the greenhouse effect damages costs and abatement the buildup of so called greenhouse gases in the atmosphere co2 in particular appears to be having an adverse impact on the global climate this paper briefly reviews current expectations with regard to physical and biological effects their potential costs to society and likely costs of abatement for a worst case scenario it is impossible to assess in economic terms the full range of possible non linear synergistic effects in the most favorable although not necessarily likely case of slow paced climate change however it seems likely that the impacts are within the affordable range at least in the industrialized countries of the world in the third world the notion of affordability is of doubtful relevance making the problem of quantitative evaluation almost impossible we tentatively assess the lower limit of quantifiable climate induced damages at 30 to 35 per ton of co2 equivalent worldwide with the major damages being concentrated in regions most adversely affected by sea level rise the non quantifiable environmental damages are also significant and should by no means be disregarded the costs and benefits of 1 reducing cfc use and 2 reducing fossil fuel consumption as a means of abatement are considered in some detail this strategy has remarkably high indirect benefits in terms of reduced air pollution damage and even direct cost savings to consumers the indirect benefits of reduced air pollution and its associated health and environmental effects from fossil fuel combustion in the industrialized countries range from 20 to 60 per ton of co2 eliminated in addition there is good evidence that modest e g 25 reductions in co2 emissions may be achievable by the u s and by implication for other countries by a combination of increased energy efficiency and restructuring that would permit simultaneous direct economic benefits savings to energy consumers of the order of 50 per ton of co2 saved a higher level of overall emissions reduction possibly approaching 50 could probably be achieved at little or not net cost by taking advantage of these savings we suggest the use of taxes on fossil fuel extraction or a carbon tax as a reasonable way of inducing the structural changes that would be required to achieve significant reduction in energy use and co2 emissions to minimize the economic burden and create a political constituency in support of the approach we suggest the substitution of resource based taxes in general for other types of taxes on labor income real estate or trade that are now the main sources of government revenue while it is conceded that it would be difficult to calculate the optimal tax on extractive resources we do not think this is a necessary prerequisite to policy making in fact we note that the existing tax system has never been optimized according to theoretical principles and is far from optimal by any reasonable criteria

welfare specifications and optimal control of climate change an application of fund the sensitivity of the optimal control of carbon dioxide emissions to the specification of the social welfare function is systematically explored using the fund model increasing risk aversion emphasises climate change damages relative to emission reduction costs but at the same time increases the discount rate of consumption without international co operation the discount rate effect dominates so that optimal control decreases with increasing risk aversion with international co operation optimal control first increases then decreases with increasing risk aversion since climate change falls heaviest on the poor optimal control increases with increasing inequity aversion full fledged intergenerational welfare functions on the one hand emphasise climate change damages but on the other hand place more weight on current poorer generations in fund the two tendencies almost cancel

measuring the economic benefits of recycling the case of the waste agricultural film in korea recently increase of the waste agricultural film waf raises the loss of the resources and produces the environmental damage in korea the korean government has established the basic plan for increasing the recycling rate and abating the environmental damage the objective of this paper is to estimate the economic benefits attached to the policy of recycling the waf using contingent valuation method aiming to provide policy makers with useful information to make an informed public decision in recycling the waf the overall results show that the respondents well accepted the contingent market and would be willing to pay a significant amount for the proposed policy of recycling the waf the mean willingness to pay and the truncated mean willingness to pay per household were 4641 korean won us 3 6 and 5730 korean won us 4 4 respectively total economic benefits for the population amounted to approximately 14 33 billion korean won us 11 02 million per year this quantitative information can be use

