Risk aversion, time preference, and the social cost of carbon

By David Anthoff, Richard S. J. Tol, Gary W. Yohe. 2009

608 citations recorded by the source corpus.

The Stern Review reported a social cost of carbon of over $300/tC, calling for ambitious climate policy. We here conduct a systematic sensitivity analysis of this result on two crucial parameters: the rate of pure time preference, and the rate of risk aversion. We show that the social cost of carbon lies anywhere in between 0 and $120 000/tC. However, if we restrict these two parameters to matching observed behaviour, an expected social cost of carbon of $60/tC results. If we correct this estimate for income differences across the world, the social cost of carbon rises to over $200/tC.

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

View Paper: https://www.semanticscholar.org/paper/ec310f94779e58cf20365b5fe5b0a906a614b17d

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In Economics and Econometrics

In Renewable Energy, Sustainability and the Environment

Citations in the corpus

The economics (or lack thereof) of aerosol geoengineering (2009, methodology): “One common method of choosing these two parameters is to adopt a “descriptive approach” where observed quantities in the economic system are used to infer consistent parameter values (Anthoff et al. 2008; Nordhaus 2008; Keller et al. 2007).”
Targets for global climate policy: an overview (2013, background): “Anthoff et al. (2009a) and Anthoff and Tol (2010b) explore equity weights in the context of a regional decision maker.”
Implications of incorporating air-quality co-benefits into climate change policymaking (2010, background): “Valuation of health and life is made worse by disagreement over the appropriate discount rate to use (Stern and Taylor 2007, Nordhaus 2007, Anthoff et al 2009).”
Discounting climate change (2008, background): “paper ( Anthoff et al. 2008 ), we only considered the pure rate of time preference and the income”
The impact of climate change and the social cost of carbon (2018, background): “Estimates of the social cost of carbon are also determined by ethical parameters such as the rates of pure time preference, risk aversion, and inequality aversion (Anthoff et al., 2009).”
Optimal climate change mitigation under long-term growth uncertainty: Stochastic integrated assessment and analytic findings (2014, background): “…predominantly addresses uncertainty by averaging deterministic Monte-Carlo runs (Richels et al. 2004, Hope 2006, Nordhaus 2008, Dietz 2009, Anthoff et al. 2009, Anthoff & Tol 2009, Ackerman et al. 2010, Interagency Working Group on Social Cost of Carbon 2010, Pycroft et al. 2011, Kopp et…”