  Social cost of carbon (SCC) is estimated by integrated assessment models
(IAM) and is widely used by government agencies to value climate policy
impacts. While there is an ongoing debate about obtained numerical estimates
and related uncertainties, little attention has been paid so far to the SCC
calculation method itself.
  This work attempts to fill the gap by providing theoretical background and
economic interpretation of the SCC calculation approach implemented in the
open-source IAM DICE (Dynamic Integrated model of Climate and the Economy). Our
analysis indicates that the present calculation method provides an
approximation that might work pretty well in some cases, while in the other
cases the estimated value substantially (by the factor of four) deviates from
the "true" value. This deviation stems from the inability of the present
calculation method to catch the linkages between two key IAM's components --
complex interconnected systems -- climate and economy, both influenced by
emission abatement policies. Within the modeling framework of DICE, the
presently estimated SCC valuates policy-uncontrolled emissions against
economically unjustified consumption, which makes it irrelevant for application
in climate-economic policies and, therefore, calls for a replacement by a more
appropriate indicator.
  An apparent SCC alternative, which can be employed for policy formulation is
the direct output of the DICE model -- the socially optimal marginal abatement
cost (SMAC), which corresponds to technological possibilities at optimal level
of carbon emissions abatement. In policy making, because of the previously
employed implicit approximation, great attention needs to be paid to the use of
SCC estimates obtained earlier.
