Executive Summary 

• President Trump signed an executive order (EO) on his first day back in office entitled “Unleashing American Energy,” which removes Biden-era barriers to federal land leasing for energy production as a method of expanding U.S. energy production. 
• A significant change imposed by the order includes the Environmental Protection Agency’s mandated reassessment of a metric quantifying environmental damage, the Social Cost of Carbon, deemed logically deficient within Section 6(c) of the EO.  
• By questioning the scientific integrity of the Social Cost of Carbon by mandating new EPA guidance on the subject, the White House is inefficiently readjusting quantitative estimates that justify stricter environmental policy. 

Introduction 

On January 20, 2025, President Donald Trump signed Executive Order (EO) 14154, titled “Unleashing American Energy,” which restored the process of federal land and water leasing for oil and natural gas production. The order promises these changes will encourage energy exploration while further establishing American dominance in the energy production market, decreasing an already marginal reliance on foreign sources. The rule additionally eliminates the “electric vehicle (EV) mandate” and 12 Biden-era executive orders concerning climate change. 

A substantial change introduced by the EO instructs the Administrator of the Environmental Protection Agency (EPA) to issue new guidance on the Social Cost of Carbon (SCC), which generally measures environmental damages to the economy. The guidance, due by March under the EO, is expected to alter the calculation method or eliminate the SCC from regulatory decisions altogether. This discussion assesses historical changes to this aspect of cost-benefit analysis and future implications of politicizing this metric. 

Background 

The Social Cost of Carbon is a metric developed under the Reagan Administration that quantifies, in dollar terms, the damages caused by emitting one additional unit of carbon dioxide into the atmosphere. The estimation uses a cost-benefit Integrated Assessment Model (IAM) that captures the changes, from agriculture to sea level, resulting from increases in global temperatures. The model includes a discount rate to account for future damages. Stanford Economist Lawrence Goulder explains, “researchers first simulate what the path of climate change would be in the absence of a policy change… then augment the model to record how much damage and climate change increases as a result of an extra ton of emissions. The difference in damage is the social cost of carbon.” 

Because of subjective elements included in the methods of estimation, namely dollarizing health impacts and varying temperature changes, administrations have successfully increased and decreased reliance on this metric in efforts to justify their corresponding environmental policies. For instance, the Obama and Biden Administrations calculated the SCC with a model that included global ramifications of CO₂ emissions, generating higher cost predictions, while the first Trump Administration changed estimates to focus only on domestic damages—generating significantly lower ones.  

Prior to this EO, the SCC has been used by agencies including the Environmental Protection Agency, Department of Energy, and Department of Transportation to determine whether new regulations produced net benefits. The second Trump Administration’s reservations about the metric pose the question: How will government agencies meet the requirement to account for the costs and benefits of changes in greenhouse gas emissions in its economic analyses going forward? 

Social Cost of Carbon: Political Swings 

The Social Cost of Carbon was formally implemented as a reliable metric for U.S. agencies in 2008, when the Center for Biological Diversity sued the government over new fuel economy standards, which were ruled to have not included an appropriately robust cost-benefit analysis of greenhouse gas emissions. Following the court’s decision, the OMB created the Interagency Working Group on the Social Cost of Carbon in 2009 to standardize cost estimates using the now-debated IAM. Under the Obama Administration, the Social Cost of Carbon was estimated to be $43 per ton. 

During the administration change in 2017, Trump’s EO 13783 eliminated the OMB’s established Working Group. Government agencies regained the ability to individually calculate SCC estimates using similar methodology, however modifying the model to account only for domestic damages and raising discount rates to account for fewer future damages of emissions. Thus, the first Trump Administration’s Social Cost of Carbon estimates hovered between $3-5 per ton.  

Biden’s inauguration came with a rapid reinstatement of Obama’s efforts, found in EO 13990. This Order reinstated the Obama-era Interagency Working Group and updated estimates of the Social Cost of Carbon to be $51 per ton, later proposed to increase nearly fourfold to $190 by the EPA. 

Gravity of the Change 

As the EPA guidance is expected to either eliminate or substantially roll back the weight of the Social Cost of Carbon in environmental analyses of regulation, it is necessary to explore how these changes will impact American policy. Immediate effects include the lowering of government estimates on emission impacts. Cost-benefit analyses under changed guidance would produce drastically reduced figures. In anticipation of emission deregulation coinciding with upcoming lower or nonexistent SCC estimates, the White House expects the U.S. energy sector’s mobilization to expand. Contrary to that expectation though, Reuters reports the oil industry is in “no rush,” prioritizing productivity gains and maximizing shareholder return over breaking ground on new drilling endeavors this fiscal year.  

It is useful to envision changes in carbon metrics in the context of a case study. In 2009, the United Kingdom terminated the use of the Social Cost of Carbon and instead adopted a target-consistent carbon valuation approach. This approach quantifies the costs required to meet U.K. and global emission goals, avoiding much of the scrutiny that surrounds inputs into the SCC’s IAM model. The U.K.’s target to cut emissions by 81% by 2035 is in line with a broader European goal of limiting global temperature increases to 1.5°C. The costs estimate an average net effective carbon rate of EUR 28.58 per ton of CO2. Unlike the SCC, the target-consistent carbon valuation approach relies on the Marginal Abatement Cost (MAC) needed to achieve set emissions goals. In simpler terms, this is the estimated cost of taking actions to achieve set targets. The case of the U.K. demonstrates how a stable, simplified approach coinciding with streamlined policy efforts has correlations to positive environmental gains and consistent cost estimates. 

It is interesting to note that between 1990 and 2022, the U.K. has decreased emissions by 46.2% while the U.S. has dropped a mere 3%. This highlights clear inefficiencies in the United States’ efforts to reduce emissions, some of which are certainly attributed to the inconsistencies in scientific metrics in American politics. 

Looking Forward 

Britain’s success in adjusting methods of quantifying environmental damages to the economy has implications about the U.S.’ oscillation of SCC practices. While eliminating the metric in the U.K. has proven to be effective to make way for a newer approach of advancing environmental goals, the Trump administration’s motives for reshaping the Social Cost of Carbon are vastly different: boosting energy production while advancing environmental deregulation. The U.K. had a replacement metric post-SCC; U.S. agencies are now left to their own devices and the upcoming guidance of the EPA to assess the value of changes in greenhouse gas emissions. Thus, the impact of updated U.S. policy will likely be an increase in emissions amidst current environmental deregulation and scientific questioning of the standing CO₂ metric. 

While President Trump’s questioning of the metric is logically valid, it is unreasonable and globally irresponsible to push the elimination of the Social Cost of Carbon on the basis of a political ideology. While consistency is not a guaranteed virtue, the EPA under the current administration would be wise in taking this EO as an opportunity to establish a nonpartisan, fact-based metric to offer accurate environmental guidance. 

Conclusion 

The historic volatility of changes surrounding the Social Cost of Carbon, a metric which quantifies the cost of emission damage, has resulted in grave inefficiencies in policy and little to no gains in improving environmental protections. Continuous reversals of metric standards, most recently found in President Trump’s executive order “Unleashing American Energy,” will continue the trend of oscillation as administrations change. Adopting a less debatable, more objective metric has effects in prolonged stability and achievement of global environmental goals. The United States would benefit from using this executive order as a stepping stone to create a nonpartisan, science-driven framework that ensures clear and accurate regulation.