EconPapers    
Economics at your fingertips  
 

The Aggregation of Climate Change Damages: a Welfare Theoretic Approach

Sam Fankhauser (sam.fankhauser@smithschool.ox.ac.uk), Richard Tol and David Pearce

Environmental & Resource Economics, 1997, vol. 10, issue 3, 249-266

Abstract: The economic value of environmental goods is commonly determined using the concepts of willingness to pay (WTP) or willingness to accept (WTA). However, the WTP/WTA observed in different countries (or between individuals) will differ according to socio-economic characteristics, in particular income. This notion of differentiated values for otherwise identical goods (say, a given reduction in mortality risk) has been criticized as unethical, most recently in the context of the 'social cost' chapter of the IPCC Second Assessment Report. These critics argue that, being a function of income, WTP/WTA estimates reflect the unfairness in the current income distribution, and for equity reasons uniform per-unit values should therefore be applied across individuals and countries. This paper analyses the role of equity in the aggregation of climate change damage estimates, using basic tools of welfare economics. It shows one way of how WTP/WTA estimates can be corrected in aggregation if the underlying income distribution is considered unfair. It proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions. Equity weighting can significantly increase aggregate (global) damage figures, although some specifications of weighting functions also imply reduced estimates. The paper also shows that while the postulate of uniform per-unit values is compatible with a wide range of 'reasonable' utility and welfare specifications, there are also cases where the common-value notion is not compatible with defensible welfare concepts. Copyright Kluwer Academic Publishers 1997

Keywords: climate change inpacts; valuation; welfare economics; aggregation; benefit-cost analysis (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (134)

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1026420425961 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:10:y:1997:i:3:p:249-266

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1023/A:1026420425961

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).

 
Page updated 2024-12-28
Handle: RePEc:kap:enreec:v:10:y:1997:i:3:p:249-266