| Summary: | Social cost of carbon (SCC) is the key concept in the economics of climate change. It
measures the economic cost of climate impacts. SCC has influence on how beneficial it is
to prevent climate change: if the value of SCC increases, investments to low-carbon technology
become more attractive and profitable.
This paper examines the sensitivity of two important assumptions that affect to SCC: the
choice of a discount rate and time horizon. Using the integrated assessment model, we
calculate SCC estimates with multiple discount rates and various time horizon lengths.
Our results show that discount rate and time horizon have great effect on SCC. For example,
the SCC estimates are drastically reduced under the use of a 10% discount rate versus
1% discount rate. Or, when dropping the end year of time horizon from 2300 to 2150, the
SCC values decrease by average 12.8% per year. We conclude that if choosing different
values of discount rate or time horizon, the outcome of the integrated assessment models
can vary greatly.
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