Climate risks and carbon prices: Revising the social cost of carbon
AbstractThe social cost of carbon - or marginal damage caused by an additional ton of carbon dioxide emissions - has been estimated by a U.S. government working group at $21/tCO2 in 2010. That calculation, however, omits many of the biggest risks associated with climate change, and downplays the impact of current emissions on future generations. Our reanalysis explores the effects of uncertainty about climate sensitivity, the shape of the damage function, and the discount rate. We show that the social cost of carbon is uncertain across a broad range, and could be much higher than $21/tCO2. In our case combining high climate sensitivity, high damages, and a low discount rate, the social cost of carbon could be almost $900/tCO2 in 2010, rising to $1,500/tCO2 in 2050. The most ambitious scenarios for eliminating carbon dioxide emissions as rapidly as technologically feasible (reaching zero or negative net global emissions by the end of this century) require spending up to $150 to $500 per ton of reductions of carbon dioxide emissions by 2050. Using a reasonable set of alternative assumptions, therefore, the damages from a ton of carbon dioxide emissions in 2050 could exceed the cost of reducing emissions at the maximum technically feasible rate. Once this is the case, the exact value of the social cost of carbon loses importance: the clear policy prescription is to reduce emissions as rapidly as possible, and cost-effectiveness analysis offers better insights for climate policy than cost-benefit analysis. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 6 (2012)
Issue (Month): 10 ()
social cost of carbon; cost-benefit analysis; climate policy; climate economics;
Other versions of this item:
- Ackerman, Frank & Stanton, Elizabeth A., 2011. "Climate risks and carbon prices: Revising the social cost of carbon," Economics Discussion Papers 2011-40, Kiel Institute for the World Economy.
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Terry Barker and S. Serban Scrieciu, 2010. "Modeling Low Climate Stabilization with E3MG: Towards a 'New Economics' Approach to Simulating Energy-Environment-Economy System Dynamics," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
- Hanemann, W. Michael, 2008. "What is the Economic Cost of Climate Change?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9g11z5cc, Department of Agricultural & Resource Economics, UC Berkeley.
- Detlef Vuuren & Jason Lowe & Elke Stehfest & Laila Gohar & Andries Hof & Chris Hope & Rachel Warren & Malte Meinshausen & Gian-Kasper Plattner, 2011. "How well do integrated assessment models simulate climate change?," Climatic Change, Springer, vol. 104(2), pages 255-285, January.
- Ottmar Edenhofer , Brigitte Knopf, Terry Barker, Lavinia Baumstark, Elie Bellevrat, Bertrand Chateau, Patrick Criqui, Morna Isaac, Alban Kitous, Socrates Kypreos, Marian Leimbach, Kai Lessmann, Bertra, 2010. "The Economics of Low Stabilization: Model Comparison of Mitigation Strategies and Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
- Kopp, Robert E. & Golub, Alexander & Keohane, Nathaniel O. & Onda, Chikara, 2011. "The influence of the specification of climate change damages on the social cost of carbon," Economics Discussion Papers 2011-22, Kiel Institute for the World Economy.
- repec:aen:journl:2010se1_low_stabilization-a06 is not listed on IDEAS
- Hanemann, William Michael, 2008. "What is the economic cost of climate change?," CUDARE Working Paper Series 1071, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Pycroft, Jonathan & Vergano, Lucia & Hope, Chris & Paci, Daniele & Ciscar, Juan Carlos, 2011.
"A tale of tails: Uncertainty and the social cost of carbon dioxide,"
Economics - The Open-Access, Open-Assessment E-Journal,
Kiel Institute for the World Economy, vol. 5(22), pages 1-29.
- Pycroft, Jonathan & Vergano, Lucia & Hope, Chris & Paci, Daniele & Ciscar, Juan Carlos, 2011. "A tale of tails: Uncertainty and the social cost of carbon dioxide," Economics Discussion Papers 2011-36, Kiel Institute for the World Economy.
- Silverstein, David N., 2011. "Using a harmonized carbon price framework to finance the Green Climate Fund," MPRA Paper 35280, University Library of Munich, Germany.
- Dietz, Simon, 2011. "The treatment of risk and uncertainty in the US social cost of carbon for regulatory impact analysis," Economics Discussion Papers 2011-30, Kiel Institute for the World Economy.
- Simon Dietz, 2011. "The treatment of risk and uncertainty in the US Social Cost of Carbon for Regulatory Impact Analysis," Grantham Research Institute on Climate Change and the Environment Working Papers 54, Grantham Research Institute on Climate Change and the Environment.
- Duncan Foley & Lance Taylor & Armon Rezai, 2013. "The Social Cost of Carbon Emissions," INET Research Notes 28, Institute for New Economic Thinking (INET).
- Dietz, Simon, 2012. "The treatment of risk and uncertainty in the US social cost of carbon for regulatory impact analysis," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(18), pages 1-12.
- Greasley, David & Hanley, Nicholas & Kunnas, Jan & McLaughlin, Eoin & Oxley, Les & Warde, Paul, 2012. "How Environmental Pollution from Fossil Fuels can be included in measures of National Accounts and Estimates of Genuine Savings," Stirling Economics Discussion Papers 2012-16, University of Stirling, Division of Economics.
- Jonathan M. Harris, 2013. "Green Keynesianism: Beyond Standard Growth Paradigms," GDAE Working Papers 13-02, GDAE, Tufts University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.