Carbon credits, which represent the price of a unit of carbon dioxide reduction or offset, have been the primary solution for companies looking to mitigate their climate impact and invest in sustainability. However, the market price of carbon credits often does not reflect the full economic and social impact of their carbon emissions. This can make it difficult for organizations to properly invest in sustainability and meet their ESG commitments. What’s needed is an estimate of the true cost of carbon emissions that reflects the full range of economic and social impacts associated with climate change. To help improve the way companies invest in sustainability, OpenEarth, in collaboration with UC Berkeley, is developing digital carbon pricing tools, which include a carbon pricing API and a Chainlink oracle that delivers the true social price of carbon to blockchains.
Measuring Real-World Impact With the Social Cost of Carbon
The social cost of carbon (SCC) measures the estimated economic damage associated with each additional ton of carbon dioxide emissions, taking into account factors such as the impact on human health, agriculture, and the environment. It’s becoming one of the most important climate metrics available today, driving policies and initiatives that help mitigate the harmful effects of climate change. Measuring the social cost of carbon is an important step for companies to take in order to manage and reduce their environmental impact and position themselves for long-term success in a low-carbon economy. It helps organizations align their financial goals with their environmental goals, demonstrate their commitment to sustainability and social responsibility, and drive innovation and efficiency by encouraging them to find ways to reduce emissions and lower costs. This is especially important in light of increasing regulatory pressures, as well as growing consumer demand for environmentally responsible products, services, and investments. In order to measure the social cost of carbon, an internal carbon price tool is needed to place a monetary value on greenhouse gas emissions. By assigning a price to carbon emissions, companies can make more informed and strategic decisions about how to reduce their environmental impact and transition to low-carbon business practices. Our tool aims to help companies throughout the entire journey of implementing a carbon pricing strategy, from learning about the different types of carbon prices, comparing different price benchmarks, understanding what is the right price for their company, accessing resources to support them while generating internal consensus, and integrating it into their digital solutions, for web2 and web3 applications. By guiding them through the various carbon pricing options, facilitating benchmark comparisons, and assisting in determining the optimal price for their organization, our tool provides access to valuable resources that foster internal consensus. Moreover, the tool allows companies to integrate the carbon pricing model with existing web2 and web3 solutions.
A calculator based on the RFF-Berkeley GIVE model:
The carbon pricing tool can be used to calculate a suggested carbon price for your organization, based on the Social Cost of Carbon (SCC), which is estimate of the damages from emitting a ton of carbon dioxide. To do so, define a discount rate which represents how much weight is assigned today to impacts of emissions felt in the future. A higher discount rate results in a lower carbon price, as future damages are considered less valuable. The decision we make about the discount rate determines how the undiscounted marginal damages are converted into a present value of damages, which is the social cost of carbon. This tool is is powered by the open source RFF-Berkeley Greenhouse Gas Impact Value Estimator (GIVE) model developed by UC Berkeley and Resources for the Future. (Learn more: https://www.rff.org/publications/data-tools/scc-explorer/) The RFF-Berkeley Greenhouse Gas Impact Value Estimator (GIVE model) is an integrated assessment model (IAM) of climate change. It is made up of four modules that work in sequence: The Socioeconomic Module, which predicts future population, GDP, and greenhouse gas emissions. The Climate Module, which uses the projections from the first module to generate four outputs that show the different types of changes in the climate system, such as global temperature increase. The Damages Module, which assesses the economic damage caused by changes in the climate system, such as impacts on agriculture and human health. The Discounting Module adds up future economic damages over time and translates them into present-day dollars, producing estimates of the Social Cost of Carbon. The social cost of carbon is the result of the GIVE model that represents the economic damage caused by releasing an additional ton of carbon dioxide into the atmosphere, in present-day dollars. The output is based on the average value instead of the median value, as the average SCC is commonly used as the primary estimate in benefit-cost analysis. The damages accounted for in the GIVE model are damages arising from: i) sea level rise, ii) building energy expenditure, iii) temperature related human mortality, & iv) loss in agricultural productivity due to climate variability. The total damages do not take into account other damage sectors such as biodiversity, labor productivity, conflict and migration, which are expected to be included in future models. The model does not take into account specific inputs or characteristics of an organization to calculate the social cost of carbon because it considers the economic damages caused by emitting one additional ton of carbon dioxide to be the same for any type of activity.
Integrating the carbon pricing tool into your web2 or web3 solutions
We have developed an Open API and a Chainlink Oracle for our carbon pricing calculator so that it can be integrated into existing or novel digital platforms. We are in the process of expanding our documentation and tooling for these types of solutions, so please reach out if you have any feedback.