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Calculating the social cost of carbon

Author

Listed:
  • Chris Hope

    (Judge Business School, University of Cambridge)

  • David Newbery

    (Faculty of Economics, University of Cambridge)

Abstract

The paper1 discusses the determination of the social cost of carbon (SCC) using the PAGE2002 model used in the Stern Review. The SCC depends sensitively on assumptions about future economic development, the range and likelihood of economic and social damage arising from climate change at future dates and the discount rate to apply to that damage. The paper critically examines the choice of pure time preference and the weight to place on damage experienced by other countries in the distant future. Key conclusions are that the SCC rises at about 2.4% p.a. and the range of plausible estimates for the SCC is wide. The SCC is sensitive to a number of factors, significantly the equilibrium temperature rise for a doubling of CO2 concentration, the pure rate of time preference, the non-economic impact, the inequality weighting parameter and the half-life of global warming. Within the model the SCC appears surprisingly insensitive to the emissions scenario for reasons that are explained. The paper points out that methane and SF6 are also powerful GHGs whose impact can be estimated within the model.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chris Hope & David Newbery, 2006. "Calculating the social cost of carbon," Working Papers EPRG 0720, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg0720
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    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp0720.pdf
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    Citations

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    Cited by:

    1. Lázaro Touza, Lara E. & Zoghby, Michel S., 2014. "Climate Change: Risky Business? /Cambio Climático: ¿Un negocio de alto riesgo?," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 32, pages 1043-1070, Septiembr.
    2. Francesco Bosello & Carlo Carraro & Enrica De Cian, 2010. "Climate Policy And The Optimal Balance Between Mitigation, Adaptation And Unavoided Damage," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 71-92.
    3. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    4. Jamasb, T. & Kiamil, H. & Nepal, R., 2008. "Hot Issue and Burning Options in Waste Management: A Social Cost Benefit Analysis of Waste-to-Energy in the UK," Cambridge Working Papers in Economics 0801, Faculty of Economics, University of Cambridge.
    5. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
    6. Nepal, Rabindra, 2011. "The roles and potentials of renewable energy in less-developed economies," MPRA Paper 31878, University Library of Munich, Germany, revised 29 Jun 2011.
    7. Isa, Selma Setsumi & Lima, Orlando Fontes & Vidal Vieira, José Geraldo, 2021. "Urban consolidation centers: Impact analysis by stakeholder," Research in Transportation Economics, Elsevier, vol. 90(C).
    8. Asbjørn Aaheim & Taoyuan Wei & Bård Romstad, 2017. "Conflicts of economic interests by limiting global warming to +3 °C," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(8), pages 1131-1148, December.

    More about this item

    Keywords

    Climate change; social impacts; carbon price; rate of pure time preference.;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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