that the research as it goes forward really does try to explore these issues of thresholds of really tipping points and feedback loops that we just do not want to cross, I think it also tells us it's not enough to work on the margins. We really have to be driving down emissions as quickly as possible everywhere that we can. And I would say that the other final piece is the process so far has been a very academic elite process. And that's just the reality. It's been the whole process of developing it and coming up with the estimate. There's not been a very open and transparent one, has not involved a lot of engagement with communities to bring in those perspectives. And so I think that at the very least as for the updates I've made, it's really important to bring more people into the conversation. And that itself can help improve how we use it, when we don't use it, what else is getting lost as we develop these estimates. And I think there's a lot of intention to go that route. And I think it'll be great to see that happen very quickly. I'll just add to what Rachel's already said that it is possible to do an additional work to get more granular about climate impacts on particular communities and then aggregate that into a social cost regard. So that is feasible, but it is not easy. It has data requirements and it's not just about the economics, it's about downscaling climate itself, which is a major scientific challenge. So I don't want to say there isn't work to be done there and additional thinking, but it's not easy. We need, we're at a stage I would say with kind of agenda setting to be able to do that. I think the more immediate thing, and which I also sense is kind of more immediately important to these communities, is things like local air pollution. It's very immediate consequences of things that, pollutants that are reduced along with CO2 emissions. And so if you looked at things like the Clean Power Plan that was proposed in the Obama administration, about half of the measured benefits from that were from climate benefits and about half were from local air pollution benefits, reducing fine particulate matter. And I think that there's more immediate work that can be done because we already have the models and the data to kind of pay attention to the local impacts of those local air pollutants and other local pollution. So I would say that that's a more immediate place to focus our attention and to understand the implications of policy decisions for global climate and for local environmental impacts. I think it's a more immediate thing that's feasible. Right. Well, let's dive into a little discussion about the discount rate, which we sort of laid the ground for earlier. And I guess my question, my sort of biggest question is how does a policymaker even begin to set it? I mean, given the value judgment when you think about the value of intergenerational justice, how does a policymaker think about that? And I'm happy with either of you to start. I can go ahead. I think about the issue of discounting a lot. So the basic approach in benefit cost analysis is to ground it in empirical evidence. And so is to look to the world we live in to get evidence and measure different attributes of benefits, costs, and how we discount them. And so the regulatory guidance that has been enforced for quite a while now, since about 2003, and is still in force, looks to two different kinds of discount rates, and they're 3% and 7%. So the one that makes sense to focus on for climate change and for social cost of carbon is the 3% number, which as I alluded to earlier, is really measuring how people value consumption, how society values consumption over time. And so what the approach is is to look to observed behavior in society about how society and how individuals make trade-offs over time. And so the 3% number, which was developed back in 2003, was based on looking at low-risk, long-term government bonds, which historically around that time and before that was about 3% per year. Now, if one was to kind of fast forward, if one was to do a similar exercise today, and the Council of Economic Advisers in 2017 did some thinking along those lines, and that has continued in the academic community, the number would be lower. If you look at observed markets for how society, how investors, how consumers are making trade-offs over time, it's a significantly lower number. It's no longer 3%. It's lower than that. And also, if you talk to macroeconomic forecasters and others who focus on things like interest rates, what is it likely to be for the foreseeable future? It's lower than 3%. And so it's an empirically grounded approach that has been used for US policy. It's not that somebody kind of makes up a number divorced from the rest of the reality we live in. So I expect that that empirically-based approach to continue to underpin benefit-cost analysis, I mean, it's the major value of benefit-cost analysis, which is like we're measuring things that we can observe. It's about facts. And so, yeah, I'll leave it that. I may be just to add a little bit to that. So I did speak to sort of the broader frame around the discount rate. It's been interesting, you know, when we think about what it'll take to tackle a climate crisis, a lot of times the conversation turns to a deep transformation in our energy system. So in the power sector, for example, really ramping up government resources of power and building the kind of transmission that'll help integrate that higher levels of renewables, et cetera. So people have talked about using the social costs of carbon in those settings. What would that mean? Well, we're talking about long-lived infrastructure that we need to really shift to low-carbon kinds of infrastructure. And we need to be thinking about really putting value on the carbon attributes of our energy system, not just the electricity delivery attributes and the reliability, the affordability, et cetera, but the carbon attributes. So adding this layer in should ideally inform decisions that will have us switch to more low-carbon electricity. And that's one way, even if we don't get the exact discount rate right, if we put enough of a value on carbon-free electricity, we can really take the momentum that's already underway in the power sector. We're already seeing a pretty historic shift away from coal and kind of accelerate that momentum. So this is a case where, frankly, social costs of carbon on the order of $50 to $100 could drive a huge shift. It may not even be the exact right number for all the reasons Richard and I described that number is complicated to calculate. But is it a market signal that can push the system? And it could be. But let's also remember that our solutions to this climate crisis need to be broader than just shifts in market incentives because we're really talking about transformative change, really huge changes that are budding up against entrenched interests. People who are currently earning profits of fossil fuels or fossil fuel-based energy system feel no reason to get out of the way and enable this transition. So there are lots of aspects that we have to get at and just market-based incentives are not going to be enough. We have to understand that changing systems, systemic change, requires really intentional policies to shift power, shift money, and really shift even the misinformation and disinformation that is then out there related to climate change, really shift the politics around an issue that should not be partisan but has become so. So the social cost of carbon is a humble tool and this toolbox is an important one. But we need to keep our eye on the