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Applied Energy Symposium and Forum 2018: Low carbon cities and urban energy systems,
CUE2018-Applied
Applied Energy
Energy Symposium andSymposium
CUE2018, Forum andLow
2018:
5–7 June Forum
2018, 2018:
carbon Low
cities
Shanghai, China carbon
and urbancities
energyandsystems,
CUE2018,
urban energy 5–7 June
systems, 2018,2018,
5–7 June Shanghai, ChinaChina
Shanghai,
A simple estimate for the social cost of carbon
A
Thesimple estimate
15th International for the on
Symposium social
Districtcost of and
Heating carbon
Cooling
Zaili Zhenaa, Lixin Tiana,b,* a
a,b,*, Qian Yea
a
Assessing the feasibility of using
Zaili Zhen , Lixin Tian the heat
, Qian Ye demand-outdoor
Energy Development and Environmental Protection Strategy Research Center, Jiangsu University, Zhenjiang, Jiangsu 212013, China
b
b
temperature function for a long-term district heat demand forecast
a
Energy
Energy Development
Interdependency and Environmental
Behavior and StrategyProtection
Research Strategy Research
Center, School
Energy Interdependency Behavior and Strategy Research Center,Jiangsu,
Center, Jiangsu
of Mathematical
School China
University,
Science, Zhenjiang,
Nanjing Normal Jiangsu 212013,
University, China
Nanjing 210042,
of Mathematical Science, Nanjing Normal University, Nanjing 210042,
Jiangsu, China
I. Andrića,b,c*, A. Pinaa, P. Ferrãoa, J. Fournierb., B. Lacarrièrec, O. Le Correc
a
AbstractIN+ Center for Innovation, Technology and Policy Research - Instituto Superior Técnico, Av. Rovisco Pais 1, 1049-001 Lisbon, Portugal
b
Abstract Veolia Recherche & Innovation, 291 Avenue Dreyfous Daniel, 78520 Limay, France
c
The social cost of carbon plays Énergétiques
Département Systèmes an importantet role
Environnement - IMT Atlantique,
in environmental 4 rue Alfred
policy, which is theKastler,
marginal 44300 Nantes,cost
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analytical
simple formulaeconomics. Different
to determine the from
socialthe
costmethods
of carbon of is
Integrated Assessment Methods (IAMs), based on marginal cost method, a
established.
simple formula to determine the social cost of carbon is established.
District heating networks are commonly addressed in the literature as one of the most effective solutions for decreasing the
Copyright © 2018 Elsevier Ltd. All rights reserved.
greenhouse
Copyright gas
2018emissions
© 2018 fromAll
Elsevier Ltd.
Ltd. therights
building sector. These systems require high investments which are returned through the heat
reserved.
Copyright
Selection and © Elsevier
peer-review underAll rights reserved.
responsibility of the scientific committee of Applied Energy Symposium and Forum 2018: Low
Selection
sales. Due andtopeer-review
the changedunder responsibility
climate conditions ofand thebuilding
scientificrenovation
committeepolicies,
of the CUE2018-Applied
heat demand in the Energy
futureSymposium and
could decrease,
Selection
carbon andand
cities peer-review
urban under
energy responsibility
systems, CUE2018. of the scientific committee of Applied Energy Symposium and Forum 2018: Low
Forum 2018:the
prolonging Low carbon cities
investment returnandperiod.
urban energy systems.
carbon cities and urban energy systems, CUE2018.
The main scope of this paper is to assess the feasibility of using the heat demand – outdoor temperature function for heat demand
Keywords: climate change; social cost of carbon; carbon cycle; climate damages
forecast. The district of Alvalade, located in Lisbon (Portugal), was used as a case study. The district is consisted of 665
Keywords: climate change; social cost of carbon; carbon cycle; climate damages
buildings that vary in both construction period and typology. Three weather scenarios (low, medium, high) and three district
renovation scenarios were developed (shallow, intermediate, deep). To estimate the error, obtained heat demand values were
1.compared
Introductionwith results from a dynamic heat demand model, previously developed and validated by the authors.
1. Introduction
The results showed that when only weather change is considered, the margin of error could be acceptable for some applications
Global
(the error climate
in annualchange
demand is was
one lower
of thethan
most20%important and challenging
for all weather problems inHowever,
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after introducing issue of
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global
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externality. To internalize externalities, climate change economics introduced the concept of the social cost of and other
for the greenhouse
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externality. accuracy of heat demand
internalize estimations.
externalities, climate change economics introduced the concept of the social cost of

© 2017 The Authors. Published by Elsevier Ltd.

