Valuing the social cost of carbon: Do economists really care about climate change?

Author/s Andrea Molocchi
Publishing Year 2023 Issue 2023/2 Language English
Pages 36 P. 41-76 File size 459 KB
DOI 10.3280/EFE2023-002003
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The aim of the article is to analyse the scientific literature of the last decade on the social cost of carbon to identify and discuss the best values representing the external cost of CO2 emis-sions calculated with a damage valuation approach, to use in cost-benefit analysis and in other external costs applications, such as Life Cycle Assessment. The social cost of carbon repre-sents the present value of the global damages of climate change attributable to the emission of an additional ton of carbon dioxide into the atmosphere. The measurement of the social cost of carbon is fundamental in the transition to a net zero emissions economy because it allows bal-ancing the costs of investments needed for decarbonization with their benefits in terms of avoided climate damages. The paper develops and applies a method for identifying the best social cost of carbon estimates, that starts from study reviews conducted within institutional processes (IPCC, OECD, US Government bodies), to then analyse the study reviews made in academic or research contexts and only in the end it delves into selected academic studies that provide original estimates of the social cost of carbon. The method allowed to identify and dis-cuss a robust even if conservative estimate of the social cost of carbon for emissions in the period 2020-2080, recently elaborated by the US Environmental Protection Agency, that can be used worldwide, for example to update the reference external cost values for CO2 emis-sions recommended by the European Commission Handbook on external cost of transport.

Keywords: social cost of carbon, externalities, cost-benefit analysis, climate damages, climate risk, literature review

Jel codes: Q48, Q54, Q58, H23, D61, D62

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Andrea Molocchi, Valuing the social cost of carbon: Do economists really care about climate change? in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 2/2023, pp 41-76, DOI: 10.3280/EFE2023-002003