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On International Equity Weights and National Decision Making on Climate Change

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  • David Anthoff

    (FNU, ZMK)

  • Richard S.J. Tol

    (Economic and Social Research Institute)

Abstract

Estimates of the marginal damage costs of carbon dioxide emissions require the aggregation of monetised impacts of climate change over people with different incomes and in different jurisdictions. Implicitly or explicitly, such estimates assume a social welfare function and hence a particular attitude towards equity and justice. We show that previous approaches to equity weighing are inappropriate from a national decision maker’s point of view, because domestic impacts are not valued at domestic values. We propose four alternatives (sovereignty, altruism, good neighbour, and compensation) with different views on concern for and liability towards foreigners. The four alternatives imply radically estimates of the social cost of carbon and hence the optimal intensity of climate policy.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2007.55.

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Date of creation: May 2007
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Handle: RePEc:fem:femwpa:2007.55

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Keywords: Domestic Climate Policy; Social Cost of Carbon; Equity Weights;

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References

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  1. Richard S.J. Tol, 2006. "Multi-Gas Emission Reduction for Climate Change Policy: An Application of Fund," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 235-250.
  2. David Anthoff & Richard S. J. Tol, 2008. "On International Equity Weights and National Decision Making on Climate Change," CESifo Working Paper Series 2373, CESifo Group Munich.
  3. Tol, Richard S. J., 2002. "Welfare specifications and optimal control of climate change: an application of fund," Energy Economics, Elsevier, Elsevier, vol. 24(4), pages 367-376, July.
  4. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 19(3), pages 362-384.
  5. Samuel Fankhauser & Richard S.J. Tol, 2001. "On Climate Change And Economic Growth," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-10, Research unit Sustainability and Global Change, Hamburg University, revised Jun 2002.
  6. David Anthoff & Cameron Hepburn & Richard S.J. Tol, 2006. "Equity weighting and the marginal damage costs of climate change," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-121, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2006.
  7. Richard S.J. Tol, 2006. "The Polluter Pays Principle And Cost-Benefit Analysis Of Climate Change: An Application Of Fund," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-98, Research unit Sustainability and Global Change, Hamburg University, revised Feb 2006.
  8. Tol, Richard S. J., 2001. "Equitable cost-benefit analysis of climate change policies," Ecological Economics, Elsevier, Elsevier, vol. 36(1), pages 71-85, January.
  9. Rehdanz, Katrin & Tol, Richard S.J., 2005. "Unilateral regulation of bilateral trade in greenhouse gas emission permits," Ecological Economics, Elsevier, Elsevier, vol. 54(4), pages 397-416, September.
  10. Tol, Richard S.J. & Ebi, Kristie L. & Yohe, Gary W., 2007. "Infectious disease, development, and climate change: a scenario analysis," Environment and Development Economics, Cambridge University Press, vol. 12(05), pages 687-706, October.
  11. William D. Nordhaus, 1982. "How Fast Should We Graze the Global Commons?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 615, Cowles Foundation for Research in Economics, Yale University.
  12. Christian Azar, 1999. "Weight Factors in Cost-Benefit Analysis of Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 13(3), pages 249-268, April.
  13. Fankhauser, Samuel & Tol, Richard S.J. & Pearce, David W., 1998. "Extensions and alternatives to climate change impact valuation: on the critique of IPCC Working Group III's impact estimates," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 59-81, February.
  14. Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 61-81.
  15. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change. Part 1: Benchmark Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 21(1), pages 47-73, January.
  16. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, Elsevier, vol. 87(12), pages 2737-2747, December.
  17. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
  18. Tol, Richard S.J., 2005. "Emission abatement versus development as strategies to reduce vulnerability to climate change: an application of FUND," Environment and Development Economics, Cambridge University Press, vol. 10(05), pages 615-629, October.
  19. P. Michael Link & Richard S.J. Tol, 2003. "Economic impacts of changes in population dynamics of fish on the fisheries in the Barents Sea," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-30, Research unit Sustainability and Global Change, Hamburg University, revised May 2003.
  20. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, Elsevier, vol. 33(16), pages 2064-2074, November.
  21. Azar, Christian & Sterner, Thomas, 1996. "Discounting and distributional considerations in the context of global warming," Ecological Economics, Elsevier, Elsevier, vol. 19(2), pages 169-184, November.
  22. Olof Johansson-Stenman, 2005. "Distributional Weights in Cost-Benefit Analysis—Should We Forget about Them?," Land Economics, University of Wisconsin Press, vol. 81(3).
  23. P. Michael Link & Richard S.J. Tol, 2004. "Possible Economic Impacts of a Shutdown of the Thermohaline Circulation: an Application of FUND," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-42, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2004.
  24. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
  25. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 39, July.
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Blog mentions

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  1. Stretching Your Global Mindset
    by Pankaj Ghemawat in HBR Blog Network on 2011-07-28 16:55:40

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  1. > Environmental and Natural Resource Economics > Climate economics > Discounting, equity, uncertainty
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