SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

A constant social discount rate cannot reflect both a reasonable opportunity cost of public funds and an ethically defensible concern for generations in the distant future. We use a model of hyperbolic discounting that achieves both goals. We imbed this discounting model in a simple climate change model to calculate constant equivalent discount rates" and plausible levels of expenditure to control climate change. We compare these results to discounting assumptions and policy recommendations in the Stern Review on Climate Change.

Time perspective and climate change policy

Palavras-chave: Discounting; Climate change modeling; Stern Review; Markov Perfect Equilibria; Environmental Economics and Policy; C61; C73; D63; D99; Q54.

Ano: 2007

URL: http://purl.umn.edu/7149

The tendency to foreshorten time units as we peer further into the future provides an explanation for hyperbolic discounting at an intergenerational time scale. We study implications of hyperbolic discounting for climate change policy, when the probability of a climate-induced catastrophe depends on the stock of greenhouse gasses. We provide a positive analysis by characterizing the set of Markov perfect equilibria (MPE) of the intergenerational game amongst a succession of policymakers. Each policymaker reflects her generation’s preferences, including its hyperbolic discounting. For a binary action game, we compare the MPE set to a “restricted commitment” benchmark. We compare the associated “constant equivalent discount rates” and the willingness to pay...

CLIMATE POLICY WHEN THE DISTANT FUTURE MATTERS: CATASTROPHIC EVENTS WITH HYPERBOLIC DISCOUNTING

Palavras-chave: Hyperbolic discounting; Markov Perfect Equilibria; Catastrophic climate change; Uncertainty; Environmental Economics and Policy; Resource /Energy Economics and Policy; C61; C73; D63; D99; Q54.

Ano: 2008

URL: http://purl.umn.edu/42848

Low probability catastrophic climate change can have a signifcant influence on policy under hyperbolic discounting. We compare the set of Markov Perfect Equilibria (MPE) to the optimal policy under time-consistent commitment. For some initial levels of risk there are multiple MPE; these may involve either excessive or insufficient stabilization effort. These results imply that even if the free-rider problem amongst contemporaneous decision-makers were solved, there may remain a coordination problem amongst successive generations of decision-makers. A numerical example shows that under plausible conditions society should respond vigorously to the threat of climate change.

Climate Policy When the Distant Future Matters: Catastrophic Events with Hyperbolic Discounting

Palavras-chave: Abrupt climate change; Event uncertainty; Catastrophic risk; Hyperbolic discounting; Markov Perfect Equilibria; Environmental Economics and Policy; C61; C73; D63; D99; Q54.

Ano: 2007

URL: http://purl.umn.edu/7181

Low probability catastrophic climate change can have a significant influence on policy under hyperbolic discounting. We compare the set of Markov Perfect Equilibria (MPE) to the optimal policy under time-consistent commitment. For some initial levels of risk there are multiple MPE; these may involve either excessive or insufficient stabilization effort. These results imply that even if the free-rider problem amongst contemporaneous decision-makers were solved, there may remain a coordination problem amongst successive generations of decision-makers. A numerical example shows that under plausible conditions society should respond vigorously to the threat of climate change.