Peer-review under responsibility of the Scientific Committee of The 15th International Symposium on District Heating and
* Corresponding author. Tel.: +86-135-0528-4660;
Cooling.
* E-mail
Corresponding
address:author. Tel.: +86-135-0528-4660;
tianlx@ujs.edu.cn (L.T.).
E-mail address: tianlx@ujs.edu.cn (L.T.).
Keywords: Heat demand; Forecast; Climate change
1876-6102 Copyright © 2018 Elsevier Ltd. All rights reserved.
1876-6102and
Selection Copyright © 2018
peer-review Elsevier
under Ltd. All of
responsibility rights reserved. committee of the Applied Energy Symposium and Forum 2018: Low carbon cities
the scientific
Selection
and urbanand peer-review
energy systems, under responsibility of the scientific committee of the Applied Energy Symposium and Forum 2018: Low carbon cities
CUE2018.
and urban energy systems, CUE2018.
1876-6102 © 2017 The Authors. Published by Elsevier Ltd.
Peer-review under responsibility of the Scientific Committee of The 15th International Symposium on District Heating and Cooling.
1876-6102 Copyright © 2018 Elsevier Ltd. All rights reserved.
Selection and peer-review under responsibility of the scientific committee of the CUE2018-Applied Energy Symposium and Forum
2018: Low carbon cities and urban energy systems.
10.1016/j.egypro.2018.09.243
 Zaili Zhen et al. / Energy Procedia 152 (2018) 768–773 769
2 Author name / Energy Procedia 00 (2018) 000–000

carbon, the externalities of carbon dioxide and other greenhouse gases were monetized valuation, which provided a
useful reference for establishing the climate policy. Social costs of carbon (SCC) represent the damage of climate
change caused by emissions of carbon dioxide with a monetary value.
SCC had been estimated in the Pigou tax of carbon dioxide emissions at the first time. In fact, if the SCC is
computed along a trajectory in which the marginal costs of emission reduction equals to the SCC, then the SCC is
the Pigou tax. Nordhaus [1] first estimated the shadow price for carbon emissions, that is, one unit of discount costs
under optimal path of carbon dioxide emissions.
Many investigators and research institutions studied climate change by model method. In particular, the
mainstream model tool is the Intergraded Assessment Model (IAM). Dowlatabadi [2] considered that IAM is
necessary to determine climate change policy. Tol and Fankhauser [3] summarized twenty IMAs which were
divided into policy optimization model and policy evaluation model.
The three most commonly used models are DICE developed by Nordhaus [4], PAGE developed by Chris Hope
[5], and FUND developed by Richard [6][7]. Pearce [8] pointed out that the complexity of IAMs on estimate the
SCC is different. But all the key ideas of the IAMs are the same. The logic of all the three models is that the
emissions are converted to concentration, then estimation of temperature variation from the concentration level,
temperature changes eventually lead to economic damage. Early researches, Cline [9], Nordhaus [10]and Titus
[11]mainly estimated the total loss of the United States. Fankhauser [12][13] estimated global losses of the first true
sense. Some scholars established a new model based on DICE/RICE model for climate change research. In 2002, on
the basis of RICE model, Wang [14] established MRICEs 2012 model. He divided the world into eight zones. Zheng
[15] applied RICE model to China's carbon dioxide emission reduction.
Golosovetal[16] derive an analytical formula for the SCC in an IAM, based on specific assumptions such as
logarithmic utility and climate-change damages proportional to output and exponential in the atmospheric CO2.
Gerlagh and Liski [17] added a more comprehensive description of the climate system and associated temperature-
change delays, and studied the implications of the formula for the optimal policies in a general-equilibrium context
with time-inconsistent preferences. Bijgaart, Gerlagh and Liski [18]developed a closed-form formula that
approximates the SCC for a general economy, and then explored the capacity of the analytical approach to capture
the key SCC drivers and then to replicate the results of the deterministic IAMs..
In this paper, we introduce the climate-economy decision problem and derive without specifying the structure of
the economy, a general expression for SCC. Herein, different from previous studies，we use a model of the carbon
cycle which is advanced by Svirezhev and both abatement cost and climate damages are considered in net
production. But the SCC expression turns out to be valid irrespective of whether the economy follows the optimal
policy or not. The result allows us to obtain the closed-form SCC that approximates the general economy. In our
study, we use a highly simplified expression in DICE model. Although there is still a lot of uncertainty in measuring
SCC, we provide a new method for computing the SCC different from the DICE model.

