Social cost of carbon under shared socioeconomic pathways

Pu Yang,Zhifu Mi,Qiao-Mei Liang,Hua Liao,Bi-Ying Yu,Yun-Fei Yao,Yi-Ming Wei,Yun-Fei Cao,D'Maris Coffman

doi:10.1016/j.gloenvcha.2018.10.001

Abstract

Abstract The Social Carbon Cost (SCC) measures present value of future economic damages caused by an additional ton of carbon emissions, and is widely used by governments to design climate policies. Although the use of SCC is very extensive, its predictions are very difficult. Because the SCC is defined by social welfare associated with economic growth and population, its estimation is necessarily dependent on future assumptions that are difficult to project. Many approaches consider the impact of population or economic growth on the SCC, but these socioeconomic factors must be grounded on solid assumptions concerning political, technological and environmental developments. Over the past seven years, the climate change research community has established five plausible socioeconomic narratives, called ‘Shared Socioeconomic Pathways’ (SSPs), numbered SSP1–SSP5. These scenarios provide descriptions of how the future might unfold in several key areas. To this end, we use the Dynamic Integrated model of Climate and the Economy (DICE) to update the SCC under the five socioeconomic pathways, while also considering alternative damage functions and the social welfare discount rate to address uncertainty. The result of the China Climate Change integrated assessment model (C3IAM) were used to re-estimate parameters in DICE, therefore characterize the SSPs. The results show that, in a world developing towards regional rivalry (SSP3), the SCC today will likely double compared with other scenarios. If emerged developing countries will follow the same path as previous industrializations (SSP5), the SCC will experience a rapid increase after 2060. Inequality (SSP4) will experience low mitigation pressure under a sustainable development scenario (SSP1), while the historical development pattern (SSP2) will have a moderate SCC with higher uncertainty. The results can provide carbon price benchmarks for policy makers who hold different attitudes towards the future and can help address the need to avoid regional rivalries and fossil-fueled development, which may counteract mitigation efforts.

Highlights

After the Paris Agreement, countries have increasingly taken actions to address climate change
The Social Carbon Cost (SCC) represents the economic damage caused by an additional ton of carbon emissions and is widely used by governments to price carbon
We found that the scenario representing extreme regional rivalry (SSP3) will cause substantial increases in the SCC in the near term, indicating that if more trade tariffs are implemented due to increasing regional conflicts, the social carbon cost today will be underestimated

Summary

Introduction

The policy costs vary among countries and sectors, making it difficult to select the most worthwhile policies. This problem can be addressed by calculating the social cost of carbon (SCC), which balances the social costs resulting from emission reductions with the incremental costs of regulation policy. The IWG SCC estimates started in 2010 and were updated with new scientific developments in 2013 and 2016, resulting in policy benefits of more than $1 trillion (Nordhaus, 2017). The SCC is increasingly being adopted for regulations at the state level, resulting in regulatory policies in California, New York and Minnesota (California, 2016; Larson, 2016; Minnesota, 2016)

Methods

Results

Conclusion