Abstract
We explore the implications of recent empirical findings about CO2 fertilization and climate sensitivity on the social cost of carbon (SCC) in the FUND model. New compilations of satellite and experimental evidence suggest larger agricultural productivity gains due to CO2 growth are being experienced than are reflected in FUND parameterization. We also discuss recent studies applying empirical constraints to the probability distribution of equilibrium climate sensitivity and we argue that previous Monte Carlo analyses in IAMs have not adequately reflected the findings of this literature. Updating the distributions of these parameters under varying discount rates is influential on SCC estimates. The lower bound of the social cost of carbon is likely negative and the upper bound is much lower than previously claimed, at least through the mid-twenty-first century. Also the choice of discount rate becomes much less important under the updated parameter distributions.
Highlights
The marginal social cost of carbon dioxide emissions, usually shortened to the social cost of carbon (SCC), is typically derived using integrated assessment models (IAMs)
We confine our analysis to the FUND model, since it has the appropriate structure to allow CO2 fertilization benefits, and we examine changes in the SCC based on new parameter distributions
We only show the 3.0% discount rate case since the relative changes are similar for the other discount rates
Summary
The marginal social cost of carbon dioxide emissions, usually shortened to the social cost of carbon (SCC), is typically derived using integrated assessment models (IAMs). PAGE incorporates the possibility of catastrophic damages due to abrupt and extreme “tipping point” events in the form of a long upper tail of costs at positive probabilities that the other models assume to be zero These differences imply SCC estimates with a predictable ranking, from lowest to highest: FUND, DICE and PAGE. The assumed structure of the damage function is critical (Marten 2011), as is the choice of equilibrium climate sensitivity (ECS), which represents the long-term temperature change from doubling atmospheric CO2, after allowing sufficient time for the deep ocean to respond to surface warming Choices of these parameters dominate SCC estimates (Webster et al 2008; Wouter et al 2012).2 Anthoff and Tol (2013) further report that agricultural productivity and air conditioning energy demand are critical parameterizations for determining the SCC in FUND. Such distributions still induce proportionately large changes in SCC and causes sign changes, but the absolute changes are very small because the SCC itself collapses to a very small amount
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
