Critical issues for the calculation of the social cost of CO2: why the estimates from PAGE09 are higher than those from PAGE2002

PAGE09 is an updated version of the PAGE2002 integrated assessment model (Hope 2011a). The default PAGE09 model gives a mean estimate of the social cost of CO2 (SCCO2) of $106 per tonne of CO2, compared to $81 from the PAGE2002 model used in the Stern review (Stern 2007). The increase is the net result of several improvements that have been incorporated into the PAGE09 model in response to the critical debate around the Stern review: the adoption of the A1B socio-economic scenario, rather than A2 whose population assumptions are now thought to be implausible; the use of ranges for the two components of the discount rate, rather than the single values used in the Stern review; a distribution for the climate sensitivity that is consistent with the latest estimates from IPCC 2007a; less adaptation than in PAGE2002, particularly in the economic sector, which was criticised for possibly being over-optimistic; and a more theoretically-justified basis of valuation that gives results appropriate to a representative agent from the focus region, the EU. The effect of each of these adjustments is quantified and explained.