2. Model

2.1 Climate module

We derive the SCC expression first for a general climate–economy model [19].

max  e t LU (C / L)dt , (1)
0
.
C  K F (K , E,T ; t )   K K .
 (2)
There is a representative consumer who maximizes the stream of future aggregate utilities, discounted at rate  .
Population is denoted by L . Output F depends on capital K , emission E , and the global average surface
temperature T . Output is used for consumption C , replacement of depreciated capital  k k .
We consider a simple model of the carbon cycle introduced by Svirezhev[20]. Compared with the carbon cycle
model in DICE/RICE model，the Carbon cycle module introduced by Svirezhev can be well integrated with the
IAM model to achieve the global carbon cycle simulation. Svirezhev carbon cycle module realizes the carbon cycle
 770 Zaili Zhen et al. / Energy Procedia 152 (2018) 768–773
Author name / Energy Procedia 00 (2018) 000–000 3

process of three layers of carbon pool. In the terrestrial ecosystem, soil carbon pool and vegetation carbon pool were
distinguished.
The equation for carbon content in the atmosphere M (t ) has the following form
dM (t )
  P( M , T )  (1   )m(t ) N (t )   (T ) S (t )  QOC  E (t ) ,
dt
dN (t )
 P( M , T )  m(t ) N (t ) ,
dt
dS (t )
  m(t ) N (t )   (T ) S (t ) ,
dt
dD (t )
 QOC
 , dT  ( ( M )  T ) . (3)
dt dt
Where E (t ) is the anthropogenic emission. P ( M , T ) is the annual primary productivity of vegetation. N (t ) is
the carbon in the terrestrial vegetation. S (t ) is the carbon in the soil.  (T ) is the decomposition rate of carbon in
soil. m(t ) is in the escape rate of vegetation carbon. O(t ) is the content of carbon in the ocean.
QOC  Q [( M  M 0 )   (O  O0 )] and  Q 、  are the parameters of the model. Temperatures adjust at rate  to
their physical long-run equilibrium level  ( M ) .
In order to obtain a simple version of the model described above we assume that a partial equilibrium with respect
to the terrestrial part of the global carbon cycle is established sufficiently fast. This means that we can put into
dN (t ) dS (t )
= =0 , P( M , T )=m(t ) N (t ) and  m(t ) N (t )= (T ) S (t ) .
dt dt
dM (t ) dD(t )
We get  QOC  E (t ) ,  QOC   Q [( M  M 0 )   (O  O0 )] . (4)
dt dt
The conservation law for carbon is as follows
t
(M  M 0 )  (O  O0 ) F  F0 ， Where F
 F0  
t0
E (t )dt . (5)

Compared to previous articles, we employ Svirezhev carbon cycle module to replace the carbon cycle model in
DICE/RICE model. In order to calculate conveniently, we use a simple version of the model, carbon storage in the
ocean is taken into account. We believe that the SCC calculated by the model will be closer to the actual value.

2.2 Economic module

There is a linear relationship between the atmospheric CO2 storage and the damage in steady state. We give a
logarithmic curve about equilibrium temperatures and atmospheric CO2 concentrations follow in DICE model.
M 1
（M ; c
, m） c ln(1  ) ,
m ln 2
Where c is the climate sensitivity parameter, m is the pre-industrial atmospheric level.
b
Climate damages are also expressed as a function of global temperature increase D  b1Tt 2 . For most of the
D ( )2
IAMs literature we consider the situation b1 =1 , b2 =2 ,  .
M M
At the time of writing CO2 concentrations are about 400 ppm, the pre-industrial stock of approximately 275 ppm.
The approximation comes from
 Zaili Zhen et al. / Energy Procedia 152 (2018) 768–773 771
4 Author name / Energy Procedia 00 (2018) 000–000

D ln1.45 c 2 c2
=2  1.1 (6)
M (ln 2)2 m m
According [21], both the abatement cost and climate damages reduce gross production to the production level
1  t (  (t ))
F ( K , E,T ; t )  Y ( K , E; t ) (7)
1 D
Where t (  (t )) is the abatement cost and characterized by the equations
 t (  (t ))= t ta2 (8)
With an exponenta2  2.8 and a coefficient  t that falls over time reflecting a decrease in abatement cost
t (1  exp[ g t ])
t a0 (1  ) (9)
a2 a1
With a0 denoting the initial cost, a1 denoting the ratio of initial over final backstop, a2 denoting the cost exponent.
The g describe the convergence from the initial to the final cost of the backstop.

