Abstract
The social cost of carbon (SCC) is the monetized damage from emitting one unit of CO2 to the atmosphere, often obtained from computational Integrated Assessment Models (IAMs). We develop a closed-form formula that approximates the SCC for a general economy, and then explore the capacity of the analytical approach to capture the key SCC drivers and thus to replicate the results of the deterministic IAMs. The formula explains the parameter-driven SCC variation of a mainstream IAM without a systematic bias. The sensitivity analysis identifies and measures the performance limits of the closed-form formulas. We then use the analytic formula to structurally interpret a distribution of SCCs from deterministic IAMs, and develop an analytical breakdown and quantification of how different sets of parameters contribute to the SCC distribution. This allows the user of the formula to evaluate where particular parameter choices tend to place the resulting SCC outcome in the distribution of outcomes for the universe of deterministic IAMs.
Original language | English |
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Pages (from-to) | 75-94 |
Number of pages | 20 |
Journal | Journal of Environmental Economics and Management |
Volume | 77 |
DOIs | |
Publication status | Published - 1 May 2016 |
Externally published | Yes |
Bibliographical note
Funding Information:The authors thank the Editor (Till Requate), two anonymous reviewers, Steve Newbold and Rick van der Ploeg for comments on the manuscript. They also thank participants at the 2013 EAERE conference in Toulouse, the 2013 EAERE FEEM VIU European Summer School in Venice and seminar participants at Tilburg University. Reyer and Inge thank the Norwegian Research Council for financial support. While carrying out this research, we have been associated with CREE-Oslo Center for Research on Environmentally friendly Energy. Matti is grateful for funding from the Academy of Finland project 140776/Ficca , and from the Aalto University project SAGA .
Publisher Copyright:
© 2016 Elsevier Inc.
Funding
The authors thank the Editor (Till Requate), two anonymous reviewers, Steve Newbold and Rick van der Ploeg for comments on the manuscript. They also thank participants at the 2013 EAERE conference in Toulouse, the 2013 EAERE FEEM VIU European Summer School in Venice and seminar participants at Tilburg University. Reyer and Inge thank the Norwegian Research Council for financial support. While carrying out this research, we have been associated with CREE-Oslo Center for Research on Environmentally friendly Energy. Matti is grateful for funding from the Academy of Finland project 140776/Ficca , and from the Aalto University project SAGA .
Keywords
- Climate change
- Integrated assessment models
- Social cost of carbon