Recalculating the Social Cost of Carbon

9 Pages Posted: 29 May 2018

See all articles by Soheil Shayegh

Soheil Shayegh

Bocconi University; European Institute on Economy and the Environment (EIEE)

Valentina Bosetti

Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Simon Dietz

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment

Johannes Emmerling

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE)

Christoph Hambel

Goethe University Frankfurt

Svenn Jensen

Oslo Metropolitan University

Holger Kraft

Goethe University Frankfurt

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM); Princeton University - Princeton Environmental Institute

Christian P. Traeger

University of Oslo - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; University of Oslo - Ragnar Frisch Centre for Economic Research; University of California, Berkeley - Department of Agricultural & Resource Economics

Rick van der Ploeg

University of Oxford

Date Written: May 28, 2018

Abstract

Over the last few decades, integrated assessment models (IAM) have provided insight into the relationship between climate change, economy, and climate policies. The limitations of these models in capturing uncertainty in climate parameters, heterogeneity in damages and policies, have given rise to skepticism about the relevance of these models for policy making. IAM community needs to respond to these critics and to the new challenges posed by developments in the policy arena. New climate targets emerging from the Paris Agreement and the uncertainty about the signatories’ commitment to Nationally Determined Contributions (NDCs) are prime examples of challenges that need to be addressed in the next generation of IAMs. Given these challenges, calculating the social cost of carbon requires a new framework. This can be done by computing marginal abatement cost in cost-effective settings which provides different results than those calculated using constrained cost-benefit analysis. Here we focus on the areas where IAMs can be deployed to asses uncertainty and risk management, learning, and regional heterogeneity in climate change impacts.

Keywords: Integrated Assessment Models, Climate Policy, Carbon, Uncertainty

JEL Classification: Q54

Suggested Citation

Shayegh, Soheil and Bosetti, Valentina and Dietz, Simon and Emmerling, Johannes and Hambel, Christoph and Jensen, Svenn and Kraft, Holger and Tavoni, Massimo and Traeger, Christian P. and van der Ploeg, Frederick, Recalculating the Social Cost of Carbon (May 28, 2018). FEEM Working Paper No. 19.2018. Available at SSRN: https://ssrn.com/abstract=3185991 or http://dx.doi.org/10.2139/ssrn.3185991

Soheil Shayegh (Contact Author)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

European Institute on Economy and the Environment (EIEE) ( email )

Via Bergognone, 34
Milan
Italy

Valentina Bosetti

Bocconi University

Via Gobbi 5
Milan, 20136
Italy

CMCC - Euro Mediterranean Centre for Climate Change

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Simon Dietz

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/dietzs

Johannes Emmerling

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE) ( email )

Via Bergognone, 34
Milan
Italy

Christoph Hambel

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Svenn Jensen

Oslo Metropolitan University ( email )

PO Box 4, St Olavs plass
Oslo, 0130
Norway

Holger Kraft

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
20123 Milan
Italy

Princeton University - Princeton Environmental Institute

22 Chambers Street
Princeton, NJ 08544-0708
United States

Christian P. Traeger

University of Oslo - Department of Economics ( email )

Norway

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 81679
Germany

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

Frederick Van der Ploeg

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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