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Conceptual winsorizing: An application to the social cost of carbon

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  • Richard S. J. Tol

Abstract

There are many published estimates of the social cost of carbon. Some are clear outliers, the result of poorly constrained models. Percentile winsorizing is an option, but I here propose conceptual winsorizing: The social cost of carbon is either a willingness to pay, which cannot exceed the ability to pay, or a proposed carbon tax, which cannot raise more revenue than all other taxes combined. Conceptual winsorizing successfully removes high outliers. It slackens as economies decarbonize, slowly without climate policy, faster with.

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  • Richard S. J. Tol, 2025. "Conceptual winsorizing: An application to the social cost of carbon," Papers 2508.07384, arXiv.org, revised Aug 2025.
    • Handle: RePEc:arx:papers:2508.07384
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    References listed on IDEAS

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    1. Frederick Van Der Ploeg & Cees Withagen, 2014. "Growth, Renewables, And The Optimal Carbon Tax," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 283-311, February.
    2. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    3. 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.
    4. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    5. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
    6. J. C. J. M. van den Bergh & W. J. W. Botzen, 2014. "A lower bound to the social cost of CO2 emissions," Nature Climate Change, Nature, vol. 4(4), pages 253-258, April.
    7. Richard Tol, 2012. "Leviathan carbon taxes in the short run," Climatic Change, Springer, vol. 114(2), pages 409-415, September.
    8. Frederick Ploeg & Cees Withagen, 2014. "Growth, Renewables, And The Optimal Carbon Tax," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 283-311, February.
    9. Richard S. J. Tol, 2023. "Social cost of carbon estimates have increased over time," Nature Climate Change, Nature, vol. 13(6), pages 532-536, June.
    10. Kevin Rennert & Frank Errickson & Brian C. Prest & Lisa Rennels & Richard G. Newell & William Pizer & Cora Kingdon & Jordan Wingenroth & Roger Cooke & Bryan Parthum & David Smith & Kevin Cromar & Dela, 2022. "Comprehensive evidence implies a higher social cost of CO2," Nature, Nature, vol. 610(7933), pages 687-692, October.
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