Book contents
- Frontmatter
- Contents
- Introduction
- Publication History
- Part I Perspectives on Climate and Equity
- Part II Analyses of Climate Damages
- Part III Theory and Methods of Integrated Assessment
- Part IV Applications of Integrated Assessment Models
- Chapter 11 Climate Risks and Carbon Prices: Revising the Social Cost of Carbon
- Chapter 12 Epstein–Zin Utility in DICE: Is Risk Aversion Irrelevant to Climate Policy?
- Chapter 13 Fat Tails, Exponents, Extreme Uncertainty: Simulating Catastrophe in DICE
- Chapter 14 Climate Damages in the FUND Model: A Disaggregated Analysis
- Chapter 15 Climate Policy and Development: An Economic Analysis
- Appendix Supplementary Data for Chapter 3
- Notes
- References
Chapter 11 - Climate Risks and Carbon Prices: Revising the Social Cost of Carbon
from Part IV - Applications of Integrated Assessment Models
Published online by Cambridge University Press: 03 November 2017
- Frontmatter
- Contents
- Introduction
- Publication History
- Part I Perspectives on Climate and Equity
- Part II Analyses of Climate Damages
- Part III Theory and Methods of Integrated Assessment
- Part IV Applications of Integrated Assessment Models
- Chapter 11 Climate Risks and Carbon Prices: Revising the Social Cost of Carbon
- Chapter 12 Epstein–Zin Utility in DICE: Is Risk Aversion Irrelevant to Climate Policy?
- Chapter 13 Fat Tails, Exponents, Extreme Uncertainty: Simulating Catastrophe in DICE
- Chapter 14 Climate Damages in the FUND Model: A Disaggregated Analysis
- Chapter 15 Climate Policy and Development: An Economic Analysis
- Appendix Supplementary Data for Chapter 3
- Notes
- References
Summary
The social cost of carbon – or marginal damage caused by an additional ton of carbon dioxide emissions – has been estimated by a US government working group at $21/tCO2 in 2010. That calculation, however, omits many of the biggest risks associated with climate change, and downplays the impact of current emissions on future generations. Our reanalysis explores the effects of uncertainty about climate sensitivity, the shape of the damage function and the discount rate. We show that the social cost of carbon is uncertain across a broad range, and could be much higher than $21/tCO2. In our case combining high climate sensitivity, high damages and a low discount rate, the social cost of carbon could be almost $900/tCO2 in 2010, rising to $1,500/tCO2 in 2050.
The most ambitious scenarios for eliminating carbon dioxide emissions as rapidly as technologically feasible (reaching zero or negative net global emissions by the end of this century) require spending up to $150 to $500 per ton of reductions of carbon dioxide emissions by 2050. Using a reasonable set of alternative assumptions, therefore, the damages from a ton of carbon dioxide emissions in 2050 could exceed the cost of reducing emissions at the maximum technically feasible rate. Once this is the case, the exact value of the social cost of carbon loses importance. The clear policy prescription is to reduce emissions as rapidly as possible, and cost-effectiveness analysis offers better insights for climate policy than cost– benefit analysis.
Introduction
With the US Environmental Protection Agency's recent historic step toward regulation of greenhouse gas emissions, cost–benefit analyses of proposed American regulations can now include an estimate of damages caused by greenhouse gas emissions – or conversely, the benefits of reducing those emissions.
It is, however, a very small step: the “social cost of carbon” (SCC), i.e., the damage per metric ton of carbon dioxide (tCO2), is estimated at $21 for 2010, in 2007 dollars (Interagency Working Group 2010). Equivalent to $0.21 per gallon of gasoline, such a low cost seems to suggest that only modest, inexpensive measures are needed to address climate risks.
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- Chapter
- Information
- Climate Change and Global Equity , pp. 151 - 168Publisher: Anthem PressPrint publication year: 2014