October 1, 2014
Journal Article

The Marginal Damage Costs of Different Greenhouse Gases: An Application of FUND

Abstract

We use FUND 3.8 to estimate the social cost of four greenhouse gases: carbon dioxide, methane, nitrous oxide, and sulphur hexafluoride emissions. The damage potential for each gas—the ratio of the social cost of the non-carbon dioxide greenhouse gas to the social cost of carbon dioxide—is also estimated. The damage potentials are compared to several metrics, focusing in particular on the global warming potentials, which are frequently used to measure the trade-off between gases in the form of carbon dioxide equivalents. We find that damage potentials could be significantly higher than global warming potentials. This finding implies that previous papers have underestimated the relative importance of reducing non-carbon dioxide greenhouse gas emissions from an economic damage perspective. We show results for a range of sensitivity analyses: carbon dioxide fertilization on agriculture productivity, terrestrial feedbacks, climate sensitivity, discounting, equity weighting, and socioeconomic and emissions scenarios. The sensitivity of the results to carbon dioxide fertilization is a primary focus as it is an important element of climate change that has not been considered in much of the previous literature. We estimate that carbon dioxide fertilization has a large positive impact that reduces the social cost of carbon dioxide with a much smaller effect on the other greenhouse gases. As a result, our estimates of the damage potentials of methane and nitrous oxide are much higher compared to estimates that ignore carbon dioxide fertilization. As a result, our base estimates of the damage potential for methane and nitrous oxide that include carbon dioxide fertilization are twice their respective global warming potentials. Our base estimate of the damage potential of sulphur hexafluoride is similar to the one previous estimate, both almost three times the global warming potential.

Revised: January 15, 2015 | Published: October 1, 2014

Citation

Waldhoff S.T., D. Anthoff, S.K. Rose, and R. Tol. 2014. The Marginal Damage Costs of Different Greenhouse Gases: An Application of FUND. Economics 8, no. 2014-31:1-33. PNNL-SA-92285. doi:10.5018/economics-ejournal.ja.2014-31