2.3 Model derivation

Consider the shadow-cost variables p、 、n for state equations (3)–(5). We give the monetized SCC that when
F
the optimal policy is implemented, equals the marginal product of energy use,  SCC . We give the
E
Hamiltonian for the problem (1)-(5).
H LU (C / L)  p  F ( K , E , T ; t )   K K  C 


 
   E (t )   Q ( M  M 0 )   ( M  M 0 )   E (t )dt   n   ( ( M )  T ) 

t

t0 
 (10)

We can get
F
(  k ) s (   Q  Q v ) t    (   Q  Q ) s
p( s )  e K
, （t） e 
t
n( s)
M
( s )e ds ,
F

n(t ) e(   )t   p( s )
 ( s )e  (   ) s ds . (11)
t T
For convenience, we write  for the elasticity of marginal utility, g for per capita consumption growth rate,
R（s; t）for the consumption discount factor between time t and s .
 2U U C F R
  C 2 / ,g  , r
   K ,  r , R
（s; t） R(s) / R(t ) . (12)
C C C K R
We normalize R (0)  1, so, R
（s） R(s； 0) ,
So r   g (13)
Using the notation above, we can derive an explicit formula for the SCC at time zero as the net present value of
marginal damages
 (0) (－ Q＋ Q v ) t  (t )  F


SCC (0)  （1- Q vE (0)）（1- Q vE (0)）0 e  p( s)e  s ( s)e  s ds . (14)
p(0) M t T
 s  rs
From (12) (13), we know p( s)e  e R(s)
SCC can be expressed as
772 Zailiname
Author Zhen / et al. / Energy
Energy Procedia
Procedia 152 000–000
00 (2018) (2018) 768–773 5

 (0)  (－ Q＋ Q v ) t  (t )  F

SCC
(0)  （1- Q vE (0)）0 e
p(0)
R(t )
M t
 p( s)e  s R( s, t ) ( s)e s ds .
T
(15)

F  F D 1.1c 2
According to (6), we can get   (1  t (  (t )))Y ( K , E; t ) , (16)
T M D M m(1  0.6c 2 )
To approximate the development of the economy, we consider a balanced growth path with constant saving rate. We
define  as “climate discount rate”.
    (   )g  l (17)
We only consider the condition  Q v   Q    0 ,

1.1c 2 
So SCC =
（0） (1   t (  (t )))Y (0) （ Q vE
（0）-1）. (18)
2
m(1  0.6c ) （  ）( Q   Q v   )
Proposition 1
Consider the economy (1)-(5), approximated by a balance growth path with constant population growth, and
constant per capita growth. The approximate social of carbon, as defined by expression (15), is given by the reduced
from formula
1.1c 2  （1- Q vE）
SCC = (1   t (  (t )))Y . (19)
2
m(1  0.6c ) （  ）(   Q   Q v)
The proof has been given above.
From the formula for SCC, we can find that SCC is expected to grow at the rate of income Y. If the value of SCC
becomes large, it will be very important to consider the emission reduction plan in the future.

A complex part of a formula is the last two terms. The first term, measures the carbon price discount
（   ）
related to the delay of damages caused by the earth’s heat inertia. An immediate full temperature,    results
are no discount. Slower regulation means the impact of the increase in carbon dioxide is longer. The second
1- Q vE
term, measures the economic lifetime of atmospheric CO 2. This is mainly through high discount
(   Q   Q v )
rates to reduce the economic life of carbon dioxide.
We look first the value of the outcome variables, that is, the SCC values predicted by the formula. We consider
the discount rate  =0.03 . By Monte Carlo simulation, we obtain ten thousand points of climate sensitive
parameters. The data comes from the DICE model.
The Obama administration calculated the SCC value from $5 /tCO2 to $65/tCO2. In our estimation, in 2005, SCC
concentrated between $30/tCO2 and $50/tCO2. In 2015, SCC concentrated between $35/tCO2 and $55 /tCO2.
Because of the output, emission reduction and emissions of different, resulting in increased SCC.

3. Conclusions

The social cost of carbon could therefore theoretically inform assessment of the desirable intensity of climate
policy, and it plays a crucial role in any cost-benefit analysis of emission abatement initiatives. In this paper, we give
the approximate social of carbon. The equation we develop offers a clear, intuitive understanding of the core
relationships that determine the SCC. We use a model of the carbon cycle which is advanced by Svirezhev. This
model is realized the carbon cycle process of three layers of carbon storage and to distinguish between soil carbon
and vegetation carbon storage in terrestrial ecosystems. Both abatement cost and climate damages are considered in
net production. At the same time, it avoids the defect that the carbon coefficient in the DICE model is transferred to
a constant. Both the abatement and climate damages reduce gross production are considered in our formula. By
 Zaili Zhen et al. / Energy Procedia 152 (2018) 768–773 773
6 Author name / Energy Procedia 00 (2018) 000–000

using Hamilton, we develop a simple formula for the social cost of carbon. Our calculations are closer to reality than
before. If the SCC grows very large, future abatement options become very important.

Acknowledgements

This paper is supported by the National Natural Science Foundation of China (Grant Nos. 71690242 ，
91546118，11731014) and the Advantages of Jiangsu Province and the Innovation Project for Graduate Student
Research of Jiangsu Province (Grant No. KYLX16_0899).

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