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Climate Damage on Production or on Growth: What Impact on the Social Cost of Carbon?

Author

Listed:
  • Céline Guivarch

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Antonin Pottier

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

Recent articles have investigated with integrated assessment models the possibility that climate damage bears on productivity (TFP) growth and not on production. Here, we compare the impact of these alternative representations of damage on the social cost of carbon (SCC). We ask whether damage on TFP growth leads to higher SCC than damage on production ceteris paribus. To make possible a controlled comparison, we introduce a measure of aggregate damage, or damage strength, based on welfare variations. With a simple climate-economy model, we compare three damage structures: quadratic damage on production, linear damage on growth and quadratic damage on growth. We show that when damage strength is the same, the ranking of SCC between a model with damage on production and a model with damage on TFP growth is not unequivocal. It depends on welfare parameters such as the utility discount rate or the elasticity of marginal social utility of consumption.

Suggested Citation

  • Céline Guivarch & Antonin Pottier, 2017. "Climate Damage on Production or on Growth: What Impact on the Social Cost of Carbon?," Post-Print halshs-01612901, HAL.
    • Handle: RePEc:hal:journl:halshs-01612901
    DOI: 10.1007/s10666-017-9572-4
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01612901v1
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    Cited by:

    1. Dominika Czyz & Karolina Safarzynska, 2023. "Catastrophic Damages and the Optimal Carbon Tax Under Loss Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(2), pages 303-340, June.
    2. Nicolas Taconet & Céline Guivarch & Antonin Pottier, 2019. "Social Cost of Carbon under stochastic tipping points: when does risk play a role?," Working Papers 2019.11, FAERE - French Association of Environmental and Resource Economists.
    3. Richard S.J. Tol, 2020. "Kernel density decomposition with an application to the social cost of carbon," Working Paper Series 0720, Department of Economics, University of Sussex Business School.

    More about this item

    Keywords

    climate change; damage; social cost of carbon; growth; TFP; IAM;
    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
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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