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The Marginal Costs of Greenhouse Gas Emissions

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  • Richard S. J. Tol

Abstract

Estimates of the marginal costs of greenhouse gas emissions are an important input to the decision how much society would want to spend on greenhouse gas emission reduction. Marginal cost estimates in the literature range between $5 and $25 per tonne of carbon. Using similar assumptions, the FUND model finds marginal costs of $9 23/tC, depending on the discount rate. If the aggregation of impacts over countries accounts for inequalities in income of 3. Marginal costs per region are an order of magnitude smaller than global marginal costs. The ratios between the marginal costs of CO2 and those of CH4 and N2O are roughly equal to the global warming potentials of these gases. The uncertainty about the marginal costs is large and right-skewed. The expected value of the marginal costs lies about 35% above the best guess, the 95-percentile about 250%.

Suggested Citation

  • Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, , vol. 20(1), pages 61-81, January.
    • Handle: RePEc:sae:enejou:v:20:y:1999:i:1:p:61-81
    DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No1-4
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    References listed on IDEAS

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    1. Kandlikar, Milind, 1996. "Indices for comparing greenhouse gas emissions: integrating science and economics," Energy Economics, Elsevier, vol. 18(4), pages 265-281, October.
    2. John Reilly & Kenneth Richards, 1993. "Climate change damage and the trace gas index issue," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(1), pages 41-61, February.
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    More about this item

    Keywords

    Greenhouse gas emissions; climate change impacts; marginal costs; economic valuation; FUND model;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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