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Sacrifice, discounting and climate policy: five questions

  • Karp, Larry

I provide a selective review of discounting and climate policy. After reviewing evidence on the importance of the discount rate in setting policy, I ask whether standard models tend to exaggerate the sacrifices that the current generation needs to undertake in order to internalize climate damages. I then consider whether the risk of catastrophic damage really overwhelms discounting, in the determination of optimal policy. I revisit the question of how we actually think about the distant future.

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Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt1zq431s8.

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Date of creation: 12 Jun 2009
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Handle: RePEc:cdl:agrebk:qt1zq431s8
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  1. Karp, Larry, 2005. "Global warming and hyperbolic discounting," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 261-282, February.
  2. Minh Ha-Duong & Nicolas Treich, 2004. "Risk aversion, intergenerational equity and climate change," Working Papers 25611, Institut National de la Recherche Agronomique, France.
  3. Karp, Larry & Tsur, Yacov, 2008. "Time perspective and climate change policy," CUDARE Working Paper Series 1062, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  4. 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.
  5. Armon Rezai & Duncan Foley & Lance Taylor, 2012. "Global warming and economic externalities," Economic Theory, Springer, vol. 49(2), pages 329-351, February.
  6. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  7. Traeger, Christian P., 2011. "Sustainability, limited substitutability, and non-constant social discount rates," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 215-228, September.
  8. Fujii, Tomoki & Karp, Larry, 2008. "Numerical analysis of non-constant pure rate of time preference: A model of climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 83-101, July.
  9. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
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