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Climate Policies Deserve a Negative Discount Rate

Author

Listed:
  • Marc Fleurbaey

    (Woodrow Wilson School and Center for Human Values - Princeton University)

  • Stéphane Zuber

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We defend a methodology of discounting, for the evaluation of the long-term effects of climate policies, which relies on a social welfare objective, against the view that the market rate of return should be used for that purpose. We also show that in the long run, the discount rate for such policies should focus on the worst-case scenario for the most disadvantaged populations. As a consequence, it is likely that the appropriate discount rate for climate policies should be negative, implying a high priority for the future.
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Suggested Citation

  • Marc Fleurbaey & Stéphane Zuber, 2013. "Climate Policies Deserve a Negative Discount Rate," Post-Print hal-01048583, HAL.
    • Handle: RePEc:hal:journl:hal-01048583
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A negative discount rate for climate policy?
      by Economic Logician in Economic Logic on 2012-10-01 19:55:00

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    Cited by:

    1. Courard-Hauri, David & Klimas, Christie A. & Parrish, Conor, 2020. "An analysis of the long-term social discount rate and the valuation of large environmental losses using non-monetary tradeoffs," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    2. Xavier Richet, 2013. "L'internationalisation des firmes chinoises : croissance, motivations, stratégies," Working Papers halshs-00796197, HAL.
    3. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    4. Byasdeb Dasgupta, 2013. "Financialization, Labour Market Flexibility, Global Crisis and New Imperialism - A Marxist Perspective," Working Papers halshs-00840831, HAL.
    5. Jean-Marc Bonnisseau & Alain Chateauneuf & Jean-Pierre Drugeon, 2023. "On Future Allocations of Scarce Resources without Explicit Discounting Factors," Documents de travail du Centre d'Economie de la Sorbonne 23004, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Tol, Richard S. J., 2011. "Modified Ramsey Discounting for Climate Change," Papers WP368, Economic and Social Research Institute (ESRI).
    7. Daniel A. Farber, 2015. "Gambling over Growth: Economic Uncertainty, Discounting, and Regulatory Policy," The Journal of Legal Studies, University of Chicago Press, vol. 44(S2), pages 509-528.
    8. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, risk and inequality: A general approach," Journal of Public Economics, Elsevier, vol. 128(C), pages 34-49.
    9. Jean-Marc Bonnisseau & Alain Chateauneuf & Jean-Pierre Drugeon, 2023. "On the (Ir)Relevance of Discount Factors for Future Allocations of Scarce Resources," Documents de travail du Centre d'Economie de la Sorbonne 23004r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jan 2025.
    10. repec:dau:papers:123456789/10490 is not listed on IDEAS
    11. Rosalie Arendt & Till M. Bachmann & Masaharu Motoshita & Vanessa Bach & Matthias Finkbeiner, 2020. "Comparison of Different Monetization Methods in LCA: A Review," Sustainability, MDPI, vol. 12(24), pages 1-39, December.
    12. van den Belt, Marjan & Stevens, Sharon M., 2016. "Transformative agenda, or lost in the translation? A review of top-cited articles in the first four years of Ecosystem Services," Ecosystem Services, Elsevier, vol. 22(PA), pages 60-72.
    13. Ferraz, Eduardo & Mantilla, César, 2024. "How risk aversion shapes the trade-off between commitment and flexibility," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    14. Byasdeb Dasgupta, 2013. "Some Aspects of External Dimensions of Indian Economy in the Age of Globalisation," Working Papers halshs-00820294, HAL.
    15. Valatin, G. & Ovando, P. & Abildtrup, J. & Accastello, C. & Andreucci, M.B. & Chikalanov, A. & El Mokaddem, A. & Garcia, S. & Gonzalez-Sanchis, M. & Gordillo, F. & Kayacan, B. & Little, D. & Lyubenova, 2022. "Approaches to cost-effectiveness of payments for tree planting and forest management for water quality services," Ecosystem Services, Elsevier, vol. 53(C).
    16. Frédéric Gonand, 2019. "Inégalité intergénérationnelle et recyclage d’une taxe carbone," Revue économique, Presses de Sciences-Po, vol. 70(3), pages 411-440.
    17. Yamaguchi, Rintaro & Shah, Payal, 2020. "Spatial discounting of ecosystem services," Resource and Energy Economics, Elsevier, vol. 62(C).
    18. Price, Colin, 2017. "Optimal rotation with negative discount rates: completing the picture," Journal of Forest Economics, Elsevier, vol. 29(PB), pages 87-93.

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