Climate Change and Future Generations

83 Pages Posted: 29 Aug 2010 Last revised: 19 Oct 2014

See all articles by Richard L. Revesz

Richard L. Revesz

New York University School of Law

Matthew R. Shahabian

New York University School of Law

Date Written: August 15, 2010

Abstract

Efforts to reduce greenhouse gases and control climate change implicate a wide range of social, moral, economic, and political issues, none of them simple or clear. But when regulators evaluate the desirability of climate change mitigation through cost-benefit analysis, one factor typically determines whether mitigation is justified: the discount rate, the rate at which future benefits are converted to their present value. Even low discount rates make the value of future benefits close to worthless: at a discount rate of three percent, ten million dollars five hundred years from now is worth thirty-eight cents today – that is more than we would be willing to pay now to save a life than under a standard cost-benefit analysis. Discounting over very long periods, like in the context of climate change, has long perplexed economists, philosophers, and legal scholars alike.

This Article evaluates the four principal justifications for intergenerational discounting, which often are conflated in the literature. It shows that none of these justifications supports the prevalent approach of discounting benefits to future generations at the rate of return in financial markets and, more generally, that discounting cannot substitute for a moral theory setting forth our obligations to future generations.

Keywords: climate change, greenhouse gases, cost-benefit analysis, discounting, environmental regulation

JEL Classification: K23, K32, Q30, Q38

Suggested Citation

Revesz, Richard L. and Shahabian, Matthew R., Climate Change and Future Generations (August 15, 2010). Southern California Law Review, Vol. 84, p. 1097, 2011; NYU Law and Economics Research Paper No. 10-38; NYU School of Law, Public Law Research Paper No. 10-59. Available at SSRN: https://ssrn.com/abstract=1666423 or http://dx.doi.org/10.2139/ssrn.1666423

Richard L. Revesz (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6185 (Phone)
212-995-4590 (Fax)

Matthew R. Shahabian

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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