SERE seminar: The social cost of carbon with economic and climate risks


With Dr. Thomas S. Lontzek, University of Zurich

Date: 23 February 2016

Time: 14.00-15.00

Venue: Royal Swedish Academy of Sciences (KVA), Linné Hall, Lilla Frescativägen 4A, Stockholm (directions)

After the seminar there will be coffee and mingle.

Download seminar invitation here

Abstract: There is great uncertainty about future climate conditions and the appropriate policies for managing interactions between the climate and the economy. We develop a multidimensional computational model to examine how uncertainties and risks in the economic and climate systems affect the social cost of carbon (SCC)—that is, the present value of the marginal damage to economic output caused by carbon emissions. The SCC is substantially increased by economic and climate risks at both current and future times. Furthermore, the SCC is itself a stochastic process with significant variation; for example, the basic elements of risk incorporated into our model cause the SCC in 2100 to be, with significant probability, ten times what it would be without those risks. We have only imprecise information about what parameter values are best for approximating reality. To deal with this parametric uncertainty we perform extensive uncertainty quantification and show that these findings are robust for a wide range of alternative specifications. More generally, this work shows that large-scale computing can enable economists to examine substantially more complex and realistic models for the purposes of policy analysis.

Bio: Thomas Lontzek is a senior postdoctoral research fellow at the University of Zurich. His current research focuses primarily on studying robust and sustainable climate, resource and energy policies in stochastic macroeconomic models. Thomas earned his PhD in Economics from the University of Kiel and his M.Sc. in Economics from the University of Maastricht.

Chandra Kiran, the Beijer Institute, Seminar series organiser

Agneta Sundin, the Beijer Institute, Communication officer

Future seminars:

22 March, Nicole S. Ngo, University of Oregon

20 April, Xiaojia Bao, Xiamen University

May, Anthony Millner, London School of Economics