the aggregation of climate change damages a welfare theoretic approach the economic value of environmental goods is commonly determined using the concepts of willingness to pay wtp or willingness to accept wta however the wtp wta observed in different countries or between individuals will differ according to socio economic characteristics in particular income this notion of differentiated values for otherwise identical goods say a given reduction in mortality risk has been criticized as unethical most recently in the context of the social cost chapter of the ipcc second assessment report these critics argue that being a function of income wtp wta estimates reflect the unfairness in the current income distribution and for equity reasons uniform per unit values should therefore be applied across individuals and countries this paper analyses the role of equity in the aggregation of climate change damage estimates using basic tools of welfare economics it shows one way of how wtp wta estimates can be corrected in aggregation if the underlying income distribution is considered unfair it proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions equity weighting can significantly increase aggregate global damage figures although some specifications of weighting functions also imply reduced estimates the paper also shows that while the postulate of uniform per unit values is compatible with a wide range of reasonable utility and welfare specifications there are also cases where the common value notion is not compatible with defensible welfare concepts

rethinking the costs related to global warming a survey of the issues one approach to the economic analysis of global warming seeks to balance the costs of damage from or adaptation to it with the costs of mitigating it the costs of adaptation and damage have been estimated using techniques of environmental evaluation but are subject to a wide margin of uncertainty the costs of mitigation principally by reducing the emissions of co2 have been estimated using different kinds of economic models some of the results of which have suggested that very little abatement of carbon emissions is justified before the costs of abatement exceed the benefits of it in terms of foregone damage and adaptation costs the paper analyses the extent to which this conclusion is a function of the modelling assumptions and techniques used rather than likely practical outcomes with regard to the models treatment of unemployed resources revenue recycling prior distortions in the economy due to the tax system and possible dynamic effects from the introduction of a carbon energy tax it concludes that with different and arguably more appropriate treatment of the above issues especially when the secondary benefits of reducing co2 emissions are also taken into account it is not clear that even substantial reductions in the use of fossil fuels will incur net costs especially if there is the prospect of even moderate costs from global warming

the social cost of carbon and its policy implications the shadow price or social cost of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today cost benefit analysis would set the optimal amount of greenhouse gas emission reduction at the point where this social cost just equals the incremental cost of controlling emissions the higher the value for the social cost of carbon the more control is warranted this comparison assumes that cost benefit analysis is the correct way of determining climate change policy and many believe this is not the case because of the very long term irreversible and potentially catastrophic nature of global warming but in the short run at least a comparison of cost and benefits is required and in any event all decisions imply costs and benefits but what is the right figure for the social cost of carbon this paper reviews the uk government s assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits moreover adoption of the uk government s shadow price would have formidable implications for energy policy in the uk and for policies on afforestation copyright 2003 oxford university press

environmental prices uncertainty and learning there is an increasing demand for putting a shadow price on the environment to guide public policy and incentivize private behaviour in practice setting that price can be extremely difficult as uncertainties abound there is often uncertainty not just about individual parameters but about the structure of the problem and how to model it a further complication is the second best nature of real environmental policy making in this paper we propose some practical steps for setting prices in the face of these difficulties drawing on the example of climate change we consider how to determine the overall target for environmental protection how to set shadow prices to deliver that target and how we can learn from the performance of policies to revise targets and prices perhaps most significantly we suggest that estimates of the marginal cost of environmental protection rather than the marginal benefit will often provide the more consistent and robust prices for achieving targets

equitable cost benefit analysis of climate change greenhouse gas emissions and vulnerability to climate change show a strong negative correlation this is the moral issue at the heart of the climate problem however little attention has been paid to this in the literature see banuri et al 1996 for an overview the literature on equity issues in climate change is largely confined to the distribution of emissions reduction targets this literature takes the need to reduce greenhouse gas emissions for granted and takes a parametric approach to the required reductions on the other hand the literature that tries to derive how much emissions abatement is desirable largely ducks the equity issue this paper is an attempt to combine the two problems

intertemporal population ethics critical level utilitarian principles this paper considers the problem of social evaluation in a model where population size individual lifetime utilities lengths of life and birth dates vary across states in an intertemporal framework we investigate principles for social evaluation that allow history to matter to some extent using an axiom called independence of the utilities of the dead we provide a characterization of critical level generalized utilitarian rules as a by product of our analysis we show that social discounting is ruled out in an intertemporal welfarist environment a simple population planning example is also discussed

