Understanding the Social Costs of Methane Emissions
Federal agencies have been quantifying the social costs of greenhouse gases, including methane (CH4), since 2008. The social cost of methane (SCM) estimates the present value of future damages from one metric ton of methane emissions, reflecting impacts on agricultural productivity, energy use, human health, and more. IAMs help in assessing these damages and discounting them back to the present, with sensitivity to discount rates.
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The Social Cost of Methane EMILY WIMBERGER CHIEF ECONOMIST CALIFORNIA AIR RESOURCES BOARD 1 CALIFORNIA AIR RESOURCES BOARD
Social Cost of Greenhouse Gases Since 2008, federal agencies have been incorporating the social cost of GHGs including carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) into regulatory impact assessment U.S. EPA Department of Transportation Department of Energy In 2009, the Interagency Working Group (IWG) was convened to develop a methodology for estimating the social cost of carbon (SCC) Standardized assumptions Based on estimates from three Integrated Assessment Models (IAMs) 2 CALIFORNIA AIR RESOURCES BOARD
Social Cost of Methane The social cost of methane (SCM) for a given year is an estimate, in dollars, of the present discounted value of future damage caused by a one metric ton increase in CH4 emissions into the atmosphere in that year, or equivalently, the benefits of reducing CH4 emissions by the same amount in that year. Provides a comprehensive measure of the net damages the monetized value of net impacts from global climate change that result from an additional ton of CH4 Damages include Changes in net agricultural productivity Energy use Human health Property damage from increased flood risk Water availability Costal communities Biodiversity 3 CALIFORNIA AIR RESOURCES BOARD
SCM Details IAMs estimate the environmental damages from a given year in the future and discount the value of the damages back to the present Increases over time as systems become stressed Highly sensitive to discount rates The value placed on future environmental damages Higher rate discounts the value placed on future damages IWG standardized range from 2.5% to 5% 4 CALIFORNIA AIR RESOURCES BOARD
Social Cost of Methane (2007$ per tonne) Year 5% Discount Rate 3% Discount Rate 2.5% Discount Rate 2015 $450 $1000 $1400 2020 $540 $1200 $1600 2025 $650 $1400 $1800 2030 $760 $1600 $2000 5 CALIFORNIA AIR RESOURCES BOARD
Social Cost of Carbon (2007$ per tonne) Year 5% Discount Rate 3% Discount Rate 2.5% Discount Rate 2015 $11 $36 $56 2020 $12 $42 $62 2025 $14 $46 $68 2030 $16 $50 $73 6 CALIFORNIA AIR RESOURCES BOARD
AB 197 Consider the social costs of the emissions of greenhouse gases Consider the cost-effectiveness, including avoided social costs, of measures in the Scoping Plan Defines social costs as an estimate of the economic damages, including but not limited to, changes in net agricultural productivity; impacts to public health; climate adaptation impacts, such as property damages from increased flood risk; and changes in energy system costs, per metric ton of greenhouse gas emissions per year 7 CALIFORNIA AIR RESOURCES BOARD
Federal Action on Social Costs Withdrew reports related to social cost of greenhouse gases Revised estimates of the social cost of greenhouse gases Federal valuation Discount rates California will rely on IWG social cost values In line with best available science National Academies recommendations Estimates are most robust, reliable, and appropriate 8 CALIFORNIA AIR RESOURCES BOARD
