Climate policy under sustainable discounted utilitarianism

Simon Dietz and Geir Asheim

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Empirical evaluation of policies to mitigate climate change has been largely confined to the application of discounted utilitarianism (DU). DU is contro-versial, both due to the conditions through which it is justifed and due to its consequences for climate policies, where the discounting of future utility gains from present abatement efforts makes it harder for such measures to justify their present costs. In this paper, we propose sustainable discounted utilitari- anism (SDU) as an alternative principle for evaluation of climate policy. Unlike undiscounted utilitarianism, which always assigns zero relative weight to present utility, SDU is an axiomatically based criterion, which departs from DU by assigning zero weight to present utility if and only if it exceeds future welfare. Using the DICE integrated assessment model to run risk analysis, we show that it is possible for future welfare to be below present utility along a `business as usual' development path. Consequently SDU and DU differ, and willingness to pay for emissions reductions is (sometimes signifcantly) higher under SDU than under DU. Under SDU, stringent schedules of emissions reductions increase social welfare, even if the discount rate is relatively high.

Keywords: climate change; discounted utilitarianism; intergenerational equity; sustainable development; sustainable discounted utilitarianism (search for similar items in EconPapers)
JEL-codes: D63 D71 Q01 Q54 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-03-10
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http://eprints.lse.ac.uk/37578/ Open access version. (application/pdf)

Related works:
Journal Article: Climate policy under sustainable discounted utilitarianism (2012)
Working Paper: Climate Policy under Sustainable Discounted Utilitarianism (2011)
Working Paper: Climate policy under sustainable discounted utilitarianism (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:37578

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