Social Cost of Carbon in Environmental Impact Assessment

Abstract

While the social cost of carbon (SCC) has played a prominent role in regulatory decision-making in recent years, use in the environmental impact assessment (EIA) realm has been minimal. This article explores potential roles for SCC in EIA. Using Canada’s proposed new federal impact assessment (IA) regime as a basis, the analysis examines how a jurisdiction could employ SCC to integrate climate change considerations into project-level assessment and decision-making. Potential roles are first discussed in relation to the broad purposes of IA, before focusing on key assessment factors such as consideration of economic costs and benefits, cumulative effects, climate change commitments and sustainability. Notwithstanding important SCC critiques and limitations, this article identifies several ways in which SCC could be incorporated into IA, finding a particularly strong fit where an assessment deals with a project’s economic costs and benefits. Additionally, as a metric that links project emissions to climate change damages, as opposed to project impacts on emission reduction targets, SCC could be used to complement more traditional carbon emission calculations. This article is the first to provide detailed consideration of the potential roles of SCC in IA in Canada. The analysis has broad international relevance as jurisdictions work to put in place policies and tools -- including carbon pricing mechanisms -- to achieve commitments under the Paris Agreement.

Keywords: Social Cost of Carbon, Environmental Impact Assessment, Environmental Law, Climate Change, Cost-Benefit Analysis, Climate Change Mitigation, Impact Assessment

JEL Classification: K23, K32