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Climate policies deserve a negative discount rate

Author

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  • Marc Fleurbaey

    (Economic Theory Center - Princeton University, Le Collège d'études mondiales/FMSH - FMSH - Fondation Maison des sciences de l'homme)

  • Stéphane Zuber

    (Le Collège d\'études mondiales - CERSES - UMR 8137 - Centre de recherche sens, ethique, société - UPD5 - Université Paris Descartes - Paris 5 - CNRS - Centre National de la Recherche Scientifique - Le Collège d'études mondiales/FMSH - FMSH - Fondation Maison des sciences de l'homme)

Abstract

We defend a methodology of discounting, for the evaluation of the long-term effects of climate policies, which relies on a social welfare objective, against the view that the market rate of return should be used for that purpose. We also show that in the long run, the discount rate for such policies should focus on the worst-case scenario for the most disadvantaged populations. As a consequence, it is likely that the appropriate discount rate for climate policies should be negative, implying a high priority for the future.

Suggested Citation

  • Marc Fleurbaey & Stéphane Zuber, 2012. "Climate policies deserve a negative discount rate," Working Papers halshs-00728193, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00728193
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00728193
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    References listed on IDEAS

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    1. Marc Fleurbaey, 2010. "Assessing Risky Social Situations," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 649-680, August.
    2. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, September.
    3. Gollier, Christian, 2002. "Discounting an uncertain future," Journal of Public Economics, Elsevier, vol. 85(2), pages 149-166, August.
    4. Schelling, Thomas C, 1995. "Intergenerational discounting," Energy Policy, Elsevier, vol. 23(4-5), pages 395-401.
    5. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    6. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63(4), pages 309-309.
    7. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
    8. 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.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A negative discount rate for climate policy?
      by Economic Logician in Economic Logic on 2012-10-01 19:55:00

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    2. Courard-Hauri, David & Klimas, Christie A. & Parrish, Conor, 2020. "An analysis of the long-term social discount rate and the valuation of large environmental losses using non-monetary tradeoffs," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    3. Tol, Richard S. J., 2011. "Modified Ramsey Discounting for Climate Change," Papers WP368, Economic and Social Research Institute (ESRI).
    4. Frédéric Gonand, 2019. "Inégalité intergénérationnelle et recyclage d’une taxe carbone," Revue économique, Presses de Sciences-Po, vol. 70(3), pages 411-440.
    5. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, risk and inequality: A general approach," Journal of Public Economics, Elsevier, vol. 128(C), pages 34-49.
    6. Yamaguchi, Rintaro & Shah, Payal, 2020. "Spatial discounting of ecosystem services," Resource and Energy Economics, Elsevier, vol. 62(C).
    7. van den Belt, Marjan & Stevens, Sharon M., 2016. "Transformative agenda, or lost in the translation? A review of top-cited articles in the first four years of Ecosystem Services," Ecosystem Services, Elsevier, vol. 22(PA), pages 60-72.
    8. Xavier Richet, 2013. "L'internationalisation des firmes chinoises : croissance, motivations, stratégies," Working Papers halshs-00796197, HAL.
    9. Byasdeb Dasgupta, 2013. "Some Aspects of External Dimensions of Indian Economy in the Age of Globalisation," Working Papers halshs-00820294, HAL.
    10. Byasdeb Dasgupta, 2013. "Financialization, Labour Market Flexibility, Global Crisis and New Imperialism - A Marxist Perspective," Working Papers halshs-00840831, HAL.
    11. Jean-Marc Bonnisseau & Alain Chateauneuf & Jean-Pierre Drugeon, 2023. "On Future Allocations of Scarce Resources without Explicit Discounting Factors," Documents de travail du Centre d'Economie de la Sorbonne 23004, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    12. repec:dau:papers:123456789/10490 is not listed on IDEAS
    13. Price, Colin, 2017. "Optimal rotation with negative discount rates: completing the picture," Journal of Forest Economics, Elsevier, vol. 29(PB), pages 87-93.
    14. Daniel A. Farber, 2015. "Gambling over Growth: Economic Uncertainty, Discounting, and Regulatory Policy," The Journal of Legal Studies, University of Chicago Press, vol. 44(S2), pages 509-528.
    15. Rosalie Arendt & Till M. Bachmann & Masaharu Motoshita & Vanessa Bach & Matthias Finkbeiner, 2020. "Comparison of Different Monetization Methods in LCA: A Review," Sustainability, MDPI, vol. 12(24), pages 1-39, December.

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    More about this item

    Keywords

    taux d'escompte; politique climatique; équité intergénérationnelle; discounting; climate policy; intergenerational equity;
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