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Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights

Wouter Botzen and Jeroen van den Bergh

Environmental & Resource Economics, 2014, vol. 58, issue 1, 1-33

Abstract: An important assumption in economic studies of climate policy is the social welfare function. This paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control, notably if climate change impacts are uncertain. First, decision criteria in current climate-economic studies are reviewed. Next, the most important alternatives are discussed, including their (mathematical) formalization and incorporation in economy-climate models. Most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach. However, several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy. We conclude that there is clear need for systematic research on this theme, for which the current review provides a solid basis. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: Climate change; Cost-benefit analysis; Discounting; Integrated assessment modelling; Mitigation; Social welfare function; Uncertainty; Q2; Q4 (search for similar items in EconPapers)
Date: 2014
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