American Economic Review: Vol. 104 No. 5 (May 2014)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Fat Tails and the Social Cost of Carbon

Article Citation

Weitzman, Martin L. 2014. "Fat Tails and the Social Cost of Carbon." American Economic Review, 104(5): 544-46.

DOI: 10.1257/aer.104.5.544

Abstract

At high enough greenhouse gas concentrations, climate change might conceivably cause catastrophic damages with small but non-negligible probabilities. If the bad tail of climate damages is sufficiently fat, and if the coefficient of relative risk aversion is greater than one, the catastrophe-reducing insurance aspect of mitigation investments could in theory have a strong influence on raising the social cost of carbon. In this paper I exposit the influence of fat tails on climate change economics in a simple stark formulation focused on the social cost of carbon. I then attempt to place the basic underlying issues within a balanced perspective.

Article Full-Text Access

Full-text Article

Additional Materials

Authors

Weitzman, Martin L. (Harvard U)

JEL Classifications

H43: Project Evaluation; Social Discount Rate
Q51: Valuation of Environmental Effects
Q54: Climate; Natural Disasters; Global Warming
Q58: Environmental Economics: Government Policy


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us