This paper distinguishes relative risk aversion and resistance to intertemporal substitution in climate risk modeling. Stochastic recursive preferences are introduced in a stylized numeric climate-economy model using preliminary IPCC 1998 scenarios. It shows that higher risk aversion increases the optimal carbon tax. Higher resistance to intertemporal substitution alone has the same effect as increasing the discount rate, provided that the risk is not too large. We discuss implications of these findings for the debate upon discounting and sustainability under uncertainty.
Ce texte étudie la différence entre l'aversion relative au risque et la résistance à la substitution intertemporelle dans la modélisation du risque climatique. Les préférences récursives stochastiques sont utilisées dans un modèle numérique stylisé utilisant les scénarios préliminaires GIEC 1998 sur l'économie et le climat. On montre qu'une aversion au risque plus forte conduit à augmenter le niveau optimal de taxation de l'énergie. Augmenter la résistance à la substitution intertemporelle a le même effet qu'augmenter le taux d'actualisation, tant que le risque n'est pas trop grand. Nous discutons les implications de ces résultats pour le débat sur l'actualisation et la durabilité sous incertitude.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Find related papers by JEL classification: Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty D90 - Microeconomics - - Intertemporal Choice and Growth - - - General H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)