Discussion Paper

No. 2011-30 | August 05, 2011
The Treatment of Risk and Uncertainty in the US Social Cost of Carbon for Regulatory Impact Analysis
(Published in Special Issue The Social Cost of Carbon)

Abstract

This note considers the treatment of risk and uncertainty in the recently established ‘social cost of carbon’ (SCC) for analysis of federal regulations in the United States. It argues that the analysis of the US Interagency Working Group on Social Cost of Carbon did not go far enough into the tail of low-probability, high-impact scenarios, and, via its approach to discounting, it mis-estimated climate risk, possibly hugely. Given the uncertainty about estimating the SCC, the note concludes by arguing that there is in fact much to commend an approach whereby a quantitative, long-term emissions target is chosen, and the price of carbon for regulatory impact analysis is then based on estimates of the marginal cost of abatement to achieve that very target.

Paper submitted to the special issue
The Social Cost of Carbon 
 

JEL Classification

Q54

Cite As

Simon Dietz (2011). The Treatment of Risk and Uncertainty in the US Social Cost of Carbon for Regulatory Impact Analysis. Economics Discussion Papers, No 2011-30, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-30

Assessment



Comments and Questions


Anonymous - Referee Report 1
November 08, 2011 - 09:12

See attached file


Simon Dietz - Reply to Referee Report 1
November 18, 2011 - 11:40

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Anonymous - Referee Report 2
January 20, 2012 - 10:47

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Simon Dietz - Reply to Referee Report 2
January 23, 2012 - 11:28

See attached file


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