The Risk-Adjusted Carbon Price

The social cost of carbon is the expected present value damages from emitting one ton today. We use perturbation theory to derive an approximate tractable expression for this adjusted climatic and economic risk. allow different aversion risk intertemporal fluctuations, skewness dynamics in distributions climate sensitivity damage ratio, correlated shocks. identify prudence, insurance, exposure effects, reproduce earlier analytical results, offer insights into numerical results on effects ratio uncertainty convex optimal price. (JEL E12, G22, H23, O44, Q35, Q51, Q54)