The Social Cost of Carbon: An Aggregate View from Latin America (ECLAC)

The Economic Commission for Latin America and the Caribbean recently published a study that analyses the social cost of carbon (SCC) for the development of public policies on climate change in the region.

Authors José Eduardo Alatorre, Karina Caballero, Jimy Ferrer and Luis Miguel Galindo –analyze and narrow down the wide variety of studies and results on SCC to identify regular patterns and reduce the margin of uncertainty for public policy purposes.

The economics of climate change seek to pinpoint the economic cost of an additional tonne of CO2 emitted into the atmosphere, which is defined as the monetary value of the damage on social well-being, ecosystems and economic activities. The goal is to identify the economic cost in order to determine the optimal amount of the carbon tax and internalize negative externalities.

The study reviews the literature on SCC, presents the methodology of integrated assessment models and sheds light on the major topics of methodological debate such as the discount rate, uncertainty and equity weights. It highlights the importance, from a public policy perspective, of identifying an SCC in the long term as it provides a kind of certainty, which is key for investment, savings, innovation and processes of substitution of carbon-intensive goods and services.

The report can be accessed through the following link.