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Kernel density decomposition with an application to the social cost of carbon

Author

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  • Richard S.J. Tol

    (Department of Economics, University of Sussex, Falmer, United Kingdom)

Abstract
A kernel density is an aggregate of kernel functions, which are itself densities and could be kernel densities. This is used to decompose a kernel into its constituent parts. Pearson's test for equality of proportions is applied to quantiles to test whether the component distributions differ from one another. The proposed methods are illustrated with a meta-analysis of the social cost of carbon. Different discount rates lead to significantly different Pigou taxes, but not different growth rates. Estimates have not varied over time. Different authors have contributed different estimates, but these differences are insignificant. Kernel decomposition can be applied in many other fields with discrete explanatory variables.

Suggested Citation

  • Richard S.J. Tol, 2020. "Kernel density decomposition with an application to the social cost of carbon," Working Paper Series 0720, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0720
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    References listed on IDEAS

    as
    1. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
    2. Nicole Glanemann & Sven N. Willner & Anders Levermann, 2020. "Paris Climate Agreement passes the cost-benefit test," Nature Communications, Nature, vol. 11(1), pages 1-11, December.
    3. Richard S.J. Tol, 2011. "The Social Cost of Carbon," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 419-443, October.
    4. Samuel Jovan Okullo, 2020. "Determining the Social Cost of Carbon: Under Damage and Climate Sensitivity Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(1), pages 79-103, January.
    5. J. Paul Kelleher & Gernot Wagner, 2019. "Ramsey discounting calls for subtracting climate damages from economic growth rates," Applied Economics Letters, Taylor & Francis Journals, vol. 26(1), pages 79-82, January.
    6. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    7. Kevin D. Dayaratna & Ross McKitrick & Patrick J. Michaels, 2020. "Climate sensitivity, agricultural productivity and the social cost of carbon in FUND," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(3), pages 433-448, July.
    8. Frederick Ploeg & Aart Zeeuw, 2019. "Pricing Carbon and Adjusting Capital to Fend Off Climate Catastrophes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 29-50, January.
    9. Hänsel, Martin C. & Quaas, Martin F., 2018. "Intertemporal Distribution, Sufficiency, and the Social Cost of Carbon," Ecological Economics, Elsevier, vol. 146(C), pages 520-535.
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    11. Nordhaus, William, 1982. "How Fast Should We Graze the Global Commons?," American Economic Review, American Economic Association, vol. 72(2), pages 242-246, May.
    12. Pindyck, Robert S., 2019. "The social cost of carbon revisited," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 140-160.
    13. Frances C. Moore & Uris Baldos & Thomas Hertel & Delavane Diaz, 2017. "New science of climate change impacts on agriculture implies higher social cost of carbon," Nature Communications, Nature, vol. 8(1), pages 1-9, December.
    14. Céline Guivarch & Antonin Pottier, 2015. "Climate damages on production or on growth: what impact on the social cost of carbon," Working Papers 2015.15, FAERE - French Association of Environmental and Resource Economists.
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    20. Lucas Bretschger & Aimilia Pattakou, 2019. "As Bad as it Gets: How Climate Damage Functions Affect Growth and the Social Cost of Carbon," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 5-26, January.
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    Cited by:

    1. David Anthoff & Richard S. J. Tol, 2022. "Testing the Dismal Theorem," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(5), pages 885-920.

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    More about this item

    Keywords

    social cost of carbon; kernel density; decomposition; discrete explanatory variables;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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