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Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model

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  • William D. Nordhaus

Abstract

A new and important concept in global warming economics and policy is the social cost of carbon or SCC. This concept represents the economic cost caused by an additional ton of carbon-dioxide emissions or its equivalent. The present study describes the development of the concept as well as its analytical background. We estimate the SCC using an updated version of the RICE-2011 model. Additional concerns are uncertainty about different aspects of global warming as well as the treatment of different countries or generations. The most important results are: First, the estimated social cost of carbon for the current time (2015) including uncertainty, equity weighting, and risk aversion is $44 per ton of carbon (or $12 per ton CO2) in 2005 US$ and international prices). Second, including uncertainty increases the expected value of the SCC by approximately 8 percent. Third, equity weighting generally tends to reduce the SCC. Finally, the major open issue concerning the SCC continues to be the appropriate discount rate.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17540.

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Date of creation: Oct 2011
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Handle: RePEc:nbr:nberwo:17540

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  1. Tol, Richard S. J., 2007. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics Discussion Papers 2007-44, Kiel Institute for the World Economy.
  2. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
  3. Nordhaus, William, 2007. "Alternative measures of output in global economic-environmental models: Purchasing power parity or market exchange rates?," Energy Economics, Elsevier, Elsevier, vol. 29(3), pages 349-372, May.
  4. David Anthoff & Cameron Hepburn & Richard S.J. Tol, 2007. "Equity Weighting and the Marginal Damage Costs of Climate Change," Working Papers 2007.43, Fondazione Eni Enrico Mattei.
  5. David Anthoff & Richard S.J. Tol, 2007. "On International Equity Weights and National Decision Making on Climate Change," Working Papers 2007.55, Fondazione Eni Enrico Mattei.
  6. Michael Greenstone & Elizabeth Kopits & Ann Wolverton, 2011. "Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation," NBER Working Papers 16913, National Bureau of Economic Research, Inc.
  7. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
  8. Hope, Chris & Maul, Philip, 1996. "Valuing the impact of CO2 emissions," Energy Policy, Elsevier, vol. 24(3), pages 211-219, March.
  9. Fankhauser, Samuel & Tol, Richard S.J. & Pearce, David W., 1998. "Extensions and alternatives to climate change impact valuation: on the critique of IPCC Working Group III's impact estimates," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 59-81, February.
  10. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 362-384.
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Cited by:
  1. Robert S. Pindyck, 2012. "The Climate Policy Dilemma," NBER Working Papers 18205, National Bureau of Economic Research, Inc.
  2. Xaquín Garcia-Muros & Mercedes Burguillo & Mikel Gonzalez-Eguino & Desiderio Romero-Jordán, 2014. "Local air pollution and global climate change taxes: a distributional analysis," Working Papers 2014-01, BC3.
  3. baptiste perrissin fabert & Etienne Espagne & Antonin Pottier & Franck Nadaus, 2012. "Disentangling the Stern/Nordhaus controversy. Why and how do beliefs and modelling choices matter?," EcoMod2012 4270, EcoMod.
  4. Foley, Duncan K. & Rezai, Armon & Taylor, Lance, 2013. "The social cost of carbon emissions: Seven propositions," Economics Letters, Elsevier, vol. 121(1), pages 90-97.
  5. Alex Marten & Robert Kopp & Kate Shouse & Charles Griffiths & Elke Hodson & Elizabeth Kopits & Bryan Mignone & Chris Moore & Steve Newbold & Stephanie Waldhoff & Ann Wolverton, 2013. "Improving the assessment and valuation of climate change impacts for policy and regulatory analysis," Climatic Change, Springer, Springer, vol. 117(3), pages 433-438, April.
  6. Nordhaus, William, 2013. "Integrated Economic and Climate Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier.

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