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Beyond Discounting Climate Change

Andersson, Julius LU (2012) NEKH01 20121
Department of Economics
Abstract
The question of which discount rate to choose when it comes to calculating costs and benefits regarding climate change has been discussed among economists since at least the beginning of the 1990’s. However, the issue of which discount rate to choose is not just an academic question, it also has major implications for climate change policy. In this paper I will show that there exists large disagreements among economists on which discount rate society should choose when calculating the costs and benefits of climate change. Moreover, because of large uncertainties, non-marginal effects, and specific aspects of the social welfare function commonly used in welfare economics, I suggest that we shift focus away from the choice of discount rates... (More)
The question of which discount rate to choose when it comes to calculating costs and benefits regarding climate change has been discussed among economists since at least the beginning of the 1990’s. However, the issue of which discount rate to choose is not just an academic question, it also has major implications for climate change policy. In this paper I will show that there exists large disagreements among economists on which discount rate society should choose when calculating the costs and benefits of climate change. Moreover, because of large uncertainties, non-marginal effects, and specific aspects of the social welfare function commonly used in welfare economics, I suggest that we shift focus away from the choice of discount rates altogether. We should instead focus on the risk of possible limitations of people’s freedoms and opportunities to lead valuable lives. This shift in focus will affect the way we normally reason when it comes to the economics of climate change. (Less)
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author
Andersson, Julius LU
supervisor
organization
course
NEKH01 20121
year
type
M2 - Bachelor Degree
subject
keywords
discounting, climate change, Ramsey rule, freedoms and opportunities
language
English
id
2629087
date added to LUP
2012-06-15 12:44:00
date last changed
2012-06-15 12:44:00
@misc{2629087,
  abstract     = {The question of which discount rate to choose when it comes to calculating costs and benefits regarding climate change has been discussed among economists since at least the beginning of the 1990’s. However, the issue of which discount rate to choose is not just an academic question, it also has major implications for climate change policy. In this paper I will show that there exists large disagreements among economists on which discount rate society should choose when calculating the costs and benefits of climate change. Moreover, because of large uncertainties, non-marginal effects, and specific aspects of the social welfare function commonly used in welfare economics, I suggest that we shift focus away from the choice of discount rates altogether. We should instead focus on the risk of possible limitations of people’s freedoms and opportunities to lead valuable lives. This shift in focus will affect the way we normally reason when it comes to the economics of climate change.},
  author       = {Andersson, Julius},
  keyword      = {discounting,climate change,Ramsey rule,freedoms and opportunities},
  language     = {eng},
  note         = {Student Paper},
  title        = {Beyond Discounting Climate Change},
  year         = {2012},
}