The trade-off between intra- and intergenerational equity in climate policy

Snorre Kverndokk, Eric Nævdal and Linda Nøstbakken

European Economic Review, 2014, vol. 69, issue C, 40-58

Abstract: This paper focuses on two equity dimensions of climate policy, intra- and intergenerational, and analyzes the implications of equity preferences on climate policy, and on the production and consumption patterns in rich and poor countries. We develop a dynamic two-region model, in which each region suffers from global warming, but also has an inequality aversion over current consumption allocations. Inequality aversion generally lifts the consumption path of the poor region, while the rich region must take a greater share of the climate burden. Furthermore, with inequality aversion, the optimal climate policy generally leads to higher investment in clean capital in the North and in dirty capital in the South, thereby allowing the South to pollute more and develop faster. The optimal policy may even require the poor region to increase emissions relative to the uncoordinated Business-as-Usual case. Introducing local pollution and transfers confirm the main results.

Keywords: Intragenerational equity; Intergenerational equity; Inequality aversion; Climate policy; Economic development (search for similar items in EconPapers)
JEL-codes: C63 D31 D63 Q54 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Working Paper: The Trade-off between Intra- and Intergenerational Equity in Climate Policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:69:y:2014:i:c:p:40-58

DOI: 10.1016/j.euroecorev.2014.01.007

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