Discount rates, equity weights and the social cost of carbon

Chris Hope

Energy Economics, 2008, vol. 30, issue 3, pages 1011-1019

Abstract: Equity weighting has been proposed as a way of allowing welfare equivalents to be included in the social cost of carbon since a dollar to a poor person is worth more than a dollar to a rich one. Here we use the PAGE2002 integrated assessment model to show that the social cost of carbon is higher without equity weights (an elasticity of marginal utility with respect to income of 0) than with them. This might seem counter-intuitive, but it comes about because of the logical link between equity weights and discount rates; as the elasticity goes from 0 to -Â 0.5 to -Â 1.0, the social rate of time preference rises, and the drop in present values that results far outweighs the small increase in impacts that equity weights bring.

Downloads: (external link)
http://www.sciencedi ... 703000b30a4340ab78ae
Full text for ScienceDirect subscribers only

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

Access Statistics for this article

Energy Economics is edited by R. S. J. Tol and J. P. Weyant

More articles in Energy Economics from Elsevier
Series data maintained by Heidi Boesdal ().