Uncertainties in the Parameters for Carbon Dioxide Pricing Estimates and Environmental Damage
“Social cost of carbon” (SCC), which is parameter that assesses the per metric ton carbon dioxide (tCO2) damage caused, has been estimatedat $21 for the year 2010,(Interagency Working Group, 2010) in 2007 dollars, by a U.S. government working group. This cost estimate is equal to about $0.21 per gallon of gasoline. What comes forth in the study is that SCC is low to the point that the climate risks can be addressed by inexpensive measures.(Ackerman & Stanton, 2012)
The Interagency Working Group studied the climate economics using three models: Dynamic Integrated model of Climate and the Economy (DICE), Framework for Uncertainty, Negotiation and Distribution (FUND), and Policy Analysis of the Greenhouse Effect (PAGE)(Ackerman & Stanton, 2012). The same five scenarios were run on the models in Monte Carlo simulation to study the climate sensitivity and many other uncertainties using a range of values. The SCC under their “central case” viz. the mean value averaged across the five scenarios, was $28/tCO2 in DICE,$6 in FUND, and $30 in PAGE. The average of the three model value of SCC came forth as $21.
There are a few major areas that affect the calculations for SCC which might vary widely with the $21 estimate mentioned above viz. the greenhouse gases sensitivity of climate; the level of damages possibly occurring at low temperatures; and at high temperatures.
(I.C. RS 3573)