scholarly journals The Risk-Adjusted Carbon Price

2021 ◽  
Vol 111 (9) ◽  
pp. 2782-2810
Author(s):  
Ton S. Van den Bremer ◽  
Frederick Van der Ploeg
Keyword(s):  
Perturbation Theory ◽  
Climate Sensitivity ◽  
Social Cost ◽  
Carbon Price ◽  
Numerical Results ◽  
Social Cost Of Carbon ◽  
Economic Risk ◽  
Present Value ◽  
Analytical Results ◽  
The Social

The social cost of carbon is the expected present value of damages from emitting one ton of carbon today. We use perturbation theory to derive an approximate tractable expression for this cost adjusted for climatic and economic risk. We allow for different aversion to risk and intertemporal fluctuations, skewness and dynamics in the risk distributions of climate sensitivity and the damage ratio, and correlated shocks. We identify prudence, insurance, and exposure effects, reproduce earlier analytical results, and offer analytical insights into numerical results on the effects of economic and damage ratio uncertainty and convex damages on the optimal carbon price. (JEL E12, G22, H23, O44, Q35, Q51, Q54)

scholarly journals EMPIRICALLY CONSTRAINED CLIMATE SENSITIVITY AND THE SOCIAL COST OF CARBON

2017 ◽  
Vol 08 (02) ◽  
pp. 1750006 ◽  
Author(s):  
KEVIN DAYARATNA ◽  
ROSS McKITRICK ◽  
DAVID KREUTZER
Keyword(s):  
Climate Sensitivity ◽  
Integrated Assessment ◽  
Social Cost ◽  
Climate Model ◽  
Temperature Response ◽  
Social Cost Of Carbon ◽  
Ocean Heat Uptake ◽  
Monte Carlo Experiments ◽  
The Social ◽  
Dice Model

Integrated Assessment Models (IAMs) require parameterization of both economic and climatic processes. The latter includes Equilibrium Climate Sensitivity (ECS), or the temperature response to doubling CO2 levels, and Ocean Heat Uptake (OHU) efficiency. ECS distributions in IAMs have been drawn from climate model runs that lack an empirical basis, and in Monte Carlo experiments may not be constrained to consistent OHU values. Empirical ECS estimates are now available, but have not yet been applied in IAMs. We incorporate a new estimate of the ECS distribution conditioned on observed OHU efficiency into two widely used IAMs. The resulting Social Cost of Carbon (SCC) estimates are much lower than those from models based on simulated ECS parameters. In the DICE model, the average SCC falls by approximately 40–50% depending on the discount rate, while in the FUND model the average SCC falls by over 80%. The span of estimates across discount rates also shrinks substantially.

A RAPID ASSESSMENT MODEL FOR UNDERSTANDING THE SOCIAL COST OF CARBON

2013 ◽  
Vol 04 (01) ◽  
pp. 1350001 ◽  
Author(s):  
STEPHEN C. NEWBOLD ◽  
CHARLES GRIFFITHS ◽  
CHRIS MOORE ◽  
ANN WOLVERTON ◽  
ELIZABETH KOPITS
Keyword(s):  
Monte Carlo ◽  
Social Cost ◽  
Rapid Assessment ◽  
Expected Value ◽  
Assessment Model ◽  
Certainty Equivalent ◽  
Social Cost Of Carbon ◽  
Present Value ◽  
The Social ◽  
Wide Range

The "social cost of carbon" (SCC) is the present value of the stream of future damages from one additional unit of carbon emissions in a particular year. This paper develops a rapid assessment model for the SCC. The model includes the essential ingredients for calculating the SCC at the global scale and is designed to be transparent and easy to use and modify. Our goal is to provide a tool to help analysts and decision-makers quickly explore the implications of various modeling assumptions for the SCC. We use the model to conduct sensitivity analyses over some of the key input parameters, and we compare estimates of the SCC under certainty and uncertainty in a Monte Carlo analysis. We find that, due to the combined effects of uncertainty and risk aversion, the certainty-equivalent SCC can be substantially larger than the expected value of the SCC. In our Monte Carlo simulation, the certainty-equivalent SCC is more than four times larger than the expected value of the SCC, and we show that this result depends crucially on how the uncertain preference parameters are handled. We also compare the approximate present value of benefits estimated using the SCC to the exact value of compensating variation in the initial period for a wide range of hypothetical emission reduction policies.

scholarly journals Inequality, climate impacts on the future poor, and carbon prices

2015 ◽  
Vol 112 (52) ◽  
pp. 15827-15832 ◽  
Author(s):  
Francis Dennig ◽  
Mark B. Budolfson ◽  
Marc Fleurbaey ◽  
Asher Siebert ◽  
Robert H. Socolow
Keyword(s):  
Social Cost ◽  
Climate Change Impacts ◽  
Carbon Price ◽  
Integrated Model ◽  
Climate Impacts ◽  
Social Cost Of Carbon ◽  
Fine Grained ◽  
The Social ◽  
Common Observation ◽  
Carbon Prices

Integrated assessment models of climate and the economy provide estimates of the social cost of carbon and inform climate policy. We create a variant of the Regional Integrated model of Climate and the Economy (RICE)—a regionally disaggregated version of the Dynamic Integrated model of Climate and the Economy (DICE)—in which we introduce a more fine-grained representation of economic inequalities within the model’s regions. This allows us to model the common observation that climate change impacts are not evenly distributed within regions and that poorer people are more vulnerable than the rest of the population. Our results suggest that this is important to the social cost of carbon—as significant, potentially, for the optimal carbon price as the debate between Stern and Nordhaus on discounting.

Monetizing the Value of Measurements of Equilibrium Climate Sensitivity Using the Social Cost of Carbon

2019 ◽  
Vol 25 (1) ◽  
pp. 59-72 ◽  
Author(s):  
Roger M. Cooke ◽  
Alexander Golub ◽  
Bruce Wielicki ◽  
Martin Mlynczak ◽  
David Young ◽  
...  
Keyword(s):  
Climate Sensitivity ◽  
Social Cost ◽  
Social Cost Of Carbon ◽  
Equilibrium Climate Sensitivity ◽  
The Social

The social cost of carbon in a non-cooperative world

2021 ◽  
pp. 103490
Author(s):  
Christoph Hambel ◽  
Holger Kraft ◽  
Eduardo Schwartz
Keyword(s):  
Social Cost ◽  
Social Cost Of Carbon ◽  
The Social
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