UAE, KSA among top nations to suffer from social cost of carbon
affects people and ecosystems around the world, today and in the future. However, these impacts are not included in market prices, creating an environmental externality whereby consumers of fossil fuel energy do not pay for and are unaware of the true costs of their consumption,” added Ricke.
Ricke elaborated further, stating that “evaluating the economic cost associated with climate is valuable on a number of fronts, as these estimates are used to inform US environmental regulation and rulemakings.”
Regarding the process of estimation, the lead author informed DNE that it is a four step process: first, a socio-economic module wherein the team of researchers defined the future evolution of the economy,including emissions of CO2, without the impact of climate change and without climate policy.
Second, a climate module wherein we estimate how the earth system will respond to emissions of CO2 and other anthropogenic forces.
Third, a damages module, wherein the economic damages due to changes in the earth system are quantified.
Fourth and finally, a discounting module, wherein a time series of future damages is compressed into a single present value using social discounting.
“We estimated the economic impacts using empirical, macroeconomic damage functionsrelationships between economic growth and changes in climate based on past observations. This has the advantage of capturing interactions and a multitude of small or difficult-to-identify impacts, but requires assuming that future damages will resemble those associated with temperature fluctuations in the past. It doesn’t include longerterm impacts of rising CO2 like ocean acidification or sea level rise. These will be important extensions of the model in the future,” Ricke concluded.