Sacrifice, Discounting and Climate Policy: Five Questions

Larry S. Karp

No CESifo Working Paper No. 2761, CESifo Working Paper Series from CESifo Group Munich

Abstract: I offer a selective review of discounting and climate policy. Analytic and numerical models show that different assumptions greatly change the degree to which decisions about climate policy depend on the discount rate. I discuss a claim that standard models exaggerate the current generation’s sacrifices needed to internalize climate damages. This claim, if correct, affects the role of discounting. I argue that the assertion that the risk of catastrophic damage overwhelms discounting is unfounded. I show that the claim that we “view the world in perspective” implies hyperbolic rather than constant discounting.

Keywords: climate change; discounting; intergenerational conflict; catastrophic risk; hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: C61 C73 D63 D99 Q54 (search for similar items in EconPapers)
Date: 2009
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