IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2016.55.html
   My bibliography  Save this paper

Priority for the Worse Off and the Social Cost of Carbon

Author

Listed:
  • Matthew Adler

    (Duke University School of Law)

  • David Anthoff

    (Energy and Resources Group, University of California)

  • Valentina Bosetti

    (Bocconi University)

  • Greg Garner

    (The Pennsylvania State University)

  • Klaus Keller

    (The Pennsylvania State University and Carnegie Mellon University)

  • Nicolas Treich

    (INRA, University of Toulouse)

Abstract

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC.

Suggested Citation

  • Matthew Adler & David Anthoff & Valentina Bosetti & Greg Garner & Klaus Keller & Nicolas Treich, 2016. "Priority for the Worse Off and the Social Cost of Carbon," Working Papers 2016.55, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2016.55
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2016-055.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    2. Blackorby,Charles & Bossert,Walter & Donaldson,David J., 2005. "Population Issues in Social Choice Theory, Welfare Economics, and Ethics," Cambridge Books, Cambridge University Press, number 9780521532587, September.
    3. Brown, Campbell, 2005. "Priority Or Sufficiency …Or Both?," Economics and Philosophy, Cambridge University Press, vol. 21(2), pages 199-220, October.
    4. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    5. Anand, Sudhir & Sen, Amartya, 2000. "Human Development and Economic Sustainability," World Development, Elsevier, vol. 28(12), pages 2029-2049, December.
    6. Richard S.J. Tol, 2011. "The Social Cost of Carbon," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 419-443, October.
    7. Azar, Christian & Sterner, Thomas, 1996. "Discounting and distributional considerations in the context of global warming," Ecological Economics, Elsevier, vol. 19(2), pages 169-184, November.
    8. Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
    9. Tungodden, Bertil, 2003. "The Value Of Equality," Economics and Philosophy, Cambridge University Press, vol. 19(1), pages 1-44, April.
    10. Richard S. J. Tol & In Chang Hwang & Frédéric Reynès, 2012. "The Effect of Learning on Climate Policy under Fat-tailed Uncertainty," Working Paper Series 5312, Department of Economics, University of Sussex Business School.
    11. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
    12. Paul Dolan & Rebecca Shaw & Aki Tsuchiya & Alan Williams, 2005. "QALY maximisation and people's preferences: a methodological review of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 197-208, February.
    13. Markus K. Brunnermeier & Stefan Nagel, 2008. "Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals," American Economic Review, American Economic Association, vol. 98(3), pages 713-736, June.
    14. Matthew Adler & Nicolas Treich, 2015. "Prioritarianism and Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 279-308, October.
    15. Porter, Thomas, 2012. "In Defence of the Priority View," Utilitas, Cambridge University Press, vol. 24(3), pages 349-364, September.
    16. Jukka Pirttilä & Roope Uusitalo, 2010. "A ‘Leaky Bucket’ in the Real World: Estimating Inequality Aversion using Survey Data," Economica, London School of Economics and Political Science, vol. 77(305), pages 60-76, January.
    17. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-286, April.
    18. Moritz A. Drupp & Mark C. Freeman & Ben Groom & Frikk Nesje, 2018. "Discounting Disentangled," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 109-134, November.
    19. Anthoff, David & Hepburn, Cameron & Tol, Richard S.J., 2009. "Equity weighting and the marginal damage costs of climate change," Ecological Economics, Elsevier, vol. 68(3), pages 836-849, January.
    20. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    21. Dietz, Simon & Asheim, Geir B., 2012. "Climate policy under sustainable discounted utilitarianism," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 321-335.
    22. Pierre‐André Chiappori & Monica Paiella, 2011. "Relative Risk Aversion Is Constant: Evidence From Panel Data," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1021-1052, December.
    23. J. C. J. M. van den Bergh & W. J. W. Botzen, 2014. "A lower bound to the social cost of CO2 emissions," Nature Climate Change, Nature, vol. 4(4), pages 253-258, April.
    24. Burke, M. & Craxton, M. & Kolstad, C.D. & Onda, C. & Allcott, H. & Baker, E. & Barrage, L. & Carson, R. & Gillingham, K. & Graff-Zivin, J. & Greenstone, M. & Hallegatte, S. & Hanemann, W.M. & Heal, G., 2016. "Opportunities for advances in climate change economics," ISU General Staff Papers 3565, Iowa State University, Department of Economics.
    25. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    26. Yoram Amiel & John Creedy & Stan Hurn, 1999. "Measuring Attitudes Towards Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 83-96, March.
    27. repec:bla:econom:v:72:y:2005:i:3:p:375-396 is not listed on IDEAS
    28. Nordhaus, William, 2007. "Alternative measures of output in global economic-environmental models: Purchasing power parity or market exchange rates?," Energy Economics, Elsevier, vol. 29(3), pages 349-372, May.
    29. Parfit, Derek, 2012. "Another Defence of the Priority View," Utilitas, Cambridge University Press, vol. 24(3), pages 399-440, September.
    30. Orazio P. Attanasio & James Banks & Sarah Tanner, 2002. "Asset Holding and Consumption Volatility," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 771-792, August.
    31. Mirrlees, J. A. & Stern, N. H., 1972. "Fairly good plans," Journal of Economic Theory, Elsevier, vol. 4(2), pages 268-288, April.
    32. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, September.
    33. Hope, Chris, 2008. "Discount rates, equity weights and the social cost of carbon," Energy Economics, Elsevier, vol. 30(3), pages 1011-1019, May.
    34. Williams, Andrew, 2012. "The Priority View Bites the Dust?," Utilitas, Cambridge University Press, vol. 24(3), pages 315-331, September.
    35. Szpiro, George G, 1986. "Measuring Risk Aversion: An Alternative Approach," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 156-159, February.
    36. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, April.
    37. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
