IDEAS home Printed from https://ideas.repec.org/a/cpp/issued/v39y2013is2p67-80.html
   My bibliography  Save this article

The Use of a Social Cost of Carbon in Canadian Cost-Benefit Analysis

Author

Listed:
  • Anthony Heyes
  • Dylan Morgan
  • Nicholas Rivers

Abstract

The Social Cost of Carbon (SCC) is being adopted for systematic use in cost-benefit analysis (CBA) conducted by the Government of Canada. Although there are potential efficiency gains from its application, we argue that the SCC may be inappropriate for use in CBA for three reasons. First, as currently calculated, the SCC typically excludes the potential for catastrophes and certain types of climate damages, and assumes perfect substitutability between natural and human capital. For these reasons, it is likely to be biased downwards, and as such would provide misleading advice to policy-makers. Second, the SCC is a global measure of benefits, whereas standard practice in CBA is to include only domestic costs and benefits. Accounting for costs borne outside of Canada and along only one dimension (carbon damage) risks reducing economic efficiency and confusing the users of CBA studies. Third, SCC-based decision-making is unlikely to be consistent with Canadian commitments to international partners on emissions reductions; so its adoption risks institutionalizing non-delivery of those commitments.

Suggested Citation

  • Anthony Heyes & Dylan Morgan & Nicholas Rivers, 2013. "The Use of a Social Cost of Carbon in Canadian Cost-Benefit Analysis," Canadian Public Policy, University of Toronto Press, vol. 39(s2), pages 67-80, August.
    • Handle: RePEc:cpp:issued:v:39:y:2013:i:s2:p:67-80
    as

    Download full text from publisher

    File URL: http://economics.ca/cgi/jab?journal=cpp&view=v39s2/CPPv39s2p067.pdf
    File Function: Full text
    Download Restriction: No access restriction except for the four most recent issues.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(3), pages 362-384.
    2. Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
    3. Christa Clapp & Katia Karousakis & Barbara Buchner & Jean Château, 2009. "National and Sectoral GHG Mitigation Potential: A Comparison Across Models," OECD/IEA Climate Change Expert Group Papers 2009/7, OECD Publishing.
    4. Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
    5. Tol, Richard S. J., 2002. "Welfare specifications and optimal control of climate change: an application of fund," Energy Economics, Elsevier, vol. 24(4), pages 367-376, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard S.J. Tol, 2018. "The impact of climate change and the social cost of carbon," Working Paper Series 1318, Department of Economics, University of Sussex Business School.
    2. Yang, Xi & Teng, Fei & Xi, Xiaoqian & Khayrullin, Egor & Zhang, Qi, 2018. "Cost–benefit analysis of China’s Intended Nationally Determined Contributions based on carbon marginal cost curves," Applied Energy, Elsevier, vol. 227(C), pages 415-425.
    3. Tol, Richard S.J., 2019. "A social cost of carbon for (almost) every country," Energy Economics, Elsevier, vol. 83(C), pages 555-566.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    2. Wei, Yi-Ming & Mi, Zhi-Fu & Huang, Zhimin, 2015. "Climate policy modeling: An online SCI-E and SSCI based literature review," Omega, Elsevier, vol. 57(PA), pages 70-84.
    3. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-22.
    4. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    5. Hof, Andries F. & van Vuuren, Detlef P. & den Elzen, Michel G.J., 2010. "A quantitative minimax regret approach to climate change: Does discounting still matter?," Ecological Economics, Elsevier, vol. 70(1), pages 43-51, November.
    6. Wesseh, Presley K. & Lin, Boqiang, 2016. "Modeling environmental policy with and without abatement substitution: A tradeoff between economics and environment?," Applied Energy, Elsevier, vol. 167(C), pages 34-43.
    7. Rintaro Yamaguchi, 2019. "Intergenerational Discounting with Intragenerational Inequality in Consumption and the Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 957-972, August.
    8. Tol, Richard S.J. & Yohe, Gary W., 2009. "The Stern Review: A deconstruction," Energy Policy, Elsevier, vol. 37(3), pages 1032-1040, March.
    9. Yohe, Gary W. & Tol, Richard S. J. & Anthoff, David, 2009. "Discounting for Climate Change," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-22.
    10. Anthoff, David & Rose, Steven K. & Tol, Richard S. J. & Waldhoff, Stephanie, 2011. "The Time Evolution of the Social Cost of Carbon: An Application of FUND," Papers WP405, Economic and Social Research Institute (ESRI).
    11. Tol, Richard S.J., 2006. "The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund," Climate Change Modelling and Policy Working Papers 12058, Fondazione Eni Enrico Mattei (FEEM).
    12. Jussi Lintunen & Lauri Vilmi, 2021. "Optimal Emission Prices Over the Business Cycles," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(1), pages 135-167, September.
    13. Dominique Bureau, 2009. "Économie d’un accord global sur le climat : une introduction," Économie et Prévision, Programme National Persée, vol. 190(4), pages 1-19.
    14. Zhang, Hong & Jin, Gui & Zhang, Zhengyu, 2021. "Coupling system of carbon emission and social economy: A review," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    15. Tol, Richard S.J., 2024. "A meta-analysis of the total economic impact of climate change," Energy Policy, Elsevier, vol. 185(C).
    16. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    17. Valentina Bosetti & Enrica De Cian, 2013. "A Good Opening: The Key to Make the Most of Unilateral Climate Action," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 255-276, October.
    18. Fangzhi Wang & Hua Liao & Richard S.J. Tol & Changjing, "undated". "Endogenous preference for non-market goods in carbon abatement decision," Working Paper Series 0224, Department of Economics, University of Sussex Business School.
    19. Simon Dietz & Nicholas Stern, 2014. "Endogenous growth, convexity of damages and climate risk: how Nordhaus� framework supports deep cuts in carbon emissions," GRI Working Papers 159, Grantham Research Institute on Climate Change and the Environment.
    20. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpp:issued:v:39:y:2013:i:s2:p:67-80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iver Chong (email available below). General contact details of provider: https://www.utpjournals.press/loi/cpp .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.