Sacrifice, Discounting and Climate Policy: Five Questions

38 Pages Posted: 24 Aug 2009

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

Date Written: August 2009

Abstract

I offer a selective review of discounting and climate policy. Analytic and numerical models show that different assumptions greatly change the degree to which decisions about climate policy depend on the discount rate. I discuss a claim that standard models exaggerate the current generation’s sacrifices needed to internalize climate damages. This claim, if correct, affects the role of discounting. I argue that the assertion that the risk of catastrophic damage overwhelms discounting is unfounded. I show that the claim that we “view the world in perspective” implies hyperbolic rather than constant discounting.

Keywords: climate change, discounting, intergenerational conflict, catastrophic risk, hyperbolic discounting

JEL Classification: C61, C73, D63, D99, Q54

Suggested Citation

Karp, Larry S., Sacrifice, Discounting and Climate Policy: Five Questions (August 2009). CESifo Working Paper Series No. 2761, Available at SSRN: https://ssrn.com/abstract=1458887

Larry S. Karp (Contact Author)

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

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