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 match observed behavior, 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.

Author names: 
Anthoff, D.
Tol, R. S. J.
Yohe, G. W.
Year: 
2008
Reference: 

Anthoff, D., Tol, R. S. J., & Yohe, G. W. (Eds.). (2008). Risk Aversion, time preference, and the social cost of carbon. Retrieved from http://hdl.handle.net/10419/50101 =X;http://www.esri.ie/UserFiles/publications/20080904135651/WP252.pdf

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