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The social cost of methane

Author

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  • Christian Azar

    (Chalmers University of Technology)

  • Jorge García Martín

    (Chalmers University of Technology)

  • Daniel JA. Johansson

    (Chalmers University of Technology)

  • Thomas Sterner

    (University of Gothenburg)

Abstract

A rapid and sustained reduction of methane emissions has been proposed recently as a key strategy to meet the climate targets of the Paris Agreement. The social cost of methane (SCM), which expresses the climate damage cost associated with an additional metric ton of methane emitted, is a metric that can be used to design policies to reduce the emissions of this gas. Here, we extend the DICE-2016R2 model so that it includes an improved carbon cycle and energy balance model as well as methane emissions, methane abatement cost, and an atmospheric methane cycle explicitly to be able to provide consistent estimations of the SCM. We estimate the SCM to lie in the range 880–8100 USD/tCH4 in 2020, with a base case estimate of 4000 USD/tCH4. We find our base case estimate to be larger than the average SCM presented in other studies mainly due to the revised damage function we use. We also estimate the social cost of carbon (SCC) and find that SCM estimates are less sensitive to variations in the social discount rate than the SCC due to the relatively short lifetime of methane. Changes in the parameterization of the damage function have similar relative impacts on both SCM and SCC. Furthermore, we evaluate the ratio of SCM to SCC as an alternative metric to GWP-100 of CH4 to facilitate tradeoffs between these two gases. We find this ratio to lie in the range 7–33 in 2020, with a base case estimate of 21, based on an extensive sensitivity analysis with respect to the discount rate, damage cost, and underlying emission scenarios. We also show that the global warming potential (GWP) and the SCM to SCC ratio are almost the same if the inverse of the effective discounting (in the social cost calculations) is equal to the time horizon used to evaluate the GWP. For comparison, the most widely used GWP, i.e., with a time horizon of 100 years, equals 27, hence in the upper range of the ratio we find using the SCM to SCC ratio.

Suggested Citation

  • Christian Azar & Jorge García Martín & Daniel JA. Johansson & Thomas Sterner, 2023. "The social cost of methane," Climatic Change, Springer, vol. 176(6), pages 1-22, June.
  • Handle: RePEc:spr:climat:v:176:y:2023:i:6:d:10.1007_s10584-023-03540-1
    DOI: 10.1007/s10584-023-03540-1
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    2. Anthony Wiskich, 2024. "Social Costs of Methane and Carbon Dioxide in a Tipping Climate," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(5), pages 1275-1293, May.

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