Intergenerationally Equitable Discounting and its Implications for Climate Policy
This paper investigates the properties of intergenerationally equitable dis- counting by using an axiomatically well-founded welfare function which was originally developed by Epstein (1983), and more recently extended by Bommier and Zuber (2008). In stead of seeking for the appropriate value of social rate of time preference, intergenerational equity is incorpo- rated at axiomatic level. I show that the intergenerational-equity-consistent (IE-consistent) discount rate can be higher or lower than the standard no- time-preference case without appealing to uncertainty. The relationship between IE-consistent discount rates and risk of world extinction is also examined with an emphasis on the case where the hazard rate is endoge- nously determined. With an application to climate change, I show that endogenous hazard rate can increase the discount rate, which implies rel- atively less stringent carbon abatement as the optimal climate policy.
|Date of creation:||Mar 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501|
Web page: http://www.econ.kyoto-u.ac.jp/projectcenter/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Masako Ikefuji & Jan R. Magnus & Hiroaki Sakamoto, 2010.
"Climate change, economic growth, and health,"
ISER Discussion Paper
0785, Institute of Social and Economic Research, Osaka University.
- Anthony Fisher & Urvashi Narain, 2003. "Global Warming, Endogenous Risk, and Irreversibility," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(4), pages 395-416, August.
- Antoine Bommier & Stéphane Zuber, 2008. "Can preferences for catastrophe avoidance reconcile social discounting with intergenerational equity?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(3), pages 415-434, October.
When requesting a correction, please mention this item's handle: RePEc:kue:dpaper:e-09-004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Graduate School of Economics Project Center)
If references are entirely missing, you can add them using this form.