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Checking the Price Tag on Catastrophe: The Social Cost of Carbon Under Non-linear Climate Response

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  • Ceronsky, Megan
  • Anthoff, David
  • Hepburn, Cameron
  • Tol, Richard S. J.

Abstract

Research into the social cost of carbon emissions — the marginal social damage from a tonne of emitted carbon ? has tended to focus on "best guess" scenarios. Such scenarios generally ignore the potential for low-probability, high-damage events, which are critically important to determining optimal climate policy. This paper uses the FUND integrated assessment model to investigate the influence of three types of low-probability, high-impact climate responses on the social cost of carbon: the collapse of the Atlantic Ocean Meridional Overturning Circulation; large scale dissociation of oceanic methane hydrates; and climate sensitivities above "best guess" levels. We find that incorporating these events can increase the social cost of carbon by a factor of over 3.

Suggested Citation

  • Ceronsky, Megan & Anthoff, David & Hepburn, Cameron & Tol, Richard S. J., 2011. "Checking the Price Tag on Catastrophe: The Social Cost of Carbon Under Non-linear Climate Response," Papers WP392, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:wp392
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    Cited by:

    1. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    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. Hein, Lars & van Koppen, C.S.A. (Kris) & van Ierland, Ekko C. & Leidekker, Jakob, 2016. "Temporal scales, ecosystem dynamics, stakeholders and the valuation of ecosystems services," Ecosystem Services, Elsevier, vol. 21(PA), pages 109-119.
    4. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-22.
    5. Richard S.J. Tol, 2006. "Why Worry About Climate Change? A Research Agenda," Working Papers 2006.136, Fondazione Eni Enrico Mattei.
    6. Kopits, Elizabeth & Marten, Alex L. & Wolverton, Ann, 2013. "Moving Forward with Incorporating “Catastrophic” Climate Change into Policy Analysis," National Center for Environmental Economics-NCEE Working Papers 280911, United States Environmental Protection Agency (EPA).
    7. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    8. Pushpam Kumar & Uwe A. Schneider, 2008. "Greenhouse gas emission mitigation through agriculture," Working Papers FNU-155, Research unit Sustainability and Global Change, Hamburg University, revised Feb 2008.
    9. Louise Kessler, 2017. "Estimating The Economic Impact Of The Permafrost Carbon Feedback," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-23, May.
    10. Louise Kessler, 2015. "Estimating the economic impact of the permafrost carbon feedback," GRI Working Papers 219, Grantham Research Institute on Climate Change and the Environment.
    11. Mete Feridun & Hasan Güngör, 2020. "Climate-Related Prudential Risks in the Banking Sector: A Review of the Emerging Regulatory and Supervisory Practices," Sustainability, MDPI, vol. 12(13), pages 1-20, July.
    12. Kousky, Carolyn & Kopp, Robert E. & Cooke, Roger M., 2011. "Risk premia and the social cost of carbon: A review," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-24.
    13. Tol, Richard S.J., 2007. "Europe's long-term climate target: A critical evaluation," Energy Policy, Elsevier, vol. 35(1), pages 424-432, January.
    14. Elizabeth Kopits & Alex L. Marten & Ann Wolverton, 2013. "Moving Forward with Incorporating "Catastrophic" Climate Change into Policy Analysis," NCEE Working Paper Series 201301, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jan 2013.
    15. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    16. Brock, W. & Xepapadeas, A., 2017. "Climate change policy under polar amplification," European Economic Review, Elsevier, vol. 99(C), pages 93-112.
    17. Fisher, Anthony, 2014. "Climate Science and Climate Economics," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt746627gz, Department of Agricultural & Resource Economics, UC Berkeley.
    18. P. Link & Richard Tol, 2011. "Estimation of the economic impact of temperature changes induced by a shutdown of the thermohaline circulation: an application of FUND," Climatic Change, Springer, vol. 104(2), pages 287-304, January.
    19. Onno J. Kuik & Barbara Bucher & Michela Catenacci & Etem Karakaya & Richard S.J. Tol, 2006. "Methodological aspects of recent climate change damage cost studies," Working Papers FNU-122, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2006.
    20. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    21. Fisher, A. C & Le, P. V, 2014. "Climate Policy: Science, Economics, and Extremes," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6tj3j4jb, Department of Agricultural & Resource Economics, UC Berkeley.
    22. Stephen Newbold & Adam Daigneault, 2009. "Climate Response Uncertainty and the Benefits of Greenhouse Gas Emissions Reductions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(3), pages 351-377, November.
    23. Anthony C. Fisher & Phu V. Le, 2014. "Climate Policy: Science, Economics, and Extremes," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 307-327.
    24. Stephanie Byrom & Sebastian Thomas & Paul Dargusch, 2014. "Millennium development goals and clean development: synergies in the Pacific," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(1), pages 33-44, January.
    25. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.

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    Keywords

    Social cost of carbon/cost/scenarios/Climate policy/Policy;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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