The U.S. Government’s Social Cost of Carbon Estimates after Their First Two Years: Pathways for Improvement

Kopp, Robert; Mignone, Bryan K.

doi:10.5018/economics-ejournal.ja.2012-15

Cited by 46 publications

(33 citation statements)

References 49 publications

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“…Later in the 21st century, other damage specifications, including both D and Xbu in the risk neutral case, exhibit a similar phenomenon (Figure 10). These examples provide a concrete illustration of the concerns about non-convex damage functions raised by Baumol (1972) in the context of the social cost of pollution generically and by Kopp and Mignone (2012) in the context of the SCC. With non-convex damage functions, emissions and growing consumption in the reference scenario can carry temperature well over an inflection point beyond which the marginal damages associated with additional warming start decreasing.…”

Section: Resultsmentioning

confidence: 99%

The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

et al. 2012

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Drawing upon climate change damage specifications previously proposed in the literature that the authors have calibrated to a common level of damages at 2.5°C, the authors examine the effect upon the social cost of carbon (SCC) of varying damage specifications in a DICE-like integrated assessment model. They find that SCC estimates are highly sensitive to uncertainty in extrapolating damages to high temperatures at moderate-to-high levels of risk aversion, but only modestly so at low levels of risk aversion. While in the absence of risk aversion, all of the SCC estimates but one agree within a factor of two, with a moderate level of risk aversion included, the differences among estimates grow greatly. For example, one composite damage specification, combining elements of different literature-derived specifications and roughly taking into account calibration uncertainty, yields SCC values 32% higher than the standard quadratic DICE damage function in the absence of risk aversion. With a coefficient of relative risk aversion of 1.4, however, the same uncertain specification yields SCC values almost triple those of the standard function. The authors conclude that failure to consider damages uncertainty and risk aversion jointly can lead to significant underestimation of the SCC.Special Issue The Social Cost of Carbon JEL Q54, Q58

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Section: Resultsmentioning

confidence: 99%

The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

et al. 2012

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“…government regulatory bodies use estimates for the SCC that were determined by the U.S. Interagency Working Group (IWG) on the Social Cost of Greenhouse Gas Emissions (IWG 2010;IWG 2015) when formulating policy (GAO 2014;Kopp and Mignone 2012). 36 The SCC estimates from the IWG represent global future damages from GHG emitted in a particular year, with the future damages calculated in present value terms using a selected range of discount rates.…”

Section: Greenhouse Gas Emissions Reduction Benefitsmentioning

confidence: 99%

A Prospective Analysis of the Costs, Benefits, and Impacts of U.S. Renewable Portfolio Standards

Mai

Wiser

Barbose

et al. 2016

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PREFACEThis is one report in a series that explores the costs, benefits, and other impacts of state renewable portfolio standards (RPS), both retrospectively and prospectively. The first report, A Survey of State-Level Cost and Benefit Estimates of Renewable Portfolio Standards, published in 2014, comprehensively summarized historical RPS compliance costs, drawing in part on estimates developed by utilities and state regulatory agencies. The study also reviewed analyses of the broader societal benefits and impacts of several states' RPS policies, typically conducted for or by the regulatory agencies or RPS administrators in those states. However, the small number of such studies, and their widely varying methods and scopes, ultimately limited the ability to compare benefits across states or to generalize beyond the specific studies performed. That limitation set the stage for future reports.The second report in the series, A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards, published in January 2016, analyzed historical benefits and impacts of renewable energy (RE) used to meet all state RPS policies, in aggregate, employing a consistent and well-vetted set of methods and data sets. The analysis focuses on three specific benefits: air pollution, greenhouse gas emissions, and water use. It also analyzes three other impacts: gross job additions, wholesale electricity market price suppression, and natural gas price suppression. These are an important subset, but by no means a comprehensive set, of all possible effects associated with RPS policies. That report did not include a comparison of costs and benefits of renewables used to meet RPS policies, and nor did it assess the potential costs, benefits, and impacts prospectively based on future increases in RPS targets.The present report fills that gap by evaluating the future costs, benefits, and other impacts of renewable energy used to meet current state RPS polices. It also examines a future scenario where RPSs are expanded. The analysis examines changes in electric system costs and retail electricity prices, which include all fixed and operating costs, including capital costs for all renewable, non-renewable, and supporting (e.g., transmission and storage) electric sector infrastructure; fossil fuel, uranium, and biomass fuel costs; and plant operations and maintenance expenditures. The analysis uses the same framework as the second report to analyze three specific benefits: air pollution, greenhouse gas emissions, and water use. It also analyzes two other impacts, RE workforce and economic development, and natural gas price suppression.The terminology applied in this series does not align precisely with the traditional concepts of costs and benefits, but rather is a function of how RPS programs have often been evaluated in practice. This analysis series, particularly the present report, evaluates renewable energy used to meet RPS policies in terms of costs, benefits, and other impacts:• Cost metrics presented in this r...

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“…There is a very wide range of uncertainty in estimates of the SCC due to the difficulty of assessing future policies, economic developments, the climate response to CO 2 forcing, and other assumptions used in the analysis (Tol 2005;Kopp and Mignone 2012). The SCC acknowledges the many uncertainties involved and the need to update SCC estimates over time to reflect advances in the science and economics of climate impacts (IWG SCC 2010, p. 32).…”

Section: Interagency Memo On the Social Cost Of Carbonmentioning

confidence: 99%

“…The estimates concern the monetized climatic benefits of regulations for the transportation, electricity, and other economic sectors that reduce carbon emissions. Since formal publication of the SCC, it has been employed in more than 20 regulations ranging from fuel economy standards for vehicles to air pollution regulations for power plants to energy efficiency standards for appliances and equipment (Kopp and Mignone 2012).…”

Section: Introductionmentioning

confidence: 99%

Value of information for climate observing systems

et al. 2013

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The Interagency Working Group Memo on the social cost of carbon is used to compute the value of information (VOI) of climate observing systems. A generic decision context is posited in which society switches from a business as usual (BAU) emissions path to a reduced emissions path upon achieving sufficient confidence that a trigger variable exceeds a stipulated critical value. Using assessments of natural variability and uncertainty of measuring instruments, it is possible to compute the time at which the required confidence would be reached under the current and under a new observing system, if indeed the critical value is reached. Economic damages (worldwide) from carbon emissions are computed with an integrated assessment model. The more accurate observing system acquires the required confidence earlier and switches sooner to the reduced emissions path, thereby avoiding more damages which would otherwise be incurred by BAU emissions. The difference in expected net present value of averted damages under the two observing systems is the VOI of the new observing system relative to the existing system. As illustration, the VOI for the proposed spaceborne CLARREO system relative to current space-borne systems is computed. Depending on details of the decision context, the VOI ranges from 2 to 30 trillion US dollars.

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The U.S. Government’s Social Cost of Carbon Estimates after Their First Two Years: Pathways for Improvement

Cited by 46 publications

References 49 publications

The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

The Influence of the Specification of Climate Change Damages on the Social Cost of Carbon

A Prospective Analysis of the Costs, Benefits, and Impacts of U.S. Renewable Portfolio Standards

Value of information for climate observing systems

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