National social cost of carbon: An application of FUND

In Chang Hwang and Richard Tol

Papers from arXiv.org

Abstract: This paper presents a refined country-level integrated assessment model, FUND 3.9n, that extends the regional FUND 3.9 framework by incorporating sector-specific climate impact functions and parametric uncertainty analysis for 198 individual countries. The model enables estimation of the national social cost of carbon (NSCC), capturing heterogeneity across nations from economic structure, climate sensitivity, and population exposure. Our results demonstrate that both the NSCC and the global sum estimates are highly sensitive to damage specifications and preference parameters, including the pure rate of time preference and relative risk aversion. Compared to aggregated single-sector approaches, the disaggregated model with uncertainty yields higher values of the NSCC for low- and middle-income countries. The paper contributes to the literature by quantifying how sector-specific vulnerabilities and stochastic variability amplify climate damages and reshape global equity in the distribution of the NSCC. The NSCCs derived from our model offer policy-relevant metrics for adaptation planning, mitigation target setting, and equitable burden-sharing in international climate negotiations. This approach bridges the gap between globally harmonized carbon pricing and nationally differentiated climate impacts, providing a theoretically grounded and empirically rich framework for future climate policy design.

Date: 2025-09
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