RSS | Matthew J. Kotchen - Which Social Cost of Carbon? A Theoretical Perspective

Matthew J. Kotchen, Associate Dean for Academic Affairs and Professor of Economics at the Yale School of Forestry & Environmental Studies, will be the speaker for this seminar. The lecture subject of the lecture will be the paper, “Which Social Cost of Carbon? A Theoretical Perspective”.

Abstract

This paper develops a theoretical foundation for the social cost of carbon (SCC). The model highlights the source of debate over whether countries should use the global or domestic SCC for regulatory impact analysis. I identify conditions under which a country’s decision to internalize the global SCC is individually rational. Nevertheless, I show that obtaining international consensus on a particular value will be more challenging than often appreciated. I introduce the notion of a “preferred SCC” to reflect each country’s preference for a globally internalized shadow value on emissions conditional on a true value of the global SCC and a distribution of the domestic SCCs among countries. While all countries have a preferred SCC greater than their domestic SCC, a country’s preferred SCC can be greater than or less than the global SCC. How these preferences translate into agreement depends on institutional arrangements for collective decision-making, for which I provide empirical evidence based on various decision rules.

This seminar is open to all LSE staff and students. If you are from outside the LSE and would like to attend, please email Gri.Events@lse.ac.uk to register for a place.