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Towards a More Inclusive and Precautionary Indicator of Global Sustainability

John Pezzey () and Paul Burke ()

CCEP Working Papers from Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University

Abstract: We construct a hybrid, economic indicator of the sustainability of global well-being, which is more inclusive than existing indicators and incorporates an environmentally pessimistic, physical constraint on global warming. Our methodology extends the World Bank's Adjusted Net Saving (ANS) indicator to include the cost of population growth, the benefit of technical progress, and a much higher, precautionary cost of current CO2 emissions. Future warming damage is so highly unknowable that valuing emissions directly is rather arbitrary, so we use a novel, inductive approach: we modify damage and climate parameters in the deterministic DICE climate-economy model so it becomes economically optimal to control emissions in a way likely to limit warming to an agreed target, here 2 degrees Celsius. If future emissions are optimally controlled, our ANS then suggests that current global well-being is sustainable. But if emissions remain uncontrolled, our base-case ANS is negative now and our corresponding, modified DICE model has an unsustained development path, with well-being peaking in 2065. Current ANS on an uncontrolled path may thus be a useful heuristic indicator of future unsustainability. Our inductive method might allow ANS to include other very hard-to-value, environmental threats to global sustainability, like biodiversity loss and nitrogen pollution.

Keywords: global sustainability; optimism and pessimism; precautionary valuation of CO2 emissions; unknowability and induction; population growth; technical progress (search for similar items in EconPapers)
JEL-codes: Q01 Q51 Q54 Q55 Q56 Q57 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-ene, nep-hap and nep-res
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Journal Article: Towards a more inclusive and precautionary indicator of global sustainability (2014) Downloads
Working Paper: Towards a more inclusive and precautionary indicator of global sustainability (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:ccepwp:1410

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