Author
Listed:
- R. Daniel Bressler
- Geoffrey Heal
Abstract
Valuing deaths caused by climate change in Benefit Cost Analysis (BCA) is complex and controversial, having caused disagreement and acrimony in past high-profile settings. Furthermore, it is of first order consequence to the value of the social cost of carbon (SCC). Despite this, the underlying considerations remain under-analyzed. We address this by assessing the theory behind different approaches to BCA, and by evaluating how they fare when applied to global externalities like climate change. The pure Kaldor-Hicks approach to BCA – measuring costs in market dollars unadjusted for diminishing marginal utility and valuing premature deaths in rich areas more than poor areas – relies on assumptions that are debated in domestic contexts, but, as we show, clearly do not hold in the context of climate change. We show that this approach is equivalent to defining a Negishi weighted social welfare function. Furthermore, we show that if costs are measured in purchasing power parity adjusted money – as is typical for the SCC – then the Kaldor-Hicks potential compensation criterion no longer necessarily holds. We conclude that the first-best BCA approach in the climate context is welfare weighting. This approach accounts for diminishing marginal utility using empirical estimates for the curvature of the utility function, and it better captures what a social planner naturally cares about: real net benefits and the welfare people get from those net benefits. The current U.S. practice – identical to the pure Kaldor-Hicks approach except that it gives a uniform population average value to all premature deaths – is preferred over the pure Kaldor-Hicks approach because it implicitly welfare weights premature mortality costs. However, the fully welfare weighted approach is first-best because it accounts for diminishing marginal utility across all costs, not just premature mortality risk.
Suggested Citation
R. Daniel Bressler & Geoffrey Heal, 2022.
"Valuing Excess Deaths Caused by Climate Change,"
NBER Working Papers
30648, National Bureau of Economic Research, Inc.
Handle:
RePEc:nbr:nberwo:30648
Note: EEE PE
Download full text from publisher
More about this item
JEL classification:
- H00 - Public Economics - - General - - - General
- Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
NEP fields
This paper has been announced in the following
NEP Reports:
Statistics
Access and download statistics
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:30648. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.