What is the social cost of carbon?

The US EPA social cost of carbon (SCC) is approximately $51/tonne CO₂ (2021 estimate) and $190/tonne (2023 revised estimate reflecting higher climate damages). The SCC is used to calculate the optimal Pigouvian carbon tax and to evaluate federal regulations.

Why is a carbon tax considered more efficient than cap-and-trade?

A carbon tax provides price certainty (helps investment decisions) but quantity uncertainty. Cap-and-trade provides quantity certainty (hits emissions targets) but price uncertainty. Theory predicts efficiency equivalence; practice favours cap-and-trade for binding emission targets.

Pigouvian Optimal Tax = Marginal External Cost Calculator

Calculate the theoretically optimal Pigouvian tax level equal to the marginal external cost (MEC) of a negative externality (pollution, carbon, congestion). Internalises the social cost of market failures.

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⚖ For informational purposes only. Not legal advice. Consult a licensed attorney for your specific situation.

How to Use

Enter the values for the scenario you are assessing. Calculate the theoretically optimal Pigouvian tax level equal to the marginal external cost (MEC) of a negative externality (pollution, carbon, congestion). Internalises the social cost of market failures. Use the pigouvian tax result to inform your calculation.

Pigouvian Optimal Tax = Marginal External Cost Calculator

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How to Use

Frequently Asked Questions

What is the social cost of carbon?

Why is a carbon tax considered more efficient than cap-and-trade?