One of President Donald Trump’s most damaging strikes at the foundation of U.S. climate policy is buried deep in a sweeping Inauguration Day executive order focused on “Unleashing American Energy.” Half way through the lengthy document is a directive that would obliterate an obscure but critically important calculation the government uses to gauge the real-world costs that climate change is imposing on the U.S. economy.
Getting rid of the measure, called the “social cost of carbon,” would upend energy and environmental regulations meant to address climate change and could have the long-term effect of shifting costs from polluting industries directly onto Americans as the expenses of climate change rise.
The measure essentially establishes a price for each ton of carbon emitted, based on the long-term damages it is expected to cause in the future. It has become the government’s primary tool to weigh the economic costs of climate change — such as disaster cleanup or health impacts from warming — against the burden of regulations.
The executive order disbanded the working group, which included the treasury secretary, energy secretary and director of national economic policy, that set the social cost of carbon and advised how it should be implemented. It revoked that group’s previous decisions. And it directed the Environmental Protection Agency, which calculates the figure and bases regulatory proposals on it, to reconsider using the social cost of carbon altogether with the goal of eradicating “abuse” that stands in the way of affordable energy production.
The order stems directly from language in the Heritage Foundation’s Project 2025 policy playbook and is based on work by the conservative think tank, which has consistently opposed climate policy and worked to defend the businesses of fossil fuel industries.
As climate change takes hold — the earth has already warmed more than half the total amount scientists project will cause catastrophic destabilization — the size and frequency of billion-dollar disasters has exploded, and the bills for climate damages have begun to affect people’s lives. Economists warn that it could be the steep financial price of adapting to this rapid shift, as much as environmental change itself, that will prove the most challenging and destabilizing.
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If carried out, the shift away from using the social cost of carbon measure would not only make it exceedingly difficult to enact new rules slowing climate change and its growing costs in the future, but it would send the signal that the Trump administration doesn’t believe that climate change carries economic consequences.
The move shows “that we’re abandoning any idea that climate change is a problem,” said Marshall Burke, a climate economics researcher at Stanford University.
The White House did not respond to a request for comment. An EPA spokesperson said the agency was working “diligently” to implement what Trump has asked for.
The social cost of carbon calculation — during the Biden administration CO2 was priced at about $190 per ton — is based on a scientifically rigorous set of models that take into account everything from projected warming to the expense of cleaning up after disasters. By putting a dollar value on emissions — and on the savings of reducing those emissions — government agencies are able to compare the costs against the benefits of regulations, as is required by law.
The concept of pricing carbon earned Yale economist William Nordhaus a Nobel Prize, and the approach has been upheld in federal court. It is an integral factor in creating, among other things, fuel economy standards, in setting EnergyStar requirements for appliances and for regulating the amount of pollution allowed to flow from utilities’ smokestacks.
The Heritage Foundation and the Project 2025 authors dispute the validity of the carbon price point, despite the broad scientific consensus supporting the methodology, on technical grounds. They argue that the computer modeling behind it is so flawed as to be easily manipulated by policymakers seeking to justify their desired outcomes. They say that the Biden administration cherry-picked how it reported results in order to produce the highest price possible. They also contend that the long-term economic toll of climate change is modest and will likely be outpaced by growth, warranting, in economic terms, a “discount” on the present value of future damages that emissions would cause, effectively nullifying the social cost of carbon.
Having no social cost of carbon measure in essence asserts that there is no detrimental cost that comes with a warming planet, and that ultimately lowers the burden — or increases profits — for drillers like Exxon, Chevron and Shell as well as the auto industry, the plastics industry, the chemical industries and utilities that generate power.
“All forms of energy should be able to compete on a level playing field, and the best one should win,” said Kevin Dayaratna, the Heritage Foundation’s chief statistician and the acting director of its Center for Data Analysis. “Fundamentally, the regulations being pursued come with significant economic costs to society.”
Ultimately, according to a Jan. 24 Heritage Foundation report, the think tank would like to see Congress “prohibit — by statute — the use of the social cost of carbon in policymaking,” so that no future administration has the option to use it again.
Canceling the measurement of economic impacts from climate change, though, doesn’t make those costs — estimated, using researchers’ projections, to be worth nearly $2 trillion for the U.S. economy this decade — go away. Instead, it will likely have the effect of levying them directly onto citizens, who will see their expenses for everything from housing to food rise higher and faster than they otherwise would.
