Time perspective and climate change policy
AbstractThe tendency to foreshorten time units as we peer further into the future provides an explanation for hyperbolic discounting at an inter-generational time scale. We study implications of hyperbolic discounting for climate change policy, when the probability of a climate-induced catastrophe depends on the stock of greenhouse gasses. We characterize the set of Markov perfect equilibria (MPE) of the inter-generational game amongst a succession of policymakers. Each policymaker reflects her generation's preferences, including its hyperbolic discounting. For a binary action game, we compare the MPE set to a "restricted commitment" benchmark. We compare the associated "constant-equivalent discount rates" and the willingness to pay to control climate change with assumptions and recommendations in the Stern Review on Climate Change. "...My picture of the world is drawn in perspective.... I apply my perspective not merely to space but also to time"--Ramsey.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 62 (2011)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870
Hyperbolic discounting Markov perfect equilibria Catastrophic climate change Uncertainty;
Other versions of this item:
- Karp, Larry & Tsur, Yacov, 2008. "Time perspective and climate change policy," CUDARE Working Paper Series 1062, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Karp, Larry & Tsur, Yacov, 2008. "Time perspective and climate change policy," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt04k4b21g, Department of Agricultural & Resource Economics, UC Berkeley.
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