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Climate policy under sustainable discounted utilitarianism

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  • Dietz, Simon
  • Asheim, Geir B.

Abstract

Empirical evaluation of policies to mitigate climate change has been largely confined to the application of discounted utilitarianism (DU). DU is controversial, both due to the conditions through which it is justified and due to its consequences for climate policies, where the discounting of future utility gains from present abatement efforts makes it harder for such measures to justify their present costs. In this paper, we propose sustainable discounted utilitarianism (SDU) as an alternative principle for evaluation of climate policy. Unlike undiscounted utilitarianism, which always assigns zero relative weight to present utility, SDU is an axiomatically based criterion, which departs from DU by assigning zero weight to present utility if and only if the present is better off than the future. Using the DICE integrated assessment model to run risk analysis, we show that it is possible for the future to be worse off than the present along a ‘business as usual’ development path. Consequently SDU and DU differ, and willingness to pay for emissions reductions is (sometimes significantly) higher under SDU than under DU. Under SDU, stringent schedules of emissions reductions increase social welfare, even for a relatively high utility discount rate.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 63 (2012)
Issue (Month): 3 ()
Pages: 321-335

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Handle: RePEc:eee:jeeman:v:63:y:2012:i:3:p:321-335

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Web page: http://www.elsevier.com/locate/inca/622870

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Keywords: Climate change; Discounted utilitarianism; Intergenerational equity; Sustainable development; Sustainable discounted utilitarianism;

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As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Environmental and Natural Resource Economics > Climate economics > Discounting, equity, uncertainty
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Cited by:
  1. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(5), pages 911-928.
  2. Prieur, Fabien & Tidball, Mabel & Withagen, Cees, 2013. "Optimal emission-extraction policy in a world of scarcity and irreversibility," Resource and Energy Economics, Elsevier, Elsevier, vol. 35(4), pages 637-658.
  3. Balvers, Ronald & Du, Ding & Zhao, Xiaobing, 2012. "The Adverse Impact of Gradual Temperature Change on Capital Investment," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124676, Agricultural and Applied Economics Association.
  4. John C. V. Pezzey & Paul J. Burke, 2014. "Towards a More Inclusive and Precautionary Indicator of Global Sustainability," CCEP Working Papers, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University 1410, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  5. Endress, Lee H. & Pongkijvorasin, Sittidaj & Roumasset, James & Wada, Christopher A., 2014. "Intergenerational equity with individual impatience in a model of optimal and sustainable growth," Resource and Energy Economics, Elsevier, Elsevier, vol. 36(2), pages 620-635.
  6. Lee H. Endress & Sittidaj Pongkijvorasin & James Roumasset & Christopher Wada, 2013. "Intergenerational Equity with Individual Impatience in an OLG Model of Optimal and Sustainable Growth," Working Papers, University of Hawaii Economic Research Organization, University of Hawaii at Manoa 2013-9, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  7. Simon Dietz & Anca N. Matei, 2013. "Is there space for agreement on climate change? A non-parametric approach to policy evaluation," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 136, Grantham Research Institute on Climate Change and the Environment.
  8. Michael Spackman, 2011. "Government discounting controversies: the valuation of social time preference," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 68, Grantham Research Institute on Climate Change and the Environment.
  9. Wouter Botzen, W.J. & van den Bergh, Jeroen C.J.M., 2012. "How sensitive is Nordhaus to Weitzman? Climate policy in DICE with an alternative damage function," Economics Letters, Elsevier, Elsevier, vol. 117(1), pages 372-374.
  10. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 51(3), pages 838-59, September.
  11. Adler, Matthew & Treich, Nicolas, 2014. "Consumption, Risk and Prioritarianism," TSE Working Papers, Toulouse School of Economics (TSE) 14-500, Toulouse School of Economics (TSE).

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