On welfare frameworks and catastrophic climate risks
AbstractRecent theoretical work in the economics of climate change has suggested that climate policy is highly sensitive to ‘fat-tailed’ risks of catastrophic outcomes (Weitzman, 2009) . Such risks are suggested to be an inevitable consequence of scientific uncertainty about the effects of increased greenhouse gas concentrations on climate. Criticisms of this controversial result fall into three categories: The first suggests that it may be irrelevant to cost benefit analysis of climate policy, the second challenges the fat-tails assumption, and the third questions the behavior of the utility function assumed in the result. This paper analyses these critiques and suggests that those in the first two categories have formal validity, but that they apply only to the restricted setup of the original result, which may be extended to address their concerns. They are thus ultimately unconvincing. Critiques in the third category are shown to be robust however they open up new ethical and empirical challenges for climate economics that have thus far been neglected—how should we ‘value’ catastrophes as a society? I demonstrate that applying results from social choice to this problem can lead to counterintuitive results, in which society values catastrophes as infinitely bad, even though each individual's utility function is bounded. Finally, I suggest that the welfare functions traditionally used in climate economics are ill-equipped to deal with climate catastrophes in which population size changes. Drawing on recent work in population ethics I propose an alternative welfare framework with normatively desirable properties, which has the effect of dampening the contribution of catastrophes to welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 65 (2013)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870
Climate change; Catastrophes; Welfare; Uncertainty; Social choice; Population;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hwang, In Chang, 2014. "Fat-tailed uncertainty and the learning-effect," MPRA Paper 53671, University Library of Munich, Germany.
- In Chang Hwang & Richard S.J. Tol & Marjan W. Hofkes, 2013. "Active Learning about Climate Change," Working Paper Series 6513, Department of Economics, University of Sussex.
- Geoffrey Heal & Antony Millner, 2013.
"Uncertainty and decision in climate change economics,"
Grantham Research Institute on Climate Change and the Environment Working Papers
108, Grantham Research Institute on Climate Change and the Environment.
- Geoffrey Heal & Antony Millner, 2013. "Uncertainty and Decision in Climate Change Economics," NBER Working Papers 18929, National Bureau of Economic Research, Inc.
- Thomas Michielsen, 2013. "Environmental Catastrophes under Time-Inconsistent Preferences," Working Papers 2013.55, Fondazione Eni Enrico Mattei.
- In Chang Hwang & Richard S.J. Tol & Marjan W. Hofkes, 2013. "Tail-effect and the Role of Greenhouse Gas Emissions Control," Working Paper Series 6613, Department of Economics, University of Sussex.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.