Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/198952
Authors: 
van den Bremer, Ton S.
van der Ploeg, Rick
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7592
Abstract: 
We use perturbation methods to derive a rule for the optimal risk-adjusted social cost of carbon (SCC) that incorporates the effects of uncertainties associated with climate and the economy from a calibrated DSGE model. We allow for different aversions to risk and intertemporal fluctuations, convex damages, uncertainties in economic growth, atmospheric carbon, climate sensitivity and damages, their correlations, and distributions that are skewed in the longer run to capture long-run climate feedbacks. Our non-certainty-equivalent rule for the SCC incorporates precaution, risk insurance, and climate sensitivity and damage rate hedging effects to deal with future economic and climatic and damage risks.
Subjects: 
precaution
insurance
hedging
economic
climatic and damage uncertainties
skewness
mean reversion
correlated risks
risk aversion
intergenerational inequality aversion
convex damages
JEL: 
H21
Q51
Q54
Document Type: 
Working Paper

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