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The Time Evolution of the Social Cost of Carbon: An Application of FUND

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  • Anthoff, David
  • Rose, Steven K.
  • Tol, Richard S. J.
  • Waldhoff, Stephanie

Abstract

We estimate the growth rate of the social cost of carbon. This is an indication of the optimal rate of acceleration of greenhouse gas emission reduction policy over time. We find that the social cost of carbon increases by 1.3% to 3.9% per year, with a central estimate of 2.2%. Previous studies found an average rate of 2.3% and a range of 0.9-4.1%. The rate of increase of the social carbon depends on a range of factors, including the pure rate of time preference, the rate of risk aversion, equity weighting, the socio-economic and emission scenarios, the climate sensitivity, dynamic vulnerability, and the curvature of the impact functions.

Suggested Citation

  • Anthoff, David & Rose, Steven K. & Tol, Richard S. J. & Waldhoff, Stephanie, 2011. "The Time Evolution of the Social Cost of Carbon: An Application of FUND," Papers WP405, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:wp405
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    References listed on IDEAS

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    1. Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
    2. Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 61-81.
    3. P. Michael Link & Richard S. J. Tol, 2004. "Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 99-114, September.
    4. Maddison, David, 1995. "A cost-benefit analysis of slowing climate change," Energy Policy, Elsevier, vol. 23(4-5), pages 337-346.
    5. Richard S.J. Tol, 2006. "Multi-Gas Emission Reduction for Climate Change Policy: An Application of Fund," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 235-250.
    6. Wahba, Mohammed & Hope, Chris, 2006. "The marginal impact of carbon dioxide under two scenarios of future emissions," Energy Policy, Elsevier, vol. 34(17), pages 3305-3316, November.
    7. William D. Nordhaus & David Popp, 1997. "What is the Value of Scientific Knowledge? An Application to Global Warming Using the PRICE Model," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-45.
    8. Tol, Richard S. J. & Narita, Daiju & Anthoff, David, 2008. "Damage Costs of Climate Change through Intensification of Tropical Cyclone Activities: An Application of FUND," Papers WP259, Economic and Social Research Institute (ESRI).
    9. Haraden, John, 1992. "An improved shadow price for CO2," Energy, Elsevier, vol. 17(5), pages 419-426.
    10. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    11. Tol, Richard S. J., 2001. "Equitable cost-benefit analysis of climate change policies," Ecological Economics, Elsevier, vol. 36(1), pages 71-85, January.
    12. Onno J. Kuik & Barbara Bucher & Michela Catenacci & Etem Karakaya & Richard S.J. Tol, 2006. "Methodological aspects of recent climate change damage cost studies," Working Papers FNU-122, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2006.
    13. Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
    14. Haraden, John, 1993. "An updated shadow price for CO2," Energy, Elsevier, vol. 18(3), pages 303-307.
    15. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Price, Colin, 2018. "Declining discount rate and the social cost of carbon: Forestry consequences," Journal of Forest Economics, Elsevier, vol. 31(C), pages 39-45.
    2. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    3. Marion Dupoux, 2016. "The land use change time-accounting failure," Working Papers 2016.25, FAERE - French Association of Environmental and Resource Economists.
    4. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    5. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    6. Dupoux, Marion, 2019. "The land use change time-accounting failure," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    7. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    8. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    9. Marion Dupoux, 2016. "The land use change time-accounting failure," Working Papers 2016/02, INRA, Economie Publique.
    10. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    11. Marion Dupoux, 2016. "The land use change time-accounting failure," EconomiX Working Papers 2016-28, University of Paris Nanterre, EconomiX.
    12. Kaushal, Kevin R. & Navrud, Ståle, 2018. "Global Biodiversity Costs of Climate Change. Improving the damage assessment of species loss in Integrated Assessment Models," Working Paper Series 4-2018, Norwegian University of Life Sciences, School of Economics and Business.
    13. Fischer, Carolyn & Salant, Stephen, 2012. "Alternative Climate Policies and Intertemporal Emissions Leakage: Quantifying the Green Paradox," RFF Working Paper Series dp-12-16, Resources for the Future.
    14. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.
    15. O'Mahony, Tadhg & Escardó-Serra, Paula & Dufour, Javier, 2018. "Revisiting ISEW Valuation Approaches: The Case of Spain Including the Costs of Energy Depletion and of Climate Change," Ecological Economics, Elsevier, vol. 144(C), pages 292-303.
    16. Martin Hrušovský & Emrah Demir & Werner Jammernegg & Tom Woensel, 2018. "Hybrid simulation and optimization approach for green intermodal transportation problem with travel time uncertainty," Flexible Services and Manufacturing Journal, Springer, vol. 30(3), pages 486-516, September.

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    More about this item

    Keywords

    agency/cost/equity/Greenhouse Gas emission reduction/growth/Policy/protection/risk/risk aversion/scenarios/Social cost of carbon;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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