CHAPTER THREE. Fighting Climate Change and the Social Cost of Carbon

2018 ◽  
pp. 57-72
Keyword(s):  
Climate Change ◽  
Social Cost ◽  
Social Cost Of Carbon ◽  
The Social

scholarly journals The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

2012 ◽  
Vol 6 (2012-13) ◽  
pp. 1 ◽  
Author(s):  
Robert E. Kopp ◽  
Alexander Golub ◽  
Nathaniel O. Keohane ◽  
Chikara Onda
Keyword(s):  
Climate Change ◽  
Social Cost ◽  
Social Cost Of Carbon ◽  
The Social ◽  
Climate Change Damages

scholarly journals Estimates of the social cost of carbon have not changed over time

2021 ◽  
Author(s):  
Richard Tol
Keyword(s):  
Climate Change ◽  
Stationary Distribution ◽  
Social Cost ◽  
Meta Analysis ◽  
Kernel Density ◽  
Social Cost Of Carbon ◽  
Almost Everywhere ◽  
The Social ◽  
Carbon Prices ◽  
Over Time

Abstract Some claim that as knowledge about climate change accumulates, the social cost of carbon increases. A meta-analysis of published estimates shows that this is not the case. Correcting for inflation and emission year and controlling for the discount rate, kernel density decomposition reveals a stationary distribution. Actual carbon prices are almost everywhere below the estimated social cost of carbon.

scholarly journals Fat Tails and the Social Cost of Carbon

2014 ◽  
Vol 104 (5) ◽  
pp. 544-546 ◽  
Author(s):  
Martin L. Weitzman
Keyword(s):  
Climate Change ◽  
Relative Risk ◽  
Risk Aversion ◽  
Strong Influence ◽  
Social Cost ◽  
Relative Risk Aversion ◽  
Fat Tails ◽  
Social Cost Of Carbon ◽  
The Social ◽  
Climate Damages

At high enough greenhouse gas concentrations, climate change might conceivably cause catastrophic damages with small but non-negligible probabilities. If the bad tail of climate damages is sufficiently fat, and if the coefficient of relative risk aversion is greater than one, the catastrophe-reducing insurance aspect of mitigation investments could in theory have a strong influence on raising the social cost of carbon. In this paper I exposit the influence of fat tails on climate change economics in a simple stark formulation focused on the social cost of carbon. I then attempt to place the basic underlying issues within a balanced perspective.

scholarly journals Climate-economy feedbacks, temperature variability, and the social cost of carbon

2020 ◽  
Author(s):  
Jarmo Kikstra ◽  
Paul Waidelich ◽  
James Rising ◽  
Dmitry Yumashev ◽  
Chris Hope ◽  
...  
Keyword(s):  
Climate Change ◽  
Social Cost ◽  
Climate Change Impacts ◽  
Climate Impacts ◽  
Temperature Variability ◽  
Policy Implications ◽  
Social Cost Of Carbon ◽  
Intergovernmental Panel ◽  
Country Level ◽  
The Social

<p>A key statistic describing climate change impacts is the “social cost of carbon” (SCC), the total market and non-market costs to society incurred by releasing a ton of CO<sub>2</sub>. Estimates of the SCC have risen in recent years, with improved understanding of the risk of climate change to various sectors, including agriculture [1], mortality [2], and economic growth [3].</p><p>The total risks of climate impacts also depend on the representation of human-climate feedbacks such as the effect of climate impacts on GDP growth and extremes (rather than a focus only on means), but this relationship has not been extensively studied [4-7]. In this paper, we update the widely used PAGE IAM to investigate how SCC distributions change with the inclusion of climate-economy feedbacks and temperature variability. The PAGE model has recently been improved with representations of permafrost thawing and surface albedo feedback, CMIP6 scenarios, and empirical market damage estimates [8]. We study how changes from PAGE09 to PAGE-ICE affected the SCC, increasing it up to 75%, with a SCC distribution with a mean around $300 for the central SSP2-4.5 scenario. Then we model the effects of different levels of the persistence of damages, for which the persistence parameter is shown to have enormous effects. Adding stochastic interannual regional temperature variations based on an analysis of observational temperature data [9] can increase the hazard rate of economic catastrophes changes the form of the distribution of SCC values. Both the effects of temperature variability and climate-economy feedbacks are region-dependent. Our results highlight the importance of feedbacks and extremes for the understanding of the expected value, distribution, and heterogeneity of climate impacts.</p><p> </p><p>[1] Moore, F. C., Baldos, U., Hertel, T., & Diaz, D. (2017). New science of climate change impacts on agriculture implies higher social cost of carbon. Nature communications, 8(1), 1607.</p><p>[2] Carleton, et al. (2018). Valuing the global mortality consequences of climate change accounting for adaptation costs and benefits.</p><p>[3] Ricke, K., Drouet, L., Caldeira, K., & Tavoni, M. (2018). Country-level social cost of carbon. Nature Climate Change, 8(10), 895.</p><p>[4] Burke, M., et al. (2016). Opportunities for advances in climate change economics. Science, 352(6283), 292–293. https://doi.org/10.1126/science.aad9634</p><p>[5] National Academies of Sciences Engineering and Medicine. (2017). Valuing climate damages: updating estimation of the social cost of carbon dioxide. National Academies Press.</p><p>[6] Stiglitz, J. E., et al.. (2017). Report of the high-level commission on carbon prices.</p><p>[7] Field, C. B., Barros, V., Stocker, T. F., & Dahe, Q. (2012). Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation: Special Report of the Intergovernmental Panel on Climate Change (Vol. 9781107025). https://doi.org/10.1017/CBO9781139177245.009</p><p>[8] Yumashev, D., et al. (2019). Climate policy implications of nonlinear decline of Arctic land permafrost and other cryosphere elements. Nature Communications, 10(1). https://doi.org/10.1038/s41467-019-09863-x</p><p>[9] Brierley, C. M., Koch, A., Ilyas, M., Wennyk, N., & Kikstra, J. S. (2019, March 12). Half the world's population already experiences years 1.5°C warmer than preindustrial. https://doi.org/10.31223/osf.io/sbc3f</p>

