IDEAS home Printed from
   My bibliography  Save this article

The Social Cost of Carbon and its Policy Implications


  • David Pearce


The shadow price, or 'social cost', of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today. Cost--benefit analysis would set the optimal amount of greenhouse-gas-emission reduction at the point where this social cost just equals the incremental cost of controlling emissions. The higher the value for the social cost of carbon, the more control is warranted. This comparison assumes that cost--benefit analysis is the correct way of determining climate-change policy, and many believe this is not the case because of the very long-term, irreversible, and potentially catastrophic nature of global warming. But, in the short run at least, a comparison of cost and benefits is required, and, in any event, all decisions imply costs and benefits. But what is the 'right' figure for the social cost of carbon? This paper reviews the UK government's assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits. Moreover, adoption of the UK government's shadow price would have formidable implications for energy policy in the UK, and for policies on afforestation. Copyright 2003, Oxford University Press.

Suggested Citation

  • 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.
  • Handle: RePEc:oup:oxford:v:19:y:2003:i:3:p:362-384

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:19:y:2003:i:3:p:362-384. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press or Christopher F. Baum (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.