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The Social Cost of Carbon


  • Richard S.J. Tol

    () (Economic and Social Research Institute, Whitaker Square, Sir John Rogerson's Quay, Dublin 2, Ireland
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands, Department of Spatial Economics, Vrije Universiteit, Amsterdam, The Netherlands, Department of Economics, Trinity College, Dublin, Ireland)


This article surveys the literature on the economic impact of climate change. Different methods have been used to estimate the impact of climate change on human welfare. Studies agree that there are positive and negative impacts. In the short term, positive impacts may dominate, but these are sunk benefits that will obtain regardless of abatement policy. In the longer term, there are net negative impacts. Poorer people tend to be more vulnerable to climate change. Estimated aggregate impacts are not very large, but they are uncertain and incomplete. Estimates of the marginal impacts suggest that greenhouse gas emissions should be taxed and that the emission reduction targets announced by politicians are probably too ambitious. Estimates of the willingness to pay for climate policy suggest that lay people are probably more concerned than experts about the total impact of climate change, whereas lay people and experts agree on estimates of the incremental impact of carbon dioxide emissions.

Suggested Citation

  • Richard S.J. Tol, 2011. "The Social Cost of Carbon," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 419-443, October.
  • Handle: RePEc:anr:reseco:v:3:y:2011:p:419-443

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    References listed on IDEAS

    1. van den Bergh, Jeroen C. J. M., 2004. "Optimal climate policy is a utopia: from quantitative to qualitative cost-benefit analysis," Ecological Economics, Elsevier, vol. 48(4), pages 385-393, April.
    2. G. C. van Kooten, 2004. "Climate Change Economics," Books, Edward Elgar Publishing, number 3424.
    3. Minh Ha-Duong & Nicolas Treich, 2004. "Risk Aversion, Intergenerational Equity and Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(2), pages 195-207, June.
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    More about this item


    climate policy; carbon dioxide emission reduction; benefit-cost analysis;

    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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