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On International Equity Weights and National Decision Making on Climate Change

Author

Listed:
  • David Anthoff
  • Richard S. J. Tol

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.

Suggested Citation

  • David Anthoff & Richard S. J. Tol, 2008. "On International Equity Weights and National Decision Making on Climate Change," CESifo Working Paper Series 2373, CESifo.
    • Handle: RePEc:ces:ceswps:_2373
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp2373.pdf
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    References listed on IDEAS

    as
    1. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 362-384.
    2. Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 61-81.
    3. P. Michael Link & Richard S. J. Tol, 2004. "Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 99-114, September.
    4. 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(5), pages 687-706, October.
    5. Fankhauser, Samuel & S.J. Tol, Richard, 2005. "On climate change and economic growth," Resource and Energy Economics, Elsevier, vol. 27(1), pages 1-17, January.
    6. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
    7. 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(5), pages 615-629, October.
    8. Tol, Richard S.J., 2006. "The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund," Climate Change Modelling and Policy Working Papers 12058, Fondazione Eni Enrico Mattei (FEEM).
    9. 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.
    10. 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, vol. 0(Special I), pages 235-250.
    11. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
    12. Tol, Richard S. J., 2002. "Welfare specifications and optimal control of climate change: an application of fund," Energy Economics, Elsevier, vol. 24(4), pages 367-376, July.
    13. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39, October.
    14. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
    15. Anthoff, David & Tol, Richard S.J., 2010. "On international equity weights and national decision making on climate change," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 14-20, July.
    16. Nordhaus, William, 1982. "How Fast Should We Graze the Global Commons?," American Economic Review, American Economic Association, vol. 72(2), pages 242-246, May.
    17. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
    18. Rehdanz, Katrin & Tol, Richard S.J., 2005. "Unilateral regulation of bilateral trade in greenhouse gas emission permits," Ecological Economics, Elsevier, vol. 54(4), pages 397-416, September.
    19. Anthoff, David & Hepburn, Cameron & Tol, Richard S.J., 2009. "Equity weighting and the marginal damage costs of climate change," Ecological Economics, Elsevier, vol. 68(3), pages 836-849, January.
    20. 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 FNU-30, Research unit Sustainability and Global Change, Hamburg University, revised May 2003.
    21. 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(1), pages 59-81, February.
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    23. Tol, Richard S. J., 2001. "Equitable cost-benefit analysis of climate change policies," Ecological Economics, Elsevier, vol. 36(1), pages 71-85, January.
    24. Christian Azar, 1999. "Weight Factors in Cost-Benefit Analysis of Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(3), pages 249-268, April.
    25. Arnulf Grübler & Nebojsa Nakicenovic & Joe Alcamo & Ged Davis & Joergen Fenhann & Bill Hare & Shunsuke Mori & Bill Pepper & Hugh Pitcher & Keywan Riahi & Hans-Holger Rogner & Emilo Lebre La Rovere & , 2004. "Emissions Scenarios: A Final Response," Energy & Environment, , vol. 15(1), pages 11-24, January.
    26. Olof Johansson-Stenman, 2005. "Distributional Weights in Cost-Benefit Analysis—Should We Forget about Them?," Land Economics, University of Wisconsin Press, vol. 81(3).
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    More about this item

    Keywords

    domestic climate policy; social cost of carbon; equity weights;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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