Weight Factors in Cost-Benefit Analysis of Climate Change
Equity considerations may justify the use of weight factors when estimating the costs of climate change. This paper reviews different weight factors that have been used in the climate economics literature. Based on a simple model, it is shown that although the different weight factors imply substantially different cost-damage estimates, they actually yield the same optimal emission reductions. This paradox is explained by the fact that some of the approaches require that also the abatement costs are weighted – and this offsets the effect of the diverging cost-damage estimates. The model is then used to analyse the importance weighting may have on the overall cost-benefit analysis. At present, when most of the global emissions of (fossil) CO2 originate from the industrialised countries, the global optimal emissions are considerably lower if costs are weighted. However, the more the emissions in developing countries grow, the less important becomes the introduction of weight factors in cost-benefit analysis of climate change for the global emission reductions, in the model developed here. On a regional level, the introduction of weight factors continues to play an important role, implying substantially lower emissions in the rich region and slightly higher (!) in the poor. Copyright Kluwer Academic Publishers 1999
Volume (Year): 13 (1999)
Issue (Month): 3 (April)
|Contact details of provider:|| Web page: http://www.springerlink.com/link.asp?id=100263 |
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.:
- Azar, Christian & Sterner, Thomas, 1996. "Discounting and distributional considerations in the context of global warming," Ecological Economics, Elsevier, vol. 19(2), pages 169-184, November.
- Spash, Clive L., 1994. "Double CO2 and beyond: benefits, costs and compensation," Ecological Economics, Elsevier, vol. 10(1), pages 27-36, May.
- Robert Ayres & Jörg Walter, 1991. "The greenhouse effect: Damages, costs and abatement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(3), pages 237-270, September.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
- Bingham, Gail & Bishop, Richard & Brody, Michael & Bromley, Daniel & Clark, Edwin (Toby) & Cooper, William & Costanza, Robert & Hale, Thomas & Hayden, Gregory & Kellert, Stephen, 1995. "Issues in ecosystem valuation: improving information for decision making," Ecological Economics, Elsevier, vol. 14(2), pages 73-90, August.
- Plambeck, Erica L & Hope, Chris, 1996. "PAGE95 : An updated valuation of the impacts of global warming," Energy Policy, Elsevier, vol. 24(9), pages 783-793, September.
- William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39, May.
- Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
- 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, vol. 10(3), pages 249-266, October.
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:13:y:1999:i:3:p:249-268. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.