EconStor >
Institut für Weltwirtschaft (IfW), Kiel >
Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/27496
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorAnthoff, Daviden_US
dc.contributor.authorTol, Richard S. J.en_US
dc.contributor.authorYohe, Gary W.en_US
dc.date.accessioned2009-08-12T07:15:10Z-
dc.date.available2009-08-12T07:15:10Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/27496-
dc.description.abstractIt is well-known that the discount rate is crucially important for estimating the social cost of carbon, a standard indicator for the seriousness of climate change and desirable level of climate policy. The Ramsey equation for the discount rate has three components: the pure rate of time preference, a measure of relative risk aversion, and the rate of growth of per capita consumption. Much of the attention on the appropriate discount rate for long-term environmental problems has focussed on the role played by the pure rate of time preference in this formulation. We show that the other two elements are numerically just as important in considerations of anthropogenic climate change. The elasticity of the marginal utility with respect to consumption is particularly important because it assumes three roles: consumption smoothing over time, risk aversion, and inequity aversion. Given the large uncertainties about climate change and widely asymmetric impacts, the assumed rates of risk and inequity version can be expected to play significant roles. The consumption growth rate plays four roles. It is one of the determinants of the discount rate, and one of the drivers of emissions and hence climate change. We find that the impacts of climate change grow slower than income, so that the effective discount rate is higher than the real discount rate. The differential growth rate between rich and poor countries determines the time evolution of the size of the equity weights. As there are a number of crucial but uncertain parameters, it is no surprise that one can obtain almost any estimate of the social cost of carbon. We even show that, for a low pure rate of time preference, the estimate of the social cost of carbon is indeed arbitrary – as one can exclude neither large positive nor large negative impacts in the very long run. However, if we probabilistically constrain the parameters to values that are implied by observed behaviour, we find that the social cost of carbon, corrected for uncertainty and inequity, is 61 US dollar per metric tonne of carbon.en_US
dc.language.isoengen_US
dc.publisherKiel Institute for the World Economy (IfW) Kiel-
dc.relation.ispartofseriesEconomics Discussion Papers / Institut für Weltwirtschaft 2009-15en_US
dc.subject.jelQ54en_US
dc.subject.ddc330en_US
dc.subject.keywordSocial cost of carbonen_US
dc.subject.keywordclimate changeen_US
dc.subject.keywordpure time preferenceen_US
dc.subject.keywordrisk aversionen_US
dc.subject.keywordinequity aversionen_US
dc.subject.keywordincome elasticityen_US
dc.subject.keywordtime horizonen_US
dc.subject.keyworduncertaintyen_US
dc.subject.stwKlimaveränderungen_US
dc.subject.stwRisikoen_US
dc.subject.stwSoziale Diskontrateen_US
dc.subject.stwSoziale Kostenen_US
dc.subject.stwZeitpräferenzen_US
dc.subject.stwRisikoaversionen_US
dc.subject.stwEinkommenselastizitäten_US
dc.subject.stwGrenznutzentheorieen_US
dc.subject.stwWelten_US
dc.titleDiscounting for Climate Changeen_US
dc.typeWorking Paperen_US
dc.identifier.ppn591434709en_US
dc.rights.licensehttp://creativecommons.org/licenses/by-nc/2.0/de/deed.en-
dc.identifier.repecRePEc:zbw:ifwedp:7539-
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers

Files in This Item:
File Description SizeFormat
dp2009-15.pdf400.49 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.