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Climate policy under sustainable discounted utilitarianism

Dietz, Simon and Asheim, Geir B. (2011) Climate policy under sustainable discounted utilitarianism. Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment working papers, 42. Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, London, UK.

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Abstract

Empirical evaluation of policies to mitigate climate change has been largely confined to the application of discounted utilitarianism (DU). DU is contro-versial, both due to the conditions through which it is justifed and due to its consequences for climate policies, where the discounting of future utility gains from present abatement efforts makes it harder for such measures to justify their present costs. In this paper, we propose sustainable discounted utilitari- anism (SDU) as an alternative principle for evaluation of climate policy. Unlike undiscounted utilitarianism, which always assigns zero relative weight to present utility, SDU is an axiomatically based criterion, which departs from DU by assigning zero weight to present utility if and only if it exceeds future welfare. Using the DICE integrated assessment model to run risk analysis, we show that it is possible for future welfare to be below present utility along a `business as usual' development path. Consequently SDU and DU differ, and willingness to pay for emissions reductions is (sometimes signifcantly) higher under SDU than under DU. Under SDU, stringent schedules of emissions reductions increase social welfare, even if the discount rate is relatively high.

Item Type: Monograph (Working Paper)
Official URL: http://www2.lse.ac.uk/GranthamInstitute/Home.aspx
Additional Information: © 2011 The Authors
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
Journal of Economic Literature Classification System: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice; Clubs; Committees; Associations
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Sets: Departments > Geography and Environment
Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 42
Date Deposited: 25 Jul 2011 13:43
URL: http://eprints.lse.ac.uk/37578/

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