If the opposition between environmental experts and the Trump Administration seems in many respects to have been the result of misrepresentations of the latter regarding the environment, President Trump’s argument could well prevail. While reducing greenhouse gases emissions has certain benefits in terms of preventing significant consequences for public health, the economy, or ecosystems, it remains difficult to measure them in monetary terms.

From what cost is a policy considered socially undesirable? Conversely, below what threshold is it considered desirable? What is the value of clean air? of the oceans? the environment of future generations? Of life? To protect the environment, and the citizens who depend on it, different governments around the world seem relatively willing to make considerable investments. A question then arises, when it comes to considering the implementation of concrete policies: how far? The economic tool known as the Social Cost of Carbon (SCC), within the framework of a cost-benefit analysis (CBA), seems able to answer it. More than wanting to assign a value to what is priceless, this tool aims to be the economic translation of the value of a resource, in a world where they remain limited and where all benefits cannot coexist. However, the recent fluctuations in its value under successive U.S. administrations reveal both its undeniable usefulness and its significant limitations.

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Foundations of Cost-Benefit Analysis in Environmental Policy

Definition and purpose of CBA

Cost-benefit analysis (CBA) is a fundamental element of modern economic policymaking. It seeks to compare the anticipated benefits of a public policy with its costs. It provides a useful decision-making framework for the efficient allocation of scarce resources by translating complex trade-offs into a common monetary measure. In the United States, its use was institutionalized under President Reagan (Executive Order 12291), which made CBA a prerequisite for any federal regulatory decision.

The maximization of social welfare is the main objective of CBA, through the optimal use of public funds. To this end, transparency and accountability are essential to the process, especially given the high stakes of evaluation, and are ensured by the possibility for public comments to be integrated into regulatory deliberations, so that decisions are not solely technocratic but also reflect concerns rooted in society. A classic example of the success of this method is the gradual elimination of leaded gasoline, as a rigorous cost-benefit analysis was able to demonstrate substantial advantages of such a policy, both for health and for the economy.

The range of costs taken into account in the analysis is broad. They range from direct costs (public spending, compliance costs for industries) to indirect costs (productivity losses, ecosystem degradation). However, cost-benefit analysis goes beyond simple market transactions by including non-market values, as well as “negative externalities” (a concept formalized by Pigou, 1912). The latter refer to damages generated by economic activities that are not reflected in market prices. In this respect, the example of pollution is telling: greenhouse gas emissions result in concrete societal costs but, in the absence of corrective measures, remain unpriced. This intellectual foundation laid the groundwork for modern carbon pricing policies.

The Social Cost of Carbon

The social cost of carbon (SCC) plays an essential role in this sense. It corresponds to the estimation of the economic damages resulting from the emission of one additional ton of CO₂. These damages cover many impacts, from agricultural losses to public health costs, infrastructure damage, and decreased labor productivity.

The calculation of the SCC relies on so-called integrated assessment models (IAMs) — the most widespread being DICE, FUND, and PAGE. These models operate according to the following causal chain:
emissions → atmospheric concentration → climate change → physical impacts → monetization.

The SCC is far from being a mere theoretical construct; it is a practical tool for policymaking. By quantifying climate-related damages, the SCC provides policymakers with a demonstration of whether the benefits of a regulation outweigh its costs.

Normative underpinnings and ethical debates

Although the SCC is based on economic modeling, its formulation is profoundly normative. It thus deeply reflects an administration’s ethical choices regarding the valuation of future generations and non-market goods. In this sense, the most determining factor for the SCC is the discount rate. In other words, it is the rate at which future costs and benefits are converted into present values. Ultimately, the discount rate answers the question: to what extent should today’s society prioritize the well-being of those who will inherit the planet decades or even centuries from now?

While economic modeling is relatively recent, this debate is far older. The philosopher Frank Ramsey (1928) urged against arbitrary devaluation of future lives, positioning himself as a safeguard against a form of intergenerational injustice. While its exact value is debated, the decline of discount rates over time, as a reflection of uncertainty about the future and the moral imperative to avoid disproportionately privileging the present, is now widely recognized among economists.

If intergenerational equity is a point raised by the SCC, it also raises complex questions related to the monetization of non-market goods. Indeed, it appears to assign a monetary value to human lives, ecosystems, or cultural heritage, which can seem reductive, even offensive. However, such evaluations are instead necessary to integrate these elements into economic models and policymaking. This is why the economic justification for public health interventions often relies on assigning a monetary value to the statistical lives they help save.

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Politicization of Cost-Benefit Analysis: The U.S. Experience

The Obama administration (2009-2017): Institutionalizing the SCC

Under President Obama, the SCC was set at around 43 dollars per ton of CO₂. This figure reflected two key methodological choices:

• A global perspective, which takes into account damages caused to the entire planet;
• A relatively low discount rate of 3%, reflecting a commitment to intergenerational equity by more heavily valuing future damages.

For consistency, the Obama administration established an interagency working group (IWG) composed of experts from several federal agencies, including the EPA, the Department of Energy, and the Council of Economic Advisers. This group harmonized methodologies and assumptions and produced a unified SCC that applied to all regulatory contexts.

The SCC quickly became a central element of major environmental policies. The Clean Power Plan (2015) is a notable example. It aimed to reduce power plant emissions by 32% by 2030 compared to 2005 levels. The cost-benefit analysis underpinning this rule estimated annual costs at 8.4 billion dollars. The projected benefits, mainly related to improved public health and avoided climate damages, ranged between 34 and 54 billion dollars per year.

Beyond climate policies, the SCC supported a broader regulatory program, including stricter air quality standards and the Waters of the United States (WOTUS) rule, which extended federal protections to wetlands and waterways. These measures demonstrated the SCC’s growing role as a regulatory pillar, at the crossroads of environmental science and economic justification.

The Trump Administrations (2017-2021 ; 2025-today): Deregulation and the Devaluation of the SCC

The transition to the Trump administration in 2016 marked a radical reversal. The SCC dropped to a range between 3 and 7 dollars per ton, significantly undermining the economic justification for strict environmental regulation. This drastic reduction was motivated by three deliberate methodological changes:

1. Limiting damages to domestic impacts, excluding the vast majority of global consequences of U.S. emissions;
2. Raising the discount rate to 7% (which strongly devalues future damages);
3. Minimizing assumptions about climate damages, thereby downplaying projected risks and costs.

This first devaluation echoes the one underway since January 2025, marked by the abandonment of the SCC. With this modified/abandoned SCC, many regulations were/are reclassified as economically unjustifiable, providing the legal and economic basis for a vast deregulation program, including:

• The repeal of the Clean Power Plan, replaced by a much looser rule;
• The relaxation of pollution standards for power plants and industrial facilities;
• The revision of cost-benefit analyses to assign zero value to certain environmental benefits, such as wetland preservation.

While the SCC’s limitations are real, they were instrumentalized by the Trump administration to justify abandoning environmental policies. However, a crucial distinction remains: the fact that the social cost of carbon may prove irrelevant for conducting climate policies does not suffice to disqualify the necessity of climate policies. In this logic, the SCC’s devaluation was accompanied by wrong/misleading statements, as seen in the Department of Energy report (2025), claiming that CO₂-induced warming “seems less economically damaging than commonly assumed” and that U.S. actions would have “undetectable direct impacts on global climate.” Zeldin’s EPA also challenged certain cost estimates of regulations without accounting for the benefits of avoided emissions.

These profound changes are not without consequences. For example, businesses face prolonged regulatory uncertainty, making long-term investments in clean technologies riskier. Additionally, the EPA’s scientific role was drastically reduced, with political appointments prevailing over expert assessments. These periods highlight how cost-benefit analysis, far from being a neutral tool, can be instrumentalized to justify ideological goals.‍

The Biden Administration (2021-2025): Restoration and Recalibration

Following Donald Trump’s first term, President Biden’s administration followed in Obama’s footsteps by reinstating the global approach and a 3% discount rate. This resulted in an inflation-adjusted SCC of 51 dollars per ton (2021). The interagency group was also reinstated to ensure methodological rigor and consistency across agencies.

The recalibrated SCC laid the economic groundwork for a wave of new policies largely favoring incentive-based measures over punitive ones. Rather than relying on carbon taxes or strict mandates, the administration favored:

• subsidies for renewable energy deployment;
• investments in R&D for green technologies, especially hydrogen and energy storage;
• tax credits for electric vehicle purchases;
• support for carbon capture and sequestration projects.

These initiatives were consolidated within major legislative programs, such as the Inflation Reduction Act (2022), one of the largest federal investments in U.S. history in combating climate change.

While Biden’s approach marked a return to Obama-era methodologies, it also reflected a strategic shift. By prioritizing the “carrot” rather than the “stick” (Goulder), the administration sought to build political coalitions and avoid the backlash that had plagued previous direct regulatory attempts. However, this raised questions about the durability of these policies amid future political changes.

The evolution of the SCC across these four administrations highlights the deeply political nature of environmental economics applications. An apparently unique, technical, and objective indicator became a battleground of ideological struggles. This dynamic points to a broader truth: cost-benefit analysis does not merely describe the world; it also helps construct the regulatory landscape itself.

In this sense, as long as key assumptions, such as the discount rate or geographic scope, remain politically contested and contestable, environmental policy will remain vulnerable to U.S. electoral fluctuations.

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Lessons and Broader Implications

‍Cost-benefit analysis as a political battleground

Cost-benefit analysis (CBA), notably through the use of the social cost of carbon (SCC), is often presented as a neutral and rational framework for policymaking. In theory, it appears to offer an objective way to weigh the benefits and costs of competing policies. In practice, however, it has proven deeply influenced by values, reflecting societal priorities, ethical judgments, and the ideological orientations of leaders.

The dramatic fluctuations of the SCC over the past decade, within a range of about $50, perfectly illustrate this point. These extreme variations are not the result of new scientific discoveries but rather opposing political philosophies regarding the importance given to future generations, global impacts, and public health co-benefits. Under the Trump administration, for example, co-benefits related to improved air quality are deliberately excluded from analyses, rendering them invisible in regulatory debates.

This politicization has, consequently, fueled legal battles over the role of the Environmental Protection Agency (EPA) and federal regulatory authority. A landmark example is the Massachusetts v. EPA case (2007), in which the Supreme Court ruled that greenhouse gases were considered pollutants under the Clean Air Act, obligating the EPA to regulate them. Since then, litigation has become commonplace in U.S. climate policy, with courts acting as arbiters between divergent economic models and competing visions of the public good.

Implications for future U.S. environmental policy

Thus, the recent history of U.S. environmental regulation reveals a troubling trend of regulatory instability. Each political turnover triggered a radical reversal of policies, generating what McGartland (2021) calls “yo-yo regulation”: this constant back-and-forth creates significant uncertainty for businesses and investors, who must adapt to shifting rules and incentives. It also affects the credibility of U.S. climate commitments, both nationally and internationally.

Addressing this challenge requires more than technical solutions: it implies institutional reforms. In this sense, two priorities seem to emerge:

• The establishment of stable, science-based standards that cannot be easily overturned by a change of administration;
• The depoliticization of CBA methodology, notably through the standardization of key assumptions such as the discount rate and the scope of damages considered.

Without these safeguards, the SCC will remain vulnerable to political manipulation, and environmental policy will continue to oscillate, undermining long-term planning and investments (especially as these oscillations dangerously align loyalty to the party with environmental positions).

International lessons

The stakes of this debate go well beyond U.S. borders. Due to the United States’ historical role as a global regulatory leader, its approach to the SCC has shaped international practices. Many countries have followed the American example by integrating similar cost-benefit frameworks into their climate policies. However, this influence carries risks: a biased methodology, for instance one excluding global damages, can be exported, reproducing distortions on a global scale.

Therefore, it explains why harmonizing methodologies at the international level is essential. Indeed, the risk of a fragmented system where each country calculates costs and benefits based on its own assumptions is that it could lead to incoherent climate policies and compromise collective action. The European Union’s Emissions Trading System (ETS) offers a promising model in this regard, as it integrates carbon costs into market mechanisms while ensuring coordination among member states. Similarly, the United Kingdom’s approach is closely aligned with SCC principles, demonstrating the potential feasibility of cross-border methodological convergence.

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Conclusion

The trajectory of the SCC over the past decade speaks volumes about the intersections between economics, politics, and ethics. While cost-benefit analysis is a tool designed to rationalize decision-making, it has become both a battlefield for and a product of competing visions of the future, rather than the other way around. The stakes surrounding this tool are growing as climate change accelerates.

To move beyond the volatility of recent years, policies must confront a fundamental question: should environmental governance be guided by short-term political considerations or by a set of stable, transparent, and globally coherent principles? The answer to this seemingly simple question will determine not only the credibility of U.S. climate policies but also the chances of effective global cooperation in the face of the climate crisis.