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Evaluating Climate Policies by the Pareto Principle: Efficiency When Future Identities Are Unobservable

Author

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  • Geir B. Asheim
  • Kohei Kamaga
  • Stéphane Zuber

Abstract

Climate change is an externality since those who emit greenhouse gases do not pay the long-term negative consequences of their emissions. In view of the resulting inefficiency, it has been claimed that climate policies can be evaluated by the Pareto principle. However, climate policies lead to different identities of future people, implying that the Pareto principle is not applicable. Assuming that there are infinitely many future people whose identities are not observable, we specify conditions under which their spatiotemporal positions do not matter. This implies that the Suppes-Sen principle whereby ranked streams are compared plays an important role and justifies that following dominance relation: A state a is said to dominate another state b if a Pareto dominates b for existing people and Suppes-Sen dominates b for future people, with at least one of the two being strict. We illustrate the consequences of this dominance definition for policy choice.

Suggested Citation

  • Geir B. Asheim & Kohei Kamaga & Stéphane Zuber, 2022. "Evaluating Climate Policies by the Pareto Principle: Efficiency When Future Identities Are Unobservable," CESifo Working Paper Series 9575, CESifo.
    • Handle: RePEc:ces:ceswps:_9575
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    Cited by:

    1. Pivato, Marcus, 2022. "A characterization of Cesàro average utility," Journal of Economic Theory, Elsevier, vol. 201(C).
    2. Asheim, Geir B. & Kamaga, Kohei & Zuber, Stéphane, 2022. "Maximal sensitivity under Strong Anonymity," Journal of Mathematical Economics, Elsevier, vol. 103(C).

    More about this item

    Keywords

    climate change; efficiency; intergenerational equity; population ethics; infinite streams;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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