Work detail

Economic Rationale for Damage Functions Entering the Social Cost of Carbon

Author: Bc. Lukáš Hochmann
Year: 2015 - winter
Leaders: doc. PhDr. Tomáš Havránek Ph.D.
Work type: Bachelors
Language: English
Pages: 63
Awards and prizes:
Abstract: Climate change studies repeatedly report the present value damage from global
warming in the realms of trillion USD. To adopt an efficient climate policy,
precise estimates of the costs and damages are essential. This thesis aims to
review the most influential social cost of carbon models and to propose for the
first time a best practice approach to constructing the damage function. Based
on the reliability of the key estimates, two alternative approaches are proposed.
The first consists of deriving a highly universal damage function and consequent
calibration by multiple point estimates. The latter is based on damage
disaggregation to different sectors and subsequent single-point calibration of
each contribution separately. Both approaches address the current challenges
for the damage function – a flexible functional form and treatment of intangible




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