scholarly journals Tail-Hedge Discounting and the Social Cost of Carbon

2013 ◽  
Vol 51 (3) ◽  
pp. 873-882 ◽  
Author(s):  
Martin L Weitzman
Keyword(s):  
Climate Change ◽  
Social Cost ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Social Cost Of Carbon ◽  
Climate Risks ◽  
The Social ◽  
Huge Impact ◽  
Adjusted Rate ◽  
Expected Payoffs

The choice of an overall discount rate for climate change investments depends critically on how different components of investment payoffs are discounted at differing rates reflecting their underlying risk characteristics. Such underlying rates can vary enormously, from ≈ 1 percent for idiosyncratic diversifiable risk to ≈ 7 percent for systematic nondiversifiable risk. Which risk-adjusted rate is chosen can have a huge impact on cost-benefit analysis. In this expository paper, I attempt to set forth in accessible language with a simple linear model what I think are some of the basic issues involved in discounting climate risks. The paper introduces a new concept that may be relevant for climate-change discounting: the degree to which an investment hedges against the bad tail of catastrophic damages by insuring positive expected payoffs even under the worst circumstances. The prototype application is calculating the social cost of carbon. (JEL C51, Q54, Q58)

scholarly journals Agreeing to disagree on climate policy

2014 ◽  
Vol 111 (10) ◽  
pp. 3695-3698 ◽  
Author(s):  
Geoffrey M. Heal ◽  
Antony Millner
Keyword(s):  
Climate Change ◽  
Climate Policy ◽  
Discount Rate ◽  
Social Cost ◽  
Time Dependent ◽  
Social Cost Of Carbon ◽  
Agreeing To Disagree ◽  
The Social ◽  
The Us ◽  
Us Government

Disagreements about the value of the utility discount rate—the rate at which our concern for the welfare of future people declines with their distance from us in time—are at the heart of the debate about the appropriate intensity of climate policy. Seemingly small differences in the discount rate yield very different policy prescriptions, and no consensus “correct” value has been identified. We argue that the choice of discount rate is an ethical primitive: there are many different legitimate opinions as to its value, and none should receive a privileged place in economic analysis of climate policy. Rather, we advocate a social choice-based approach in which a diverse set of individual discount rates is aggregated into a “representative” rate. We show that performing this aggregation efficiently leads to a time-dependent discount rate that declines monotonically to the lowest rate in the population. We apply this discounting scheme to calculations of the social cost of carbon recently performed by the US government and show that it provides an attractive compromise between competing ethical positions, and thus provides a possible resolution to the ethical impasse in climate change economics.

SOME RESEARCH CHALLENGES IN THE ECONOMICS OF CLIMATE CHANGE

2016 ◽  
Vol 07 (02) ◽  
pp. 1650002 ◽  
Author(s):  
MARSHALL BURKE ◽  
MELANIE CRAXTON ◽  
CHARLES D. KOLSTAD ◽  
CHIKARA ONDA
Keyword(s):  
Climate Change ◽  
Integrated Assessment ◽  
Social Cost ◽  
Emissions Reduction ◽  
Social Cost Of Carbon ◽  
Relevant Research ◽  
Climate Policies ◽  
The Social ◽  
The World ◽  
Research Questions

The paper reviews progress in understanding the economics of climate change with an emphasis on identifying promising advances that are both significant and nonmarginal, as well as areas in which there are key gaps in our knowledge. We highlight several important areas in which important policy-relevant research questions remain: improving estimates of climate damage used for determining the social cost of carbon, refining integrated assessment models, and designing better climate policies. As the world moves to understand and implement country emissions reduction pledges in the context of the UNFCCC, understanding the economics of the problem will become even more important. The hope is that the paper is not only informative for existing economists already working in climate change economics, but that it also serves as an inspiration for economists in other areas, or even those in other disciplines, on ways in which to contribute to solving the problem at hand.

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