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Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model

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Abstract

A new and important concept in global warming economics and policy is the social cost of carbon or SCC. This concept represents the economic cost caused by an additional ton of carbon-dioxide emissions or its equivalent. The present study describes the development of the concept as well as its analytical background. We estimate the SCC using an updated version of the RICE-2011 model. Additional concerns are uncertainty about different aspects of global warming as well as the treatment of different countries or generations. The most important results are: First, the estimated social cost of carbon for the current time (2015) including uncertainty, equity weighting, and risk aversion is $44 per ton of carbon (or $12 per ton CO_{2}) in 2005 US$ and international prices). Second, including uncertainty increases the expected value of the SCC by approximately 8 percent. Third, equity weighting generally tends to reduce the SCC. Finally, the major open issue concerning the SCC continues to be the appropriate discount rate.

Suggested Citation

  • William D. Nordhaus, 2011. "Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model," Cowles Foundation Discussion Papers 1826, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1826
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    Cited by:

    1. 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.
    2. Richard S. J. Tol, 2015. "Economic impacts of climate change," Working Paper Series 7515, Department of Economics, University of Sussex.
    3. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    4. Newbold, Stephen C. & Marten, Alex L., 2014. "The value of information for integrated assessment models of climate change," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 111-123.
    5. Alex L. Marten, 2014. "The Role of Scenario Uncertainty in Estimating the Benefits of Carbon Mitigation," NCEE Working Paper Series 201404, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Mar 2014.
    6. Borck, Rainald, 2016. "Will skyscrapers save the planet? Building height limits and urban greenhouse gas emissions," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 13-25.
    7. Alex Marten & Robert Kopp & Kate Shouse & Charles Griffiths & Elke Hodson & Elizabeth Kopits & Bryan Mignone & Chris Moore & Steve Newbold & Stephanie Waldhoff & Ann Wolverton, 2013. "Improving the assessment and valuation of climate change impacts for policy and regulatory analysis," Climatic Change, Springer, vol. 117(3), pages 433-438, April.
    8. Xavier Timbeau, 2015. "A diverging Europe on the edge: The independent Annual Growth Survey 2015," Sciences Po publications info:hdl:2441/4s2r6d8kua9, Sciences Po.
    9. Nordhaus, William, 2013. "Integrated Economic and Climate Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier.
    10. Stern, Nicholas, 2014. "Ethics, equity and the economics of climate change paper 2: economics and politics," LSE Research Online Documents on Economics 62704, London School of Economics and Political Science, LSE Library.
    11. Lavanya Ravikanth Anneboina & K. S. Kavi Kumar, 2016. "Benefits of Coastal Shipping: Scope for Sea Change in Domestic Freight Transportation in India," Working Papers 2016-147, Madras School of Economics,Chennai,India.
    12. Xaquín Garcia-Muros & Mercedes Burguillo & Mikel Gonzalez-Eguino & Desiderio Romero-Jordán, 2014. "Local air pollution and global climate change taxes: a distributional analysis," Working Papers 2014-01, BC3.
    13. Christian Traeger, 2014. "Why uncertainty matters: discounting under intertemporal risk aversion and ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(3), pages 627-664, August.
    14. Naqvi, Syed Ali Asjad, 2015. "Modeling Growth, Distribution, and the Environment in a Stock-Flow Consistent Framework," Ecological Economic Papers 4468, WU Vienna University of Economics and Business.
    15. repec:wsi:ccexxx:v:05:y:2014:i:03:n:s2010007814500079 is not listed on IDEAS
    16. Laurie Johnson & Chris Hope, 2012. "The social cost of carbon in U.S. regulatory impact analyses: an introduction and critique," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 2(3), pages 205-221, September.
    17. baptiste perrissin fabert & Etienne Espagne & Antonin Pottier & Franck Nadaus, 2012. "Disentangling the Stern/Nordhaus controversy. Why and how do beliefs and modelling choices matter?," EcoMod2012 4270, EcoMod.
    18. Foley, Duncan K. & Rezai, Armon & Taylor, Lance, 2013. "The social cost of carbon emissions: Seven propositions," Economics Letters, Elsevier, vol. 121(1), pages 90-97.
    19. David Anthoff & Johannes Emmerling, 2016. "Inequality and the Social Cost of Carbon," Working Papers 2016.54, Fondazione Eni Enrico Mattei.
    20. Robert S. Pindyck, 2013. "The Climate Policy Dilemma," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 219-237, July.
    21. Montag, Josef, 2015. "The simple economics of motor vehicle pollution: A case for fuel tax," Energy Policy, Elsevier, vol. 85(C), pages 138-149.
    22. Jeffrey, Cynthia & Perkins, Jon D., 2015. "The association between energy taxation, participation in an emissions trading system, and the intensity of carbon dioxide emissions in the European Union," The International Journal of Accounting, Elsevier, vol. 50(4), pages 397-417.
    23. Gevrek, Z.Eylem & Uyduranoglu, Ayse, 2015. "Public preferences for carbon tax attributes," Ecological Economics, Elsevier, vol. 118(C), pages 186-197.

    More about this item

    Keywords

    Social cost of carbon; Climate change; Carbon price; Equity weights;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • H4 - Public Economics - - Publicly Provided Goods

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