Estimating the economic impact of the permafrost carbon feedback

The permafrost carbon feedback is not currently taken into account in economic assessments of climate change, yet it could have important implications for the social cost of carbon and the associated choice of the optimal greenhouse gas emissions pathway. Although this feedback is still imperfectly known, there are enough estimates of its potential strength to now include it in our assessments. In this paper, I present a model of the permafrost carbon feedback and integrate it in the DICE Integrated Assessment Model to examine its consequences. I find that doing so increases the social cost of carbon by 10-20% in the base case scenario, but that this impact is much more signifcant in the case of a more convex damage function and can reach up to 220%. It follows that setting industrial emissions targets without taking into account the permafrost carbon feedback would lead to excessive atmospheric carbon: I find that it increases the optimal emissions rate by c. 8 percentage points on average over the period 2015-2100. These results are yet another illustration of the crucial role of discounting and damage functions in economic assessments of climate change but also make a clear case for including the permafrost carbon feedback in the current debate about the appropriate stringency of climate mitigation commitments.