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  Determining the social cost of carbon: Under damage and climate sensitivity uncertainty

Okullo, S. J. (2020): Determining the social cost of carbon: Under damage and climate sensitivity uncertainty. - Environmental and Resource Economics, 75, 1, 79-103.
https://doi.org/10.1007/s10640-019-00389-w

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 Creators:
Okullo, Samuel Jovan1, Author              
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1Potsdam Institute for Climate Impact Research, ou_persistent13              

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 Abstract: This article quantifies the impact on optimal climate policy, of both damage elasticity and equilibrium climate sensitivity uncertainty, under separable preferences for risk and intergenerational inequality. The primary findings are as follows. (1) Such preferences can depress the social cost of carbon (SCC) when calibration aims at matching actual economic outcomes, countering the prevailing view that the SCC is greater with separable than with conventional entangled preferences. (2) Damage elasticity uncertainty has larger effects on climate policy than equilibrium climate sensitivity uncertainty, even under high impact tail risk of the latter. (3) Risk aversion decisively strengthens optimal climate policy under joint damage and climate sensitivity uncertainty, than with a single source of uncertainty alone. Indeed, failing to account for the interaction between damage and climate sensitivity uncertainty underestimates the cost of climate change by more than US dollars 1 trillion.

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 Dates: 2020
 Publication Status: Finally published
 Pages: -
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: DOI: 10.1007/s10640-019-00389-w
PIKDOMAIN: RD3 - Transformation Pathways
eDoc: 8898
Research topic keyword: Carbon Pricing
Research topic keyword: Economics
Research topic keyword: Climate Policy
Model / method: Decision Theory
Organisational keyword: RD3 - Transformation Pathways
Working Group: Climate & Energy Policies
 Degree: -

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Title: Environmental and Resource Economics
Source Genre: Journal, SCI, Scopus
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Pages: - Volume / Issue: 75 (1) Sequence Number: - Start / End Page: 79 - 103 Identifier: Other: Springer Science+Business Media B.V.
Other: 1573-1502
ISSN: 0924-6460
CoNE: https://publications.pik-potsdam.de/cone/journals/resource/environmental-resource-economics
Publisher: Springer