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Risk Aversion, Time Preference, and the Social Cost of Carbon

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Author Info
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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Abstract

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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File URL: http://www.esri.ie/UserFiles/publications/20080904135651/WP252.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP252.

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Length: 34 pages
Date of creation: Sep 2008
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Handle: RePEc:esr:wpaper:wp252

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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.:
  1. David J. Evans & Haluk Sezer, 2004. "Social discount rates for six major countries," Applied Economics Letters, Taylor and Francis Journals, vol. 11(9), pages 557-560, January. [Downloadable!] (restricted)
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  1. Atkinson, Giles D. & Dietz, Simon & Helgeson, Jennifer & Hepburn, Cameron & Sælen, Håkon, 2009. "Siblings, not triplets: social preferences for risk, inequality and time in discounting climate change," Economics Discussion Papers 2009-14, Kiel Institute for the World Economy. [Downloadable!]
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This page was last updated on 2009-11-19.


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