David Anthoff () (Economic and Social Research Institute (ESRI)) Richard S. J. Tol () (Economic and Social Research Institute (ESRI)) Gary W. Yohe (Wesleyan University)
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The Stern Review reported a social cost of carbon of over $300/tC, calling for ambitious climate policy. We here conduct a systematic sensitivity analysis of this result on two crucial parameters: the rate of pure time preference, and the rate of risk aversion. We show that the social cost of carbon lies anywhere in between 0 and $120,000/tC. However, if we restrict these two parameters to match observed behavior, an expected social cost of carbon of $60/tC results. If we correct this estimate for income differences across the world, the social cost of carbon rises to over $200/tC.
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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number
WP252.
Length: 34 pages Date of creation: Sep 2008 Date of revision: Handle: RePEc:esr:wpaper:wp252
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