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The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

27 Pages Posted: 16 Dec 2011  

Robert E. Kopp

Rutgers, The State University of New Jersey - New Brunswick/Piscataway

Alexander Golub

Environmental Defense

Nathaniel O. Keohane

Yale University - School of Management

Chikara Onda

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: 2011

Abstract

Drawing upon climate change damage functions previously proposed in the literature that we have calibrated to a common level of damages at 2.5 C, we examine the effect upon the social cost of carbon (SCC) of varying the specification of damages in a DICE-like integrated assessment model. In the absence of risk aversion, all of the SCC estimates but one agree within a factor of two. The effect of varying calibration damages is mildly sublinear. With a moderate level of risk aversion included, however, the differences among estimates grow greatly. By combining elements of different damage specifications and roughly taking into account uncertainty in calibration, we have constructed a composite damage function that attempts to approximate the range of uncertainty in climate change damages. In the absence of risk aversion, SCC values calculated with this function are in agreement with the standard quadratic DICE damage function; with a coefficient of relative risk aversion of 1.4, this damage function yields SCC values more than triple those of the standard function.

Keywords: Climate change, social cost of carbon

JEL Classification: Q54, Q58

Suggested Citation

Kopp, Robert E. and Golub, Alexander and Keohane, Nathaniel O. and Onda, Chikara, The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon (2011). Economics Discussion Paper No. 2011-22. Available at SSRN: https://ssrn.com/abstract=1973465 or http://dx.doi.org/10.2139/ssrn.1973465

Robert E. Kopp

Rutgers, The State University of New Jersey - New Brunswick/Piscataway ( email )

HOME PAGE: http://www.bobkopp.net/

Alexander Golub

Environmental Defense ( email )

New York, Nat'l Headquarters
257 Park Avenue South
New York, NY 10010
United States
202-387-3500 (Phone)

Nathaniel O. Keohane

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Chikara Onda

affiliation not provided to SSRN

No Address Available

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