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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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    Cited by:

    1. Jenkins, Jesse D., 2014. "Political economy constraints on carbon pricing policies: What are the implications for economic efficiency, environmental efficacy, and climate policy design?," Energy Policy, Elsevier, vol. 69(C), pages 467-477.
    2. Mercure, J.-F. & Pollitt, H. & Chewpreecha, U. & Salas, P. & Foley, A.M. & Holden, P.B. & Edwards, N.R., 2014. "The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector," Energy Policy, Elsevier, pages 686-700.
    3. Richard S. J. Tol, 2015. "Economic impacts of climate change," Working Paper Series 7515, Department of Economics, University of Sussex.
    4. Weyant John, 2014. "Integrated assessment of climate change: state of the literature," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(3), pages 377-409, December.
    5. van den Bijgaart, Inge & Gerlagh, Reyer & Liski, Matti, 2016. "A simple formula for the social cost of carbon," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 75-94.
    6. Kenneth Gillingham & William D. Nordhaus & David Anthoff & Geoffrey Blanford & Valentina Bosetti & Peter Christensen & Haewon McJeon & John Reilly & Paul Sztorc, 2015. "Modeling Uncertainty in Climate Change: A Multi-Model Comparison," NBER Working Papers 21637, National Bureau of Economic Research, Inc.
    7. Ben Ayara, Amine & Cho, Seong-Hoon & Clark, Christopher & Lambert, Dayton & Armsworth, Paul, 2016. "Spatial and Temporal Variation in the Optimal Provision of Forest-based Carbon Storage," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236005, Agricultural and Applied Economics Association.
    8. T. Chatzivasileiadis & F. Estrada & M. W. Hofkes & R. S. J. Tol, 2017. "Systematic sensitivity analysis of the full economic impacts of sea level rise," Working Paper Series 1617, Department of Economics, University of Sussex.
    9. Armon Rezai & Rick van der Ploeg, 2017. "Climate Policies under Climate Model Uncertainty: Max-Min and Min-Max Regret," CESifo Working Paper Series 6626, CESifo Group Munich.
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    11. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    12. Kollenbach, Gilbert, 2017. "On the optimal accumulation of renewable energy generation capacity," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 157-179.
    13. Maria Waldinger, 2015. "The economic effects of long-term climate change: evidence from the little ice age," GRI Working Papers 214, Grantham Research Institute on Climate Change and the Environment.
    14. Marcus C. Sarofim & Stephanie T. Waldhoff & Susan C. Anenberg, 2017. "Valuing the Ozone-Related Health Benefits of Methane Emission Controls," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 45-63.
    15. Neill, Clinton L. & Williams, Ryan B., 2015. "An Economic Valuation on the External Cost of Alternative Milk Packaging," Journal of Food Distribution Research, Food Distribution Research Society, vol. 46(3), November.
    16. Elisabeth J. Moyer & Mark D. Woolley & Nathan J. Matteson & Michael J. Glotter & David A. Weisbach, 2014. "Climate Impacts on Economic Growth as Drivers of Uncertainty in the Social Cost of Carbon," The Journal of Legal Studies, University of Chicago Press, vol. 43(2), pages 401-425.
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    18. 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.
    19. Ottmar Edenhofer & Susanne Kadner & Christoph von Stechow & Gregor Schwerhoff & Gunnar Luderer, 2014. "Linking climate change mitigation research to sustainable development," Chapters,in: Handbook of Sustainable Development, chapter 30, pages 476-499 Edward Elgar Publishing.
    20. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-859, September.
    21. Delavane B. Diaz, 2015. "Integrated Assessment of Climate Catastrophes with Endogenous Uncertainty: Does the Risk of Ice Sheet Collapse Justify Precautionary Mitigation?," Working Papers 2015.64, Fondazione Eni Enrico Mattei.
    22. Barry ANDERSON & Emanuele BORGONOVO & Marzio GALEOTTI & Roberto ROSON, 2012. "Uncertainty in climate change modelling: can global sensitivity analysis be of help?," Departmental Working Papers 2012-18, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
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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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