Thanks for this. One thing that perplexes me about the Ricke et al. (2018) analysis is that the SCC for most African countries looks to be lower than for the USA (fig.2), whereas the general consensus seems to be that the impacts of climate change will have far worse effects on individuals’ utilities in Africa. So this makes me wonder have they properly captured the effect of marginal utility changing with income? I’m not an economist, so I don’t know how to judge this myself.
2. the social cost of carbon measures the cost to GDP—and if your GDP is not very big to start with then there’s not a big cost to you.
It is quite unintuitive/ disconcerting that the official social cost of carbon for the DRC (one of the poorest countries, 80 million people, close to the equator and particularly affected by climate change), only has a social cost of carbon of 30 cents per tonne, whereas the US has one of $40 - see:
As I said above, there are contributors to (true) social cost of carbon not fully captured by empirical, macroeconomic damage functions, and their likely impacts on the social cost of carbon (see Table S5 in the paper’s supplementary material and Table 1 in[21]). For instance:
Adjustment costs (short-term costs of adaptation)
Non-market damages (biodiversity loss, cultural losses, etc.)
Tipping points in the climate system (catastrophic climate events, hysteresis etc.)
High inertia effects of CO2 (ocean acidification, sea level rise)
General equilibrium effects (spillover, trade, etc.)
Macro-scale adaptation (long-term restructuring of economy)
Political instability and violent conflicts
Large migration flows
More extreme weather and natural disasters
Bresler finds that explicitly accounting for climate mortality costs triples the welfare costs of climate change.[22]
The highest social cost of carbon estimate in the literature is on the same order of magnitude ($1687[23]), and the highest figure amongst many in a recently published paper find that for 6 degrees of warming the cost will be (which has a substantial probability) is $21889 / per tonne) [24]
That’s why in the pessimistic version of my model increased the SCC by 10x (higher than most estimates).
Thanks for this. One thing that perplexes me about the Ricke et al. (2018) analysis is that the SCC for most African countries looks to be lower than for the USA (fig.2), whereas the general consensus seems to be that the impacts of climate change will have far worse effects on individuals’ utilities in Africa. So this makes me wonder have they properly captured the effect of marginal utility changing with income? I’m not an economist, so I don’t know how to judge this myself.
Excellent point
I think it’s a mixture of the following:
1. African countries are relatively small
2. the social cost of carbon measures the cost to GDP—and if your GDP is not very big to start with then there’s not a big cost to you.
It is quite unintuitive/ disconcerting that the official social cost of carbon for the DRC (one of the poorest countries, 80 million people, close to the equator and particularly affected by climate change), only has a social cost of carbon of 30 cents per tonne, whereas the US has one of $40 - see:
https://country-level-scc.github.io/explorer/
As I said above, there are contributors to (true) social cost of carbon not fully captured by empirical, macroeconomic damage functions, and their likely impacts on the social cost of carbon (see Table S5 in the paper’s supplementary material and Table 1 in[21]). For instance:
Adjustment costs (short-term costs of adaptation)
Non-market damages (biodiversity loss, cultural losses, etc.)
Tipping points in the climate system (catastrophic climate events, hysteresis etc.)
High inertia effects of CO2 (ocean acidification, sea level rise)
General equilibrium effects (spillover, trade, etc.)
Macro-scale adaptation (long-term restructuring of economy)
Political instability and violent conflicts
Large migration flows
More extreme weather and natural disasters
Bresler finds that explicitly accounting for climate mortality costs triples the welfare costs of climate change.[22]
The highest social cost of carbon estimate in the literature is on the same order of magnitude ($1687[23]), and the highest figure amongst many in a recently published paper find that for 6 degrees of warming the cost will be (which has a substantial probability) is $21889 / per tonne) [24]
That’s why in the pessimistic version of my model increased the SCC by 10x (higher than most estimates).