蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Risk-Adjusted Carbon Price
蝌蚪网 Review
vol. 111,
no. 9, September 2021
(pp. 2782–2810)
Abstract
The social cost of carbon is the expected present value of damages from emitting one ton of carbon today. We use perturbation theory to derive an approximate tractable expression for this cost adjusted for climatic and economic risk. We allow for different aversion to risk and intertemporal fluctuations, skewness and dynamics in the risk distributions of climate sensitivity and the damage ratio, and correlated shocks. We identify prudence, insurance, and exposure effects, reproduce earlier analytical results, and offer analytical insights into numerical results on the effects of economic and damage ratio uncertainty and convex damages on the optimal carbon price.Citation
van den Bremer, Ton S., and Frederick van der Ploeg. 2021. "The Risk-Adjusted Carbon Price." 蝌蚪网 Review 111 (9): 2782–2810. DOI: 10.1257/aer.20180517Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- G22 Insurance; Insurance Companies; Actuarial Studies
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O44 Environment and Growth
- Q35 Hydrocarbon Resources
- Q51 Valuation of Environmental Effects
- Q54 Climate; Natural Disasters and Their Management; Global Warming