Cited By (@RePEc)
 

Discussion Paper

No. 2011-36 | September 05, 2011
A Tale of Tails: Uncertainty and the Social Cost of Carbon Dioxide
(Published in Special Issue The Social Cost of Carbon)

Abstract

Recent thinking about the economics of climate change has concerned the uncertainty about the upper bound of both climate sensitivity to greenhouse gases and the damages that might occur at high temperatures. This argument suggests that the appropriate probability distributions for these factors may be fat-tailed. The matter of tail shape has important implications for the calculation of the social cost of carbon dioxide (SCCO2). In this paper a probabilistic integrated assessment model is adapted to allow for the possibility of a thin, intermediate or fat tail for both (i) the climate sensitivity parameter and (ii) the damage function exponent. Results show that depending on the tail shape of the climate sensitivity parameter the mean SCCO2 rises by 29 to 85 percent. Changes in the mean SCCO2 due to the adjustments to the damage function alone range from a reduction of 7 percent to a rise of 12 percent. The combination of both leads to rises of 33 to 115 percent. Greater rises occur for the upper percentiles of the SCCO2 estimates. Given the uncertainties in both the science and the economics of climate change different tail shapes deserve consideration due to their important implications for the range of possible values for the SCCO2.


Paper submitted to the special issue
The Social Cost of Carbon 
 

JEL Classification

Q54

Cite As

Jonathan Pycroft, Lucia Vergano, Chris W. Hope, Daniele Paci, and Juan Carlos Ciscar (2011). A Tale of Tails: Uncertainty and the Social Cost of Carbon Dioxide. Economics Discussion Papers, No 2011-36, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-36

Assessment



Comments and Questions


Anonymous - Referee Report 1
October 12, 2011 - 09:42

see attached file


J. Pycroft, L. Vergano, C. Hope, D. Paci and J. C. Ciscar - Reply to Referee Report 1
October 27, 2011 - 11:10

See attached file


Anonymous - Referee Report 2
October 14, 2011 - 11:40

See attached file


J. Pycroft, L. Vergano, C. Hope, D. Paci and J. C. Ciscar - Reply to Referee Report 2
October 27, 2011 - 11:12

See attached file


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