IDEAS home Printed from
   My bibliography  Save this paper

Risk aversion - a necessary condition for limiting global environmental risks?


  • Ohl, Cornelia


Standard risk economic analysis suggests that global environmental risk is lower in the case of risk aversion than in the case of risk neutrality or risk seeking. Maybe the reason why the Advisory Council of the German Government on Global Environmental Change (WBGU) explicitly recommends to behave as a risk averter when dealing with problems of global risk management. However risk aversion not always guaranties the limitation of a global pollutant, like CO2. To show this the paper focuses on two different landscapes of risk that are motivated by aspects of ecological vulnerability of the nations as well as the country-specific abilities to cope with environmental change. Each is defined in terms of the means – and of the standard deviation ó of the national welfare distributions in different states of emission behaviour. The nations under consideration are either risk neutral, risk averse or risk seeking and are sovereign in taking measures of global risk reduction. Following the assumption of expected utility maximisation it is revealed that taking and enforcing measures of risk reduction critically depend on the interplay of the subjective risk preferences and the landscape of risk induced by the effects of global risk control. Hence, given the national risk preferences, it is the landscape of risk that determines the co-operative power of national risk attitudes and with it attributes the nations as environmental-friendly or not.

Suggested Citation

  • Ohl, Cornelia, 2002. "Risk aversion - a necessary condition for limiting global environmental risks?," HWWA Discussion Papers 190, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26360

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Dasgupta, P., 1990. "The Environment as Commodity.i," Research Paper 84, World Institute for Development Economics Research.
    2. Chichilnisky, Graciela, 2000. "An axiomatic approach to choice under uncertainty with catastrophic risks," Resource and Energy Economics, Elsevier, vol. 22(3), pages 221-231, July.
    3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    4. Benedick, Richard Elliot, 1999. "Contrasting approaches: the ozone layer, climate change, and resolving the Kyoto dilemma," Discussion Papers, Research Professorship Environmental Policy FS II 99-404, Social Science Research Center Berlin (WZB).
    5. Oleg Eismont & Heinz Welsch, 1996. "Optimal greenhouse gas emissions under various assessments of climate change ambiguity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(2), pages 129-140, September.
    6. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    7. Roughgarden, Tim & Schneider, Stephen H., 1999. "Climate change policy: quantifying uncertainties for damages and optimal carbon taxes," Energy Policy, Elsevier, vol. 27(7), pages 415-429, July.
    8. Fisher, Anthony C., 2000. "Investment under uncertainty and option value in environmental economics," Resource and Energy Economics, Elsevier, vol. 22(3), pages 197-204, July.
    9. Dasgupta, Partha, 1990. "The Environment as a Commodity," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 51-67, Spring.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:hwwadp:26360. 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: (ZBW - German National Library of Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.