Climate Impacts on Natural Capital: Consequences for the Social Cost of Carbon

Abstract

The effects of climate change on natural systems will be substantial, widespread, and likely irreversible. Warmer temperatures and changing precipitation patterns have already contributed to forest dieback and pushed some species toward extinction. Natural systems contribute to human welfare both as an input to the production of consumption goods and through the provision of nonuse values (i.e., existence and bequest values). But because they are often unpriced, it can be difficult to constrain these benefits. Understanding how climate change effects on the natural capital stock affect human well-being, and therefore the social cost of carbon (SCC), requires understanding not just the biophysical effects of climate change but also the particular role they play in supporting human welfare. This article reviews a range of topics from natural capital accounting through climate change economics important for quantifying the ecological costs of climate change and integrating these costs into SCC calculations. Expected final online publication date for the Annual Review of Resource Economics, Volume 14 is October 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.