The Marginal Damage Costs of Different Greenhouse Gases: An Application of Fund

36 Pages Posted: 18 Dec 2011

See all articles by Stephanie T. Waldhoff

Stephanie T. Waldhoff

affiliation not provided to SSRN

David Anthoff

University of California, Berkeley - Energy and Resources Group

Steven Rose

Electric Power Research Institute

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM); Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change; University of Hamburg - Centre for Marine and Climate Research (ZMK); Princeton University

Date Written: 2011

Abstract

We use FUND 3.5 to estimate the social cost of carbon dioxide, methane, nitrous oxide, and sulphur hexafluoride emissions. We show the results of a range of sensitivity analyses, focusing on the impact of carbon dioxide fertilization. Ignored in previous studies of the social cost of greenhouse gas emissions, carbon dioxide fertilization has a positive effect at the margin, but only for carbon dioxide. Because of this, the ratio of the social cost of a greenhouse gas to that of carbon dioxide (the global damage potential) is higher - that is, previous papers underestimated the importance of reducing non-carbon dioxide greenhouse gas emissions. When leaving out carbon dioxide fertilization, our estimate of the social cost of methane is comparable to previous estimates. Our estimate of the global damage potential of methane is close to the estimates of the global warming potential because discounting roughly cancels carbon dioxide fertilization. Our estimate of the social cost of nitrous oxide is higher than previous estimates, also when omitting carbon dioxide fertilization. This is because, in FUND, vulnerability to climate change falls over time (with development) while in the long run carbon dioxide is a more potent greenhouse gas than nitrous oxide. Our estimate of the global damage potential of nitrous oxide is larger than the global warming potential because of carbon dioxide fertilization, discounting, and rising atmospheric concentrations of both gases. Our estimate of the social cost of sulphur hexafluoride is similar to the one previous estimate. Its global damage potential is higher than the global warming potential because of carbon dioxide fertilization, discounting, and rising concentrations.

Keywords: climate change, social cost, carbon dioxide, methane, nitrous oxide, sulphur hexafluoride

JEL Classification: Q54

Suggested Citation

Waldhoff, Stephanie T. and Anthoff, David and Rose, Steven and Tol, Richard S. J., The Marginal Damage Costs of Different Greenhouse Gases: An Application of Fund (2011). Economics Discussion Paper No. 2011-43, Available at SSRN: https://ssrn.com/abstract=1974111 or http://dx.doi.org/10.2139/ssrn.1974111

Stephanie T. Waldhoff (Contact Author)

affiliation not provided to SSRN

David Anthoff

University of California, Berkeley - Energy and Resources Group ( email )

United States

Steven Rose

Electric Power Research Institute

3412 Hillview Avenue
P.O. Box 10412
Palo Alto, CA 94304-1395
United States

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31 20 444 9555 (Phone)
+31 20 444 9553 (Fax)

Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change

Pittsburgh, PA 15213-3890
United States

University of Hamburg - Centre for Marine and Climate Research (ZMK)

Troplowitzstrasse 7
D-22529 Hamburg
Germany

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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