How Do Long‐Shot Outcomes Affect Preferences for Climate‐Change Mitigation?

Mary Riddel

Southern Economic Journal, 2014, vol. 80, issue 3, 752-771

Abstract: This article takes a fresh look at how public uncertainty influences willingness to pay (WTP) for climate‐change mitigation programs. I elicit subjective distribution functions over future global mean temperatures and WTP for mitigation. I find, not surprisingly, that subjects, on average, view climate change as a “bad,” and the higher the expected temperature increase they perceive, the more they are willing to pay for mitigation. Subjects are generally risk averse, so that they are WTP more for mitigation programs when the outcome of the program is more certain. The skew of the subjective climate‐change distribution also affects preferences, so that aversion to catastrophic outcomes is an important component of WTP for mitigation. I find that models that ignore skew are likely to underestimate the influence of uncertainty on willingness to pay for climate‐change mitigation.

Date: 2014
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https://doi.org/10.4284/0038-4038-2011.231

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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:80:y:2014:i:3:p:752-771

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