Risk aversion, time preference, and the social cost of carbon

D. Anthoff, R.S.J. Tol, G.W. Yohe

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The 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. © 2009 IOP Publishing Ltd.
Original languageEnglish
Article number024002
Pages (from-to)1-7
JournalEnvironmental Research Letters
Volume4
Issue number2-2
DOIs
Publication statusPublished - 2009

Fingerprint

Carbon
Costs and Cost Analysis
carbon
Costs
Climate
environmental policy
Sensitivity analysis
sensitivity analysis
income
social cost
rate
parameter

Cite this

@article{f3ea0afc20614ec8a85c32f574dec5b5,
title = "Risk aversion, time preference, and the social cost of carbon",
abstract = "The 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. {\circledC} 2009 IOP Publishing Ltd.",
author = "D. Anthoff and R.S.J. Tol and G.W. Yohe",
year = "2009",
doi = "10.1088/1748-9326/4/2/024002",
language = "English",
volume = "4",
pages = "1--7",
journal = "Environmental Research Letters",
issn = "1748-9326",
publisher = "IOP Publishing Ltd.",
number = "2-2",

}

Risk aversion, time preference, and the social cost of carbon. / Anthoff, D.; Tol, R.S.J.; Yohe, G.W.

In: Environmental Research Letters, Vol. 4, No. 2-2, 024002, 2009, p. 1-7.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Risk aversion, time preference, and the social cost of carbon

AU - Anthoff, D.

AU - Tol, R.S.J.

AU - Yohe, G.W.

PY - 2009

Y1 - 2009

N2 - The 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. © 2009 IOP Publishing Ltd.

AB - The 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. © 2009 IOP Publishing Ltd.

U2 - 10.1088/1748-9326/4/2/024002

DO - 10.1088/1748-9326/4/2/024002

M3 - Article

VL - 4

SP - 1

EP - 7

JO - Environmental Research Letters

JF - Environmental Research Letters

SN - 1748-9326

IS - 2-2

M1 - 024002

ER -