Climate damages in the FUND model: A disaggregated analysis

This research paper analyzes the FUND model of climate economics, finding that its low Social Cost of Carbon (SCC) estimate of $6 is largely driven by an overestimation of agricultural benefits from CO2 fertilization and temperature increases. The authors identify several technical flaws, including a potential division-by-zero error in the optimum temperature equation and the use of implausible temperature ranges in Monte Carlo simulations. They argue that FUND relies on outdated research from the 1990s and suggest that updating the model with recent empirical data on crop yields and CO2 fertilization would significantly increase the SCC estimate.

• The $6 SCC estimate in FUND is primarily driven by a net benefit in agriculture and a net cost in cooling and heating. Specifically, it is the sum of a $6 net benefit in agriculture, an $8 net cost in cooling and heating, and $4 of net costs across 12 other damage categories. Consequently, FUND estimates that without the costs of air conditioning, climate change would be a net benefit to the world.
• The net benefit attributed to agriculture in FUND is almost entirely due to the CO2 fertilization effect, which is estimated to provide a net benefit of more than $14 per ton of CO2 emissions.
• The authors identified a mathematical flaw in FUND 3.5's optimum temperature equation that could lead to division by zero during Monte Carlo simulations if the optimum temperature parameter (Topt) equals 1.6. Fixing this bug using two different proposed methods would increase the FUND SCC estimate by $10 to $12.
• FUND's Monte Carlo analysis for optimum temperatures uses confidence intervals that the authors argue exceed physically plausible ranges. For example, the 95% confidence interval for South America ranges from 17°C below to almost 18°C above 1990 levels, and for the United States, it ranges from -7°C to +9°C.
• FUND uses truncated normal distributions for carbon fertilization parameters, which can significantly distort the mean in regions where the reported mean is less than the standard deviation. In Southeast Asia, the true mean of the truncated distribution used by the model is almost four times larger than the reported unconstrained mean.
• The authors argue that FUND relies on outdated agricultural research from 1992-1996. Recent evidence suggests that CO2 fertilization benefits are smaller than previously thought and that the relationship between temperature and crop yields is not quadratic (as FUND assumes) but rather characterized by slow increases up to an optimum followed by rapid declines.

APA

Ackerman, F., & Munitz, C. (2011). Climate damages in the FUND model: A disaggregated analysis. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/SEI-WorkingPaper-Ackerman-ClimateDamagesInTheFUNDmodel-2011.pdf

Chicago

Ackerman, Frank, and Charles Munitz. Climate damages in the FUND model: A disaggregated analysis. Stockholm Environment Institute, 2011. https://www.sei.org/mediamanager/documents/Publications/SEI-WorkingPaper-Ackerman-ClimateDamagesInTheFUNDmodel-2011.pdf.

Wikipedia

{{cite report |last1=Ackerman |first1=Frank |last2=Munitz |first2=Charles |title=Climate damages in the FUND model: A disaggregated analysis |publisher=Stockholm Environment Institute |date=March 2011 |url=https://www.sei.org/mediamanager/documents/Publications/SEI-WorkingPaper-Ackerman-ClimateDamagesInTheFUNDmodel-2011.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ackerman2011climate, author = {Ackerman, Frank and Munitz, Charles}, title = {{Climate damages in the FUND model: A disaggregated analysis}}, institution = {Stockholm Environment Institute}, year = {2011}, month = mar, url = {https://www.sei.org/mediamanager/documents/Publications/SEI-WorkingPaper-Ackerman-ClimateDamagesInTheFUNDmodel-2011.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }