The Impacts and Costs of Climate Change Page: 39
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The Impacts and Costs of Climate Change
The effect of equity weighting can dramatically increase the values. This is shown below, again using
the FUND model. Note there is no consideration of socially contingent effects or surprises in the
model, and we stress that the figure is simply a sensitivity analysis and carries no implication about
values that should be used in practice.
Scheme 0% PRTP 1% PRTP 3% PRTP
No equity weighing 21 4 -0.7
Equity weighted 267 64 -0.3
Figure 10. The effect of equity weighting (FUND 2.8).
0% PRTP discount rate
0 no equity weighting
O equity weighted
1% PRTP discount rate 3% PRTP discount rate
Source: FUND. Version 2.8. Pure rate of time preference. Time horizon 2300. The values above do not include all impacts
of climate change, i.e. they are a sub-total of the 'full' value. They are presented only as an illustration of the effects of
discount rate. Including these other effects would have a large effect on the above values.
The Time Period of Emissions
Recent work has assessed the potential change in emissions over time (under a business as usual
scenario). This shows that emissions in future years will have a greater total impact than emissions
Analysis from the PAGE model (see later section) has been used to assess how the marginal social
cost of emissions will change in future decades, under a scenario of no further action. The best fit to
the mean values is a 2.4% increase in the marginal social cost of emissions each year. The central
values for marginal social costs therefore needed to be increased in line with this to compare to the
future projections of marginal abatement costs.
Marginal social costs of climate change from GHG emissions in year of emission
Year of emissions 2001 2010 2020 2040 2060
Euro/tCO2 18 23 30 49 72
Source: PAGE. Based on the A2 scenarios, with PPP exchange rates, Green book SRTP, an equity weight parameter of 1.
This leads to a higher value in 2000 than using the usual PAGE output above, as the standard PAGE analysis is equivalent to
a mean 2% prtp.
AEA Technology Environment, August 2005
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Watkiss, Paul; Downing, Tom; Handley, Claire & Butterfield, Ruth. The Impacts and Costs of Climate Change, text, September 2005; Oxford, England. (digital.library.unt.edu/ark:/67531/metadc29337/m1/50/: accessed July 24, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .