Intertemporal Distribution, Sufficiency, and the Social Cost of Carbon.

Hänsel, Martin C. and Quaas, Martin (2018) Intertemporal Distribution, Sufficiency, and the Social Cost of Carbon. Open Access Ecological Economics, 146 . pp. 520-535. DOI 10.1016/j.ecolecon.2017.11.024.

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Abstract

We explore how the intertemporal distribution of well-being affects the social cost of carbon. In contrast to the literature that studies parameters of a particular social welfare function, such as the discount rate, we shift the focus and directly assume a parametric form for the intertemporal distribution of well-being. This has the advantage of avoiding explicit discounting choices, which has initiated much debate. Specifically, we consider a set of intertemporal distributions that reach a steady-state at a pre-specified level of “sufficient” well-being, or equivalently after a pre-specified “end-of-growth horizon”. We numerically illustrate our results in DICE and find that the social cost of carbon increases over-proportionally with the sufficiency level of well-being. While the social cost of carbon in 2015 is US$ 7 if the sufficiency level is four-fold the present level, it is US$ 30 if the sufficiency level is 15-fold, and US$ 100 if the sufficiency level is 26-fold the present level. This shows in a transparent way how conceptions of intergenerational distributive justice drive the social cost of carbon.

Document Type: Article
Keywords: Climate change, Social cost of carbon, Optimal tax, DICE, Optimal growth, Sustainability, Social welfare function, Discounting
Research affiliation: Kiel University > Kiel Marine Science
OceanRep > The Future Ocean - Cluster of Excellence
Kiel University
Refereed: Yes
Open Access Journal?: Yes
DOI etc.: 10.1016/j.ecolecon.2017.11.024
ISSN: 0921-8009
Projects: Future Ocean
Date Deposited: 02 Feb 2018 12:07
Last Modified: 14 Mar 2019 10:06
URI: http://oceanrep.geomar.de/id/eprint/41808

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