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The Uncertainty about the Social Cost of Carbon: A Decomposition Analysis Using FUND

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  • Anthoff, David
  • Tol, Richard S. J.

Abstract

We report the results of an uncertainty decomposition analysis of the social cost of carbon as estimated by FUND, a model that has a more detailed representation of the economic impact of climate change than any other model. Some of the parameters particularly influence impacts in the short run whereas other parameters are important in the long run. Some parameters are influential in some regions only. Some parameters are known reasonably well, but others are not. Ethical values, such as the pure rate of time preference and the rate of risk aversion, therefore affect not only the social cost of carbon, but also the importance of the parameters that determine its value. Some parameters, however, are consistently important: cooling energy demand, migration, climate sensitivity, and agriculture. The last two are subject to a large research effort, but the first two are not.

Suggested Citation

  • Anthoff, David & Tol, Richard S. J., 2011. "The Uncertainty about the Social Cost of Carbon: A Decomposition Analysis Using FUND," Papers WP404, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:wp404
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    as
    1. Anthoff, David & Tol, Richard S.J., 2010. "On international equity weights and national decision making on climate change," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 14-20, July.
    2. Bessec, Marie & Fouquau, Julien, 2008. "The non-linear link between electricity consumption and temperature in Europe: A threshold panel approach," Energy Economics, Elsevier, vol. 30(5), pages 2705-2721, September.
    3. Barrios, Salvador & Bertinelli, Luisito & Strobl, Eric, 2006. "Climatic change and rural-urban migration: The case of sub-Saharan Africa," Journal of Urban Economics, Elsevier, vol. 60(3), pages 357-371, November.
    4. P. Michael Link & Richard S. J. Tol, 2004. "Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 99-114, September.
    5. Lee, Chien-Chiang & Chiu, Yi-Bin, 2011. "Electricity demand elasticities and temperature: Evidence from panel smooth transition regression with instrumental variable approach," Energy Economics, Elsevier, vol. 33(5), pages 896-902, September.
    6. Anthoff, David & Hepburn, Cameron & Tol, Richard S.J., 2009. "Equity weighting and the marginal damage costs of climate change," Ecological Economics, Elsevier, vol. 68(3), pages 836-849, January.
    7. Mansur, Erin T. & Mendelsohn, Robert & Morrison, Wendy, 2008. "Climate change adaptation: A study of fuel choice and consumption in the US energy sector," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 175-193, March.
    8. Richard S.J. Tol, 2006. "Multi-Gas Emission Reduction for Climate Change Policy: An Application of Fund," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 235-250.
    9. Maureen Cropper & James K. Hammitt & Lisa A. Robinson, 2011. "Valuing Mortality Risk Reductions: Progress and Challenges," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 313-336, October.
    10. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    11. Daiju Narita & Richard Tol & David Anthoff, 2010. "Economic costs of extratropical storms under climate change: an application of FUND," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 53(3), pages 371-384.
    12. Hope, Chris, 2008. "Discount rates, equity weights and the social cost of carbon," Energy Economics, Elsevier, vol. 30(3), pages 1011-1019, May.
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    20. repec:dau:papers:123456789/8180 is not listed on IDEAS
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    Keywords

    cost/decomposition/Social cost of carbon/uncertainty/Economic Impact/Climate change/impacts/risk/risk aversion/migration;

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