    38. David Anthoff & Richard Tol, 2014. "Climate policy under fat-tailed risk: an application of FUND," Annals of Operations Research, Springer, vol. 220(1), pages 223-237, September.
    39. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    40. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ryan Rafaty & Geoffroy Dolphin & Felix Pretis, 2020. "Carbon pricing and the elasticity of CO2 emissions," Working Papers EPRG2035, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Richard S.J. Tol, 2018. "The impact of climate change and the social cost of carbon," Working Paper Series 1318, Department of Economics, University of Sussex Business School.
    3. Ottmar Edenhofer & Max Franks & Matthias Kalkuhl, 2021. "Pigou in the 21st Century: a tribute on the occasion of the 100th anniversary of the publication of The Economics of Welfare," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1090-1121, October.
    4. Bas (B.) Jacobs & Rick (F.) van der Ploeg, 2017. "Should Pollution Taxes Be Targeted At Income Redistribution?," Tinbergen Institute Discussion Papers 17-070/VI, Tinbergen Institute.
    5. Martinet, Vincent & Del Campo, Stellio & Cairns, Robert D., 2022. "Intragenerational inequality aversion and intergenerational equity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    6. Kornek, Ulrike & Klenert, David & Edenhofer, Ottmar & Fleurbaey, Marc, 2021. "The social cost of carbon and inequality: When local redistribution shapes global carbon prices," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    7. Edenhofer, Ottmar & Flachsland, Christian & Kalkuhl, Matthias & Knopf, Brigitte & Pahle, Michael, 2019. "Optionen für eine CO2-Preisreform," Working Papers 04/2019, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    8. Casey Helgeson & Robert E. Nicholas & Klaus Keller & Chris E. Forest & Nancy Tuana, 2022. "Attention to values helps shape convergence research," Climatic Change, Springer, vol. 170(1), pages 1-19, January.
    9. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.
    10. Stéphane Zuber & Marc Fleurbaey, 2019. "Discounting and Intergenerational Ethics," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04467244, HAL.
    11. Jafino, Bramka Arga, 2021. "An equity-based transport network criticality analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 144(C), pages 204-221.
    12. Suphi Sen & Serhan Sadikoglu & Changjing Ji & Edwin van der Werf, 2024. "The Effectiveness of Carbon Pricing: A Global Evaluation," CESifo Working Paper Series 11291, CESifo.
    13. Christian P. Fries & Lennart Quante, 2023. "Intergenerational Equitable Climate Change Mitigation: Negative Effects of Stochastic Interest Rates; Positive Effects of Financing," Papers 2312.07614, arXiv.org, revised May 2024.
    14. Malerba, Daniele & Gaentzsch, Anja & Ward, Hauke, 2021. "Mitigating poverty: The patterns of multiple carbon tax and recycling regimes for Peru," Energy Policy, Elsevier, vol. 149(C).
    15. Bramka Arga Jafino & Jan H. Kwakkel & Frans Klijn, 2022. "Evaluating the distributional fairness of alternative adaptation policies: a case study in Vietnam’s upper Mekong Delta," Climatic Change, Springer, vol. 173(3), pages 1-20, August.
    16. Jinchi Dong & Jinnan Wang & Bi Jun & Richard S.J. Tol, 2023. "The effects of weather conditions on economic growth: Evidence from global subnational economic output and income," Working Paper Series 0423, Department of Economics, University of Sussex Business School.
    17. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    18. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    19. Ekholm, Tommi, 2018. "Climatic Cost-benefit Analysis Under Uncertainty and Learning on Climate Sensitivity and Damages," Ecological Economics, Elsevier, vol. 154(C), pages 99-106.
    20. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matthew Adler & Nicolas Treich, 2015. "Prioritarianism and Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 279-308, October.
    2. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    3. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    4. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).
    5. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    6. Buchholz, Wolfgang & Schumacher, Jan, 2010. "Discounting and welfare analysis over time: Choosing the [eta]," European Journal of Political Economy, Elsevier, vol. 26(3), pages 372-385, September.
    7. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.
    8. Yohe, Gary W. & Tol, Richard S. J. & Anthoff, David, 2009. "Discounting for Climate Change," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-22.
    9. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, risk and inequality: A general approach," Journal of Public Economics, Elsevier, vol. 128(C), pages 34-49.
    10. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    11. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    12. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    13. Tol, Richard S.J. & Yohe, Gary W., 2009. "The Stern Review: A deconstruction," Energy Policy, Elsevier, vol. 37(3), pages 1032-1040, March.
    14. Holger Strulik, 2021. "Hyperbolic discounting and the time‐consistent solution of three canonical environmental problems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 462-486, June.
    15. Geir B. Asheim, 2017. "Sustainable growth," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 825-848, December.
    16. David Anthoff & Richard Tol, 2009. "The Impact of Climate Change on the Balanced Growth Equivalent: An Application of FUND," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 351-367, July.
    17. Antony Millner, 2013. "On Welfare Frameworks and Catastrophic Climate Risks," CESifo Working Paper Series 4442, CESifo.
    18. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2013. "Should we sustain? And if so, sustain what? Consumption or the quality of life?," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 30, pages 639-665, Edward Elgar Publishing.
    19. DeCanio, Stephen J. & Manski, Charles F. & Sanstad, Alan H., 2022. "Minimax-regret climate policy with deep uncertainty in climate modeling and intergenerational discounting," Ecological Economics, Elsevier, vol. 201(C).
    20. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.

    More about this item

    Keywords

    Prioritarianism; Social Welfare Function; Social Cost of Carbon;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2016.55. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.