Negative externality and the Social cost of carbon

Question 1

What is the social cost of carbon?

Answer 1

o The social cost of carbon pollution is the
economic cost associated to climate change

o More precisely, the marginal damage in
monetary terms from emitting one extra
ton of C02

Question 2

What are the best estimates available on the social cost of carbon and why are they so different among them?

Answer 2

• The social cost of carbon is all over the place in literature on climate change, but nobody agrees on how much it is
• Today the estimated price is higher than it was years ago
• The estimates for the SCC can vary due to several factors, including
  • the choice of discount rate,
  • climate models used,
  • assumptions about future economic growth and technological advancements,
  • and the consideration of uncertainties.

Question 3

Can the market alone solve the problem of climate change?

Answer 3

NO, the market alone can not solve the problem of climate change. At the individual level, the gap between private and social cost of carbon is even greater than at the national level.

Question 4

If “Climate change is the biggest market failure the world has ever seen” (Nicholas Stern), what is the solution to climate change?

Answer 4

.

Question 5

The impact on living standards over the next century would be modest if mitigation is done…

Answer 5

a) Immediately
b) With a good design
c) Under universal participation of countries