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Calculating The Social Cost Of Carbon

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Author Info

  • Hope, C.
  • Newbery, D.

Abstract

The paper1 discusses the determination of the social cost of carbon (SCC) using the PAGE2002 model used in the Stern Review. The SCC depends sensitively on assumptions about future economic development, the range and likelihood of economic and social damage arising from climate change at future dates and the discount rate to apply to that damage. The paper critically examines the choice of pure time preference and the weight to place on damage experienced by other countries in the distant future. Key conclusions are that the SCC rises at about 2.4% p.a. and the range of plausible estimates for the SCC is wide. The SCC is sensitive to a number of factors, significantly the equilibrium temperature rise for a doubling of CO2 concentration, the pure rate of time preference, the non-economic impact, the inequality weighting parameter and the half-life of global warming. Within the model the SCC appears surprisingly insensitive to the emissions scenario for reasons that are explained. The paper points out that methane and SF6 are also powerful GHGs whose impact can be estimated within the model.

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File URL: http://www.electricitypolicy.org.uk/pubs/wp/eprg0720.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0749.

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Length: 24
Date of creation: May 2006
Date of revision:
Handle: RePEc:cam:camdae:0749

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: Climate change; social impacts; carbon price; rate of pure time preference.;

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Cited by:
  1. Jamasb, T. & Kiamil, H. & Nepal, R., 2008. "Hot Issue and Burning Options in Waste Management: A Social Cost Benefit Analysis of Waste-to-Energy in the UK," Cambridge Working Papers in Economics 0801, Faculty of Economics, University of Cambridge.
  2. Cui, Jingbo & Lapan, Harvey E. & Moschini, GianCarlo & Cooper, Joseph C., 2010. "Welfare impacts of alternative biofuel and energy policies," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61138, Agricultural and Applied Economics Association.
  3. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 0. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
  4. Nepal, Rabindra, 2011. "The roles and potentials of renewable energy in less-developed economies," MPRA Paper 31878, University Library of Munich, Germany, revised 29 Jun 2011.

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