AN IMPROVED SHADOW PRICE FOR CO2

In 1980, Nordhaus developed a model for calculating the shadow price of CO2. In this paper, we present an improvement of that model that is more direct and has fewer assumptions. When there are more reliable estimates for the potential damages from CO2 emissions, our model may be used to calculate the appropriate shadow price for CO2. To demonstrate the application of the model, we calculate shadow prices for damages based on sea level rise alone. We conservatively estimate these damages at 0.0003-0.5% of world GNP per annum for a doubling of atmospheric CO2.