Discounting and Climate Change Policy

Larry S. Karp and Yacov Tsur
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Yacov Tsur: The Hebrew University of Jerusalem

No 1038, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: A constant social discount rate cannot reflect both a reasonable opportunity cost of public funds and an ethically defensible concern for generations in the distant future. We use a model of hyperbolic discounting that achieves both goals. We imbed this discounting model in a simple climate change model to calculate "constant equivalent discount rates" and plausible levels of expenditure to control climate change. We compare these results to discounting assumptions and policy recommendations in the Stern Review on Climate Change.

Keywords: discounting; climate change modeling; Stern Review; Markov Perfect Equilibria (search for similar items in EconPapers)
Date: 2007-05-17
Note: oai:cdlib1:are_ucb-1139
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Related works:
Working Paper: DISCOUNTING AND CLIMATE CHANGE POLICY (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cdl:agrebk:1038

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