Priority for the Worse Off and the Social Cost of Carbon

29 Pages Posted: 17 Aug 2016

See all articles by Matthew D. Adler

Matthew D. Adler

Duke University School of Law

David Anthoff

University of California, Berkeley - Energy and Resources Group

Valentina Bosetti

Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Gregory Garner

Pennsylvania State University

Klaus Keller

Pennsylvania State University

Nicolas Treich

University of Toulouse 1 - Toulouse School of Economics (TSE)

Multiple version iconThere are 3 versions of this paper

Date Written: August 14, 2016

Abstract

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF) — one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC.

Keywords: Social Cost of Carbon, Climate Change, Prioritarianism, Integrated Assessment Model, Welfare Economics

JEL Classification: Q540

Suggested Citation

Adler, Matthew D. and Anthoff, David and Bosetti, Valentina and Garner, Gregory and Keller, Klaus and Treich, Nicolas, Priority for the Worse Off and the Social Cost of Carbon (August 14, 2016). CESifo Working Paper Series No. 6032. Available at SSRN: https://ssrn.com/abstract=2823066

Matthew D. Adler (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

David Anthoff

University of California, Berkeley - Energy and Resources Group ( email )

United States

Valentina Bosetti

Bocconi University

Via Gobbi 5
Milan, 20136
Italy

CMCC - Euro Mediterranean Centre for Climate Change

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Gregory Garner

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Klaus Keller

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Nicolas Treich

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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