We study climate change in a model with a carbon-intensive and a green sector, each subject to stochastic sectoral productivity shocks, and show how the underlying economic structure affects the risk-adjusted discount rate and the climate risk premium in the social cost of carbon (SCC)....

Overview -- Baseline emissions under business as usual -- Abatement initiatives in the Copenhagen Accord and Cancun Agreements -- Abatement cost functions -- Abatement costs through 2050 -- Trade and timing -- Estimating investment requirements and adaptation costs -- Synthesis

Given disparate beliefs about economic growth, technical change and damage caused by climate change, this paper starts with the seeming impossibility of determining a unique time profile of the social costs of carbon as a benchmark for climate negotiations and for infrastructure decisions that...