There is an increasing interest in the economics of climate change,
and the marginal damage costs of emissions, known as the Social Cost of
Carbon (SCC). In 2002, the UK Government recommended an SCC for
policy appraisal. A recent review of this SCC was commissioned and summarised
in this paper. The authors conclude that SCC estimates span at
least three orders of magnitude, reflecting uncertainties in climate change
and choices of key parameters/variables (discount rate, equity weighting
and risk aversion). Estimates also vary due to their coverage, and a risk
matrix was developed to compare climate change effects (predictable to
major events) against impacts (market, non-market and socially contingent).
From several lines of evidence, the current lower SCC value is
considered a reasonable lower benchmark for a global decision committed
to reducing the threat of dangerous climate change. An upper benchmark
was more difficult to deduce, though the risk of high values was considered
significant. It is currently impossible to provide a central value with
confidence. The study also reviewed the use of the SCC in policy, from
project appraisal to long-term climate policy, and used stakeholder interviews
to elicit views. A wide diversity of responses was found: whilst
most considered some values are needed for policy appraisal, nearly all had
reservations for long-term policy. From this, the authors propose a two
tier approach. The economic benefits of climate change should be considered
when setting long-term policy, but a wider framework is needed (i.e.
than cost-benefit analysis). This should include a disaggregated analysis