Zero discounting can compensate future generations for climate damage

Marc D. Davidson

Ecological Economics, 2014, vol. 105, issue C, 40-47

Abstract: In cost–benefit analysis of climate policy there are two main approaches to discounting, each with implications conflicting with our moral intuitions. Thus, discounted utilitarianism implies that we hardly need to protect future generations against climate change, while classical utilitarianism implies that we should reduce our consumption across the board to benefit future generations. The insolubility of the debate derives from the fact that both classical and discounted utilitarianism permit only a single discount rate for all consequences occurring in the same future year, while our intuitions clearly do distinguish between consequences, depending on whether we cause adverse effects on other people's interests and violate their rights. Most people share the moral intuition that we ought to refrain from harming others, and ought to compensate them if we were unable to prevent harm. To regain a reflective equilibrium between such deontological intuitions and economic theory there is a need to accept different discount rates for different situations: a zero consumption discount rate in the case of cost–benefit analysis of measures to prevent wrongful harm to future generations, and standard discounting in all other cases. Applying a zero consumption discount rate means that future generations are automatically largely compensated for climate damage that remains unmitigated.

Keywords: Future generations; Discount rate; Compensation; Climate change; Cost–benefit analysis; Deontology (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:105:y:2014:i:c:p:40-47

DOI: 10.1016/j.ecolecon.2014.05.018

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