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The Trade-off between Intra- and Intergenerational Equity in Climate Policy

Author

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  • Snorre Kverndokk
  • Eric Nævdal
  • Linda Nøstbakken

Abstract

This paper focuses on two equity dimensions of climate policy, intra- and intergenerational, and analyzes the implications of equity preferences on climate policy, and on the production and consumption patterns in rich and poor countries. We develop a dynamic two-region model, in which each region suffers from global warming, but also has an inequality aversion over current consumption allocations. Inequality aversion generally lifts the consumption path of the poor region, while the rich region must take a greater share of the climate burden. Furthermore, with inequality aversion, the optimal climate policy generally leads to higher investment in clean capital in the North and in dirty capital in the South, thereby allowing the South to pollute more and develop faster. The optimal policy may even require the poor region to increase emissions relative to the uncoordinated business-as-usual case. Introducing local pollution, transfers and loans confirm the main results. However, loans to poor countries to reduce inequality may result in permanent inequality, and hence, debt remittance may be part of the optimal climate policy.

Suggested Citation

  • Snorre Kverndokk & Eric Nævdal & Linda Nøstbakken, 2013. "The Trade-off between Intra- and Intergenerational Equity in Climate Policy," CESifo Working Paper Series 4285, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4285
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lea Skræp Svenningsen, 2017. "Distributive outcomes matter: Measuring social preferences for climate policy," IFRO Working Paper 2017/11, University of Copenhagen, Department of Food and Resource Economics.
    2. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2016. "Development Aid and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 429-450, February.
    3. Rashidi, Hamidreza & GhaffarianHoseini, Ali & GhaffarianHoseini, Amirhosein & Nik Sulaiman, Nik Meriam & Tookey, John & Hashim, Nur Awanis, 2015. "Application of wastewater treatment in sustainable design of green built environments: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 845-856.
    4. Arsenio, Elisabete & Martens, Karel & Di Ciommo, Floridea, 2016. "Sustainable urban mobility plans: Bridging climate change and equity targets?," Research in Transportation Economics, Elsevier, vol. 55(C), pages 30-39.
    5. Lea Skræp Svenningsen & Bo Jellesmark Thorsen, 2017. "Preferences for distributional impacts of climate policy," IFRO Working Paper 2017/10, University of Copenhagen, Department of Food and Resource Economics.
    6. Michael Hoel & Sverre A.C. Kittelsen & Snorre Kverndokk, 2015. "Pareto Improving Climate Policies: Distributing the Benefits across Generations and Regions," CESifo Working Paper Series 5487, CESifo Group Munich.
    7. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2013. "Equity, Development Aid and Climate Finance," GRI Working Papers 123, Grantham Research Institute on Climate Change and the Environment.

    More about this item

    Keywords

    intragenerational equity; intergenerational equity; inequality aversion; climate policy; economic development; local pollution; international transfers;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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