A report published last month by First Street, a commercial research firm that studies climate threats to housing, found that climate-driven disasters have already spurred rate hikes in homeowners insurance. Over the next 30 years, the report projects, they may double or even quadruple in Florida and other parts of the country especially at risk for disasters, making insurance one of the most expensive aspects of owning a home.
Meanwhile many people are paying more for electricity to run air conditioning to cope with extreme heat. The Rhodium Group, a climate and economic research firm, projects that demand for power could increase as much as 9% on average nationwide within the next 15 years, due to warming alone, and that by later this century people will be paying as much as 20% more for their power than they would if the climate were not warming, especially in parts of Texas and the South.
Extreme heat and humidity are also making it more difficult to work, cutting into both household incomes and company profits as temperatures limit both the number of hours people can labor outdoors and the efficiency of the work they do. An economic study published in the journal Science projects a decline in labor supply as rising temperatures impact worker productivity across parts of the southern United States.
All the while, higher temperatures have already cut into the productivity of farming in the U.S., according to a 2021 study in the journal Nature Climate Change, and crop yields are widely forecast to decrease as temperatures get hotter, cutting into farmers’ livelihoods. Local taxes across the country are expected to rise, as municipalities stretch to raise money for infrastructure projects — from water treatment plants to bridges — that the climate crisis is making necessary.
Collectively, these costs are creating a significant, systemic drag on the U.S. economy. In some of the Gulf Coast counties most vulnerable to hurricanes, according to the Science study and research led by Solomon Hsiang, who heads the Global Policy Laboratory at Stanford University, that drag could amount to as much as a 60% reduction in the growth of the gross domestic product, promising a permanent stagnation of the local economy. Nationally, researchers estimate, climate change is already costing the equivalent of about 1.2% of U.S. GDP per degree of recent warming — which equates to roughly $200 billion each year now and is on pace to rise to more than $1 trillion annually within the next several decades.
These costs touch people already worried about inflation and home affordability, and they stem directly from generations of carbon pollution from fossil fuel consumption that has powered industrial advancement and the growth of the United States’ modern economy. There have been countless and immense benefits to this industrialization. But until the social cost of carbon calculation came along, those costs had been difficult to quantify and had been shifted onto society instead of the balance sheets of the oil and coal companies primarily responsible for them.
Utilizing the social cost of carbon, which began in earnest with the Obama administration in 2009 and was maintained — though minimized — by the first Trump administration, effectively did two things: It reflected some of those expenses back onto the industries that cause them by asking them to pay the expense of complying with regulations that would lower future emissions. And it discounted some of the new costs of climate change to consumers by making the products they use more efficient and thus cheaper to operate. The social cost of carbon calculations have made it possible for Americans to drive cars that go farther for each dollar of gasoline pumped into them or to use refrigerators and light bulbs that gulp fewer kilowatt hours of electricity. Regulators can justify the imposition of those rules because they can quantify the trade-offs.
By eliminating the consideration of carbon’s costs, the Trump administration not only stands to eliminate the consumer benefits, but it will also allow carbon emissions to grow unabated, intensifying the very increases in global temperature that are driving the broader economic damages and hardship in the first place.
Climate scientists and economists say it is fair to question whether the $190 per ton carbon price tag arrived at by the Biden administration — compared with $42 under the Obama administration or the $7 that the Trump administration set during its first term — is too high. There are valid reasons to debate some of the assumptions fed into the EPA’s models and the seeming precision that results from them. But they warn that just because there are a range of calculable outcomes does not make the premise false. Uncertainty is a feature, not a bug, in trying to understand the historic and unprecedented change unfolding on the planet.
But it is implausible to argue that there is no cost at all, Burke, the Stanford researcher, said. That is what the Trump administration and Heritage Foundation appear to be after. The foundation has centered its opposition on the wonky economic process of measuring how much climate damages that are realized decades from now should be worth today. They argue that so long as economic growth continues, there is little reason to pay a premium through regulations now — which the social cost of carbon justifies. So, they seek to discount the metric dramatically, perhaps all the way to zero.
This sounds arcane but is decisive. “Calling for a high discount rate is basically saying that we should give virtually no weight to our grandchildren and successive generations,” said Max Sarinsky, the regulatory policy director at the Institute for Policy Integrity, a nonpartisan think tank associated with New York University’s School of Law. “It’s saying we should be willing to spend very little now to make life better in the future.”