price, the big picture here, and not lose sight of the fact that we're going to need to do all of these other things as well. Right. Go ahead, sorry. No, well, I'll add to that that the social cost of carbon and other metrics that measure the benefits of reducing environmental harms are ingredients in decision analysis. They're meant to help inform policy decisions. They don't themselves make policy decisions. We still need to decide what would be the form of a tailpipe standard for automobiles. How do we decarbonize the power sector? Do we do that through some kind of a cap and trade system or a carbon tax or a clean electricity standard or some other policy? We still have that decision. What the social cost of carbon is helping us do is it's helping us measure the benefits and costs of those actions, right? But it alone doesn't tell us necessarily the type of actions to take. So I agree with that. It's a very important decision tool, but it itself is not a policy. Right. Right. Well, I think the tool in the toolbox phrasing makes a lot of sense. I want to just in the last few minutes we have here talk a bit about some of the novel applications or applications outside of the federal government. And I guess maybe seeing as we have somewhat limited time, I just invite you both to talk about areas that you find most relevant and interesting in that regard. I could throw out a couple of quick ones. It has been used and I think will be important to use in familiar types of regulations like tailpipe standards for automobiles, like regulations on the power sector, but then there are some additional areas where there's already been conversation. So one is, for example, federal oil and gas leasing. So we've done work at resources to the future to explore the notion of what if federal oil and gas leasing, if the royalty structure for that incorporated the social cost of greenhouse gases in that royalty structure, what would be the implications for oil and gas production in the United States, what would be the implications for government revenues being raised, what would be the implications for reducing greenhouse gas emissions. That's a newer example that has not been done. It was talked about in the Obama administration in the context of coal leasing program, but now relevant as we reconsider the royalty structure for oil and gas. I'll just give one other example, which is government procurement. So there's a lot of interest in government procurement, particularly in the American Jobs Plan, the need to particularly move forward innovative approaches to decarbonization, things like you may think of like green cement or green steel or other technologies that need some demand pull innovation. How do you incorporate that value into government procurement decisions? And so that's another area where actually the executive order that we alluded to earlier has asked the interjections, we're going to kind of think about applications of the social cost of carbon, maybe beyond what it has been used for in the past. It is very quickly to add to that. I think if the Biden administration process moves forward, we're going to see a much higher number come January 2022. And it's sending a signal to the economic and financial system, the global economic and financial system, that this is a risk that needs to be fundamentally taken into account in business decisions. This is a risk that should materially affect how they see their supply chains, their exposure to risk. And there are also efforts underway, both Treasury Secretary Yellen and others have been talking about climate risk disclosure in the marketplace more broadly. So what we're coming up against now is I think a very interesting dynamic where climate change is finally, finally being talked about as an economic and financial risk. Yes, it's a risk to future generations. It's a deep equity issue. It's affecting ecosystems. It's an environmental problem, a public health problem. And guess what? It's an economic problem. And so having metrics like this out there, having them be part of the decision-making frameworks and how people think about solutions, not just the problem but the solutions and how they can be part of it is crucial. Well, with that, I'm just going to invite you both just to end with a final takeaway. Anything that you think the audience should leave this conversation where we've covered really a lot of ground and we probably could have talked for another hour, but just anything that is a final takeaway for the audience. I guess what I would say is climate change is already here. It's already exacting a devastating toll on people and our planet. And we have choices. Our choices are deeply consequential. So using every tool in our toolbox to act across the economy to cut our emissions as quickly and deeply as possible, that's the imperative of the day. We do have choices and our choices will be very consequential for our children and grandchildren. I would just say that specifically on the social cost of greenhouse gases, any reasonable estimate of the social cost of greenhouse gases is significantly higher than the level of effort we are currently putting into as a society in terms of what we've been willing to spend to address it, significantly higher. And so there's a lot of complexities to this, but any social cost of carbon or other greenhouse gases, whether it's $50 per ton or $100 per ton or even $25 per ton, we are not taking that level of action right now. And so the economic benefits of addressing this very, very, very substantially exceed the cost of doing so. And so it warrants a much more significant policy action than we've taken to date. Well, thank you to you both. Very interesting discussion. With that, I'm going to hand back to Alex, but just a fantastic conversation. Thanks, Justin. Well, thank you, Justin. And thank you again to all of you for joining us for the third climate conversations from the National Academies of Science, Engineering and Medicine. I want to thank Rachel and Richard for sharing your extensive expertise and a special thanks, Justin, for your thoughtful moderation. The conversation was recorded and should be available for viewing on this same webpage starting tomorrow. And again, there should be a link above to join us for our next month's climate conversation, which you can access by going to solargeoengineering.eventbrite.com. At the event, we'll talk about the possible risks and benefits of solar geoengineering as a potential part of the toolkit we've discussed of responses to climate change. Again, that's solargeoengineering.eventbrite.com and the event will take place May 20th. I also invite you to join us for the April 26th to 28th Nobel Prize Summit, where you can join Nobel Prize Laureates, scientists, policymakers, business leaders and youth leaders to explore the question, what can be achieved in this decade to put the world on a path to a more sustainable, more prosperous future for all of humanity? We'll also share this information through our climate at the National Academies newsletter, which you can also sign up for above. As a final reminder to share your feedback on today's event or your ideas for future events, please see the survey link also above. Thanks to all of you for joining us today. And again, thanks to Justin, Rachel and Richard for sharing your background and expertise with us. Lastly, thank you to the Climate Communications team at the National Academies and to everyone behind the scenes who supported today's event. We're excited to continue this conversation through future events like this. Stay safe and have a great day. Thank you. Thank you.