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Calculating The Social Cost Of Carbon

Author

Listed:
  • Hope, C.
  • Newbery, D.

Abstract

The paper1 discusses the determination of the social cost of carbon (SCC) using the PAGE2002 model used in the Stern Review. The SCC depends sensitively on assumptions about future economic development, the range and likelihood of economic and social damage arising from climate change at future dates and the discount rate to apply to that damage. The paper critically examines the choice of pure time preference and the weight to place on damage experienced by other countries in the distant future. Key conclusions are that the SCC rises at about 2.4% p.a. and the range of plausible estimates for the SCC is wide. The SCC is sensitive to a number of factors, significantly the equilibrium temperature rise for a doubling of CO2 concentration, the pure rate of time preference, the non-economic impact, the inequality weighting parameter and the half-life of global warming. Within the model the SCC appears surprisingly insensitive to the emissions scenario for reasons that are explained. The paper points out that methane and SF6 are also powerful GHGs whose impact can be estimated within the model.

Suggested Citation

  • Hope, C. & Newbery, D., 2006. "Calculating The Social Cost Of Carbon," Cambridge Working Papers in Economics 0749, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0749
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    File URL: http://www.electricitypolicy.org.uk/pubs/wp/eprg0720.pdf
    File Function: Working Paper Version
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    Citations

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    Cited by:

    1. Lázaro Touza, Lara E. & Zoghby, Michel S., 2014. "Climate Change: Risky Business? /Cambio Climático: ¿Un negocio de alto riesgo?," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 32, pages 1043-1070, Septiembr.
    2. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 0. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
    3. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    4. Nepal, Rabindra, 2011. "The roles and potentials of renewable energy in less-developed economies," MPRA Paper 31878, University Library of Munich, Germany, revised 29 Jun 2011.
    5. Jamasb, T. & Kiamil, H. & Nepal, R., 2008. "Hot Issue and Burning Options in Waste Management: A Social Cost Benefit Analysis of Waste-to-Energy in the UK," Cambridge Working Papers in Economics 0801, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Climate change; social impacts; carbon price; rate of pure time preference.;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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