CHECKING THE PRICE TAG ON CATASTROPHE: THE SOCIAL COST OF CARBON UNDER NON-LINEAR CLIMATE RESPONSE

Megan Ceronsky, David Anthoff, Cameron J. Hepburn () and Richard S.J. Tol ()

No FNU-87, Working Papers from Research unit Sustainability and Global Change, Hamburg University

Abstract: Research into the social cost of carbon emissions — the marginal social damage from a ton of emitted carbon — has tended to focus on “best guess” scenarios. Such scenarios generally ignore the potential for low-probability, high-damage events, which are critically important to determining optimal climate policy. This paper uses the FUND integrated assessment model to investigate the influence of three types of non-linear climate responses on the social cost of carbon: the collapse of the thermohaline circulation; the dissociation of oceanic methane hydrates; and climate sensitivities above “best guess” levels. We find that incorporating these impacts can increase the social cost of carbon by a factor of 20. Furthermore, our results suggest that the exclusive focus on thermohaline circulation collapse in the non-linear climate response literature is unwarranted, because other potential non-linear climate responses appear to be significantly more costly.

Keywords: climate change; catastrophe; non-linearity; impacts (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: Written 2005-08
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