is the income elasticity of environmental improvements less than one we estimated the income elasticity of environmental improvements for a number of european data sets the value of this parameter is consistently found to be less than one with few exceptions our findings are compared with state of the art contingent valuation studies from other countries we also compared our findings with those reported in the literature on charitable donations and corporate donations these studies show a similar pattern donations decrease as a percentage of income as income increases

preferences for distributional impacts of climate policy what role do people think distributional aspects should play in the design of climate policy the literature assessing climate policies has shown that assumptions regarding peoples distributional preferences for climate change policy impacts are central for policy assessment but empirical evidence for such preferences is lacking we design a discrete choice experiment that varies how climate policies affect the income of future generations living in three geographical regions with distinctly different current and predicted future income levels the experiment is implemented on a sample of the danish population and preferences are modelled in a latent class model our results show that a small majority of the sample 60 hold preferences consistent with inequity aversion with respect to future income effects of climate policies across regions for the same group we find that preferences for co benefits for current generations reflect a form of altruism but not inequity aversion in both cases the altruistic aspects are moderated by an element of preferences for positive outcomes in own region too the remaining classes display preferences with a varying focus on impacts in their own region or simply no support for further climate policy our results provide some support for the inclusion of social preferences regarding distributional effects of climate change policies in policy assessments and hence for the significant impact on policy this inclusion will have

accounting for india s forest wealth in this paper we account for forest wealth in india changes in the timber and carbon wealth embodied in these forests are related to important green national accounting aggregates such as genuine saving and the change in wealth per capita important accounting issues include the timing of carbon releases that occur when forests are disturbed as well as the valuation of these releases our empirical findings suggest that while india s forest wealth is substantial net changes in this wealth are arguably not so large at least in relation to gnp however when viewed in the context of the wealth diluting effects of population growth this implies a far larger additional savings effort is required to cover the net loss in forest values than otherwise appears to be the case finally we examine ways in which the accounting approach that we adopt can be reconciled with approaches which stress conserving forest wealth

intergenerational discounting with intragenerational inequality in consumption and the environment it is now established that the consumption discount rate is determined by the growth of consumption multiplied by the elasticity of marginal utility but distributive concerns are rarely reflected in the literature assuming a social welfare function with inequality aversion we consider a consumption discount rate that can be decomposed into the growth effect and the intragenerational distribution effect the framework is then extended to include population change and inequality in the environment as an amenity in a utility with constant elasticity of substitution numerical examples illustrate that distributional effects turn non negligibly negative that may reduce consumption discount rate by 1 3 for plausible parameters once distribution is adjusted for both population and the environment

on international equity weights and national decision making on climate change abstract estimates of the marginal damage costs of carbon dioxide emissions require the aggregation of monetised impacts of climate change over people with different incomes and in different jurisdictions implicitly or explicitly such estimates assume a social welfare function and hence a particular attitude towards equity and justice we show that previous approaches to equity weighting are inappropriate from a national decision maker s point of view because domestic impacts are not valued at domestic values we propose four alternatives sovereignty altruism good neighbour and compensation with different views on concern for and liability towards foreigners the four alternatives imply radically different estimates of the social cost of carbon and hence the optimal intensity of climate policy

understanding how income influences willingness to pay for joint programs a more equitable value measure for the less wealthy the preponderance of evidence from many studies is that less wealthy households are subjected to greater exposure per capita and in aggregate to air pollution water pollution and toxic wastes it also is the case that the less wealthy are provided with a disproportionately low amount of other programs to enhance amenities provided by the natural environment such as recreational resources and high quality esthetic opportunities both quality and quantity however to date no study has quantified the scale of this effect on the less wealthy as compared to their more wealthy counterparts when it comes to policy choices made on the basis of benefits analysis this study provides a new equity adjustment method to measure quantitatively the effect of this inequity in the case of public goods

welfare as equity equivalents equity or its counterpart inequity plays a fundamental role in the evaluation of social welfare in different dimensions in this paper we revisit the concept of inequity in the sense of unequal distributions across individuals time and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach we propose a general measure of welfare as equity equivalents and a corresponding inequity index we show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations we then prove that the order of aggregation across the different dimensions matters for welfare evaluations finally we show that many of the welfare theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

a comment on economy wide estimates of the implications of climate change human health abstract in a recent article in this journal francesco bosello roberto roson and richard tol make the remarkable prediction that one degree of global warming will on balance save more than 800 000 lives annually by 2050 they introduce enormous controversial monetary valuations of mortality and morbidity varying with income they then focus primarily on modeling the much smaller indirect economic effects of the changes in health outcomes their calculations large and small are driven by the huge projected reduction in mortality an estimate that bosello et al fail to substantiate they rely on research that identifies a simple empirical relationship between temperature and mortality but ignores the countervailing effect of human adaptation to gradual changes in average temperature while focusing on small changes in average temperatures they ignore the important health impacts of extreme weather events they extrapolate the effects of small changes in average temperature far beyond the level that is apparently supported by their principal sources and introduce arbitrary assumptions that may bias the result toward finding net health benefits from warming

weight factors in cost benefit analysis of climate change equity considerations may justify the use of weight factors when estimating the costs of climate change this paper reviews different weight factors that have been used in the climate economics literature based on a simple model it is shown that although the different weight factors imply substantially different cost damage estimates they actually yield the same optimal emission reductions this paradox is explained by the fact that some of the approaches require that also the abatement costs are weighted and this offsets the effect of the diverging cost damage estimates the model is then used to analyse the importance weighting may have on the overall cost benefit analysis at present when most of the global emissions of fossil co2 originate from the industrialised countries the global optimal emissions are considerably lower if costs are weighted however the more the emissions in developing countries grow the less important becomes the introduction of weight factors in cost benefit analysis of climate change for the global emission reductions in the model developed here on a regional level the introduction of weight factors continues to play an important role implying substantially lower emissions in the rich region and slightly higher in the poor

distributional weights in environmental valuation and cost benefit analysis theory and practice abstract cost benefit analysis cba is built on the kaldor hicks efficiency criterion whereby projects that have aggregate positive net benefits are recommended even if those who lose are not compensated for their losses two kinds of problems can be identified with the use of the criterion first as income tends to affect monetary welfare changes positively the preferences of those with higher wealth have a larger weight in societal decision making second monetary welfare changes can be thought of as changes in real income which matter more for those with a lower initial wealth level both problems can be mitigated with distributional weighting despite their strong theoretical pedigree distributional weights have been largely neglected in practical cbas one exception being analyses in climate change economics we present the theory of distributional weighting and illustrate how weights can be applied empirically in an international environmental cba that deals with marine water quality improvements we show that different weighting schemes can result in different policy recommendations we also show that taking the income distribution within countries into account can change a country s willingness to participate in the water quality improvement program and that the income elasticity of willingness to pay wtp is an important indication of the direction of change

an equilibrium framework for the analysis of a degrowth society with asymmetric agents sharing and basic income abstract this paper presents a novel equilibrium framework allowing for asymmetries in the initial wealth allocations labour supplies as well as in the preferences of optimizing agents the framework is applied to study a degrowth society where a subset of agents voluntarily limit their material consumption thereby complying with voluntary simplicity vs at micro level the utility maximization problems of asymmetric agents are formulated and solved for optimal labour supplies new macro level equilibrium solutions accounting for wealth inequality are presented based on different labour supply models the equilibrium welfare is measured using a bernoully nash aggregate an increase in the share of the vs type agents implies a degrowth transition to a lower level of average consumption analysis of the equilibrium framework shows that degrowth whereby average market based consumption falls improves the equilibrium welfare assuming the vs type agents have sufficient resources enabling a reduction in labour supplies sharing collaborative consumption and basic income support welfare increasing degrowth any growing economy can eventually reach the size at which degrowth would improve the welfare simulations suggest that degrowth can also yield a pareto improvement in welfare

a model of trade in exhaustible resources what distinguishes exhaustible resources from most other goods