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New article : Climate Damage on Production or on Growth : What Impacton the Social Cost of Carbon ?

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Recent articles have investigated with integratedassessment models the possibility that climate damage bearson productivity (TFP) growth and not on production. Here,we compare the impact of these alternative representationsof damage on the social cost of carbon (SCC). We askwhether damage on TFP growth leads to higher SCC thandamage on production ceteris paribus. To make possible acontrolled comparison, we introduce a measure of aggregatedamage, or damage strength, based on welfare variations. Witha simple climate-economy model, we compare three dam-age structures : quadratic damage on production, linear dam-age on growth and quadratic damage on growth. We showthat when damage strength is the same, the ranking of SCCbetween a model with damage on production and a modelwith damage on TFP growth is not unequivocal. It dependson welfare parameters such as the utility discount rate or theelasticity of marginal social utility of consumption.

Keywords : Climate change - Damage - Social cost of carbon - Growth - TFP - IAM

Online access to the article here