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Integrated Assessment Models (IAMs) require parameterization of both economic and climatic processes. The latter includes Equilibrium Climate Sensitivity (ECS), or the temperature response to doubling CO2 levels, and Ocean Heat Uptake (OHU) efficiency. ECS distributions in IAMs have been drawn from climate model runs that lack an empirical basis, and in Monte Carlo experiments may not be constrained to consistent OHU values. Empirical ECS estimates are now available, but have not yet been applied in IAMs. We incorporate a new estimate of the ECS distribution conditioned on observed OHU efficiency into two widely used IAMs. The resulting Social Cost of Carbon (SCC) estimates are much lower than those from models based on simulated ECS parameters. In the DICE model, the average SCC falls by approximately 40–50% depending on the discount rate, while in the FUND model the average SCC falls by over 80%. The span of estimates across discount rates also shrinks substantially.

It is shown that rather than having a neutral (in the short run) or negative (in the long run) effect on output, a profit tax can, with joint products, increase a profit-maximizing firm's output. As counterintuitive as this result appears initially, it is a straightforward implication of joint products.

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