The social cost of carbon revisited

By Robert S. Pindyck. Journal of Environmental Economics and Management, 2016

258 citations recorded by the source corpus.

An estimate of the social cost of carbon (SCC) is key to climate policy. But how should we estimate the SCC? A common approach is to use an integrated assessment model (IAM) to simulate time paths for the atmospheric CO2 concentration, its impact on global mean temperature, and the resulting reductions in GDP and consumption. I have argued that IAMs have serious deficiencies that make them poorly suited for this job, but what is the alternative? I present a more transparent approach to estimating an average SCC, which I argue is a more useful guide for policy than the marginal SCC derived from IAMs. I rely on a survey through which I elicit expert opinions regarding (1) the probabilities of alternative economic outcomes of climate change, including extreme outcomes such as a 20% or greater reduction in GDP, but not the particular causes of those outcomes; and (2) the reduction in emissions required to avert an extreme outcome. My estimate of the average SCC is the ratio of the present value of damages from an extreme outcome to the total emission reduction needed to avert such an outcome. I discuss the survey instrument, explain how experts were identified, and present results. I obtain SCC estimates of $200/mt or higher, but the variation across experts is large. Trimming outliers and focusing on experts who expressed a high degree of confidence in their answers yields lower SCCs, $80 to $100/mt.

Subfields: Economics and Econometrics, Environmental Engineering, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/248932a0bdd3efb00f2460e857e29d497d9f4fb4

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Citations in the corpus

Does carbon pricing reduce emissions? A review of ex-post analyses (2021, background): “A recent study surveyed environmental experts on their estimation of SCC, which ranged between $80 and $300 ton−1 (Pindyck 2019).”
Climate economics support for the UN climate targets (2020, methodology): “This updated damage function is closer to, yet still more conservative than, recent micro-econometric studies 47 and expert elicitations on the topic 48,49 , which estimate damages upwards of around 10% of global GDP for a 3°C temperature increase.”