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Risk aversion, time preference, and the social cost of carbon
journal contribution
posted on 2023-06-08, 11:05 authored by David Anthoff, Richard TolRichard Tol, Gary W YoheThe 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.
History
Publication status
- Published
Journal
Environmental Research LettersISSN
1748-9326Publisher
Institute of PhysicsExternal DOI
Issue
2Volume
4Department affiliated with
- Economics Publications
Full text available
- No
Peer reviewed?
- Yes