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Unspoken ethical issues in the climate affair: Insights from a theoretical analysis of negotiation mandates

  • Franck Lecocq

    ()

  • Jean-Charles Hourcade

Taking climate change as an example, this paper provides new insights on the optimal provision of a long-term public good within and across generations. We write the Bowen–Lindhal–Samuelson (BLS) conditions for the optimal provision of the public good in a world divided into N countries, with two periods, present and future, and we simultaneously determine the optimal response in the first and second periods for a given rate of pure time preference. However, the Negishi weights at second period cannot be determined unambiguously, even under a “no redistribution constraint†within each generation, because they depend on non-observable future incomes; and thus on the answers to two often-overlooked ethical questions: (i) Do rich countries agree on deals which recognize that developing countries may catch up with developed countries in the long run, or do they use their negotiating powers to preserve the current balance of power? And (ii) does each country consider only the welfare of its own future citizens (dynastic solidarity) or does it extend its concern to all future human beings (universal solidarity)? Answers to (i) and (ii)—critical in the debate about how to correct the market failures causing global warming—define four sets of Negishi weights and intertemporal welfare functions, which we interpret as four mandates that countries could give to the Chair of an international negotiation on climate change to find an optimal solution. We find that in all mandates, public good provision expenditures are decreasing functions of income at first period. But each mandate leads to a different allocation of expenditures at second period and to different optimal levels of public good provision at both first and second periods. Finally, we show that only one of these four mandates defines a space for viable compromises.

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 49 (2012)
Issue (Month): 2 (February)
Pages: 445-471

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Handle: RePEc:spr:joecth:v:49:y:2012:i:2:p:445-471
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  1. Sandler, Todd & Smith, V. Kerry, 1976. "Intertemporal and intergenerational Pareto efficiency," Journal of Environmental Economics and Management, Elsevier, vol. 2(3), pages 151-159, February.
  2. Jean-Charles Hourcade & Frédéric Ghersi, 2002. "The Economics of a Lost Deal : Kyoto - The Hague - Marrakesh," Post-Print halshs-00009838, HAL.
  3. Ghersi, Frederic & Hourcade, Jean-Charles, 2001. "The Economics of a Lost Deal," Discussion Papers dp-01-48-, Resources For the Future.
  4. Kristen A. Sheeran, 2006. "Who Should Abate Carbon Emissions? A Note," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(2), pages 89-98, October.
  5. Hallegatte, Stephane & Hourcade, Jean-Charles & Dumas, Patrice, 2007. "Why economic dynamics matter in assessing climate change damages: Illustration on extreme events," Ecological Economics, Elsevier, vol. 62(2), pages 330-340, April.
  6. Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
  7. Graciela Chichilnisky & Geoffrey Heal, 1993. "Who Should Abate Carbon Emissions? An International Viewpoint," NBER Working Papers 4425, National Bureau of Economic Research, Inc.
  8. Schelling, Thomas C, 1995. "Intergenerational discounting," Energy Policy, Elsevier, vol. 23(4-5), pages 395-401.
  9. Lecocq, Franck & Crassous, Renaud, 2003. "International climate regime beyond 2012 - are quota allocation rules robust to uncertainty?," Policy Research Working Paper Series 3000, The World Bank.
  10. Zmarak Shalizi & Franck Lecocq, 2010. "To Mitigate or to Adapt: Is that the Question? Observations on an Appropriate Response to the Climate Change Challenge to Development Strategies," World Bank Research Observer, World Bank Group, vol. 25(2), pages 295-321, August.
  11. Armon Rezai & Duncan Foley & Lance Taylor, 2012. "Global warming and economic externalities," Economic Theory, Springer, vol. 49(2), pages 329-351, February.
  12. Jean-Charles Hourcade & Philippe Ambrosi & Stéphane Hallegatte & Franck Lecocq & Patrice Dumas & Minh Ha-Duong, 2003. "Optimal control models and elicitation of attitudes towards climate damages," Post-Print halshs-00000966, HAL.
  13. Geir Asheim & Tapan Mitra & Bertil Tungodden, 2012. "Sustainable recursive social welfare functions," Economic Theory, Springer, vol. 49(2), pages 267-292, February.
  14. Jean-Charles Hourcade & Frederic Ghersi, 2002. "The Economics of a Lost Deal: Kyoto - The Hague - Marrakesh," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-26.
  15. Hourcade, Jean-Charles & Ambrosi, Philippe & Dumas, Patrice, 2009. "Beyond the Stern Review: Lessons from a risky venture at the limits of the cost-benefit analysis," Ecological Economics, Elsevier, vol. 68(10), pages 2479-2484, August.
  16. Ringius, Lasse & Torvanger, Asbjorn & Holtsmark, Bjart, 1998. "Can multi-criteria rules fairly distribute climate burdens?: OECD results from three burden sharing rules," Energy Policy, Elsevier, vol. 26(10), pages 777-793, August.
  17. Christian Azar, 1999. "Weight Factors in Cost-Benefit Analysis of Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(3), pages 249-268, April.
  18. repec:oup:wbrobs:v:25:y:2009:i:2:p:295-321 is not listed on IDEAS
  19. Cooper, Richard N, 2000. "International Approaches to Global Climate Change," World Bank Research Observer, World Bank Group, vol. 15(2), pages 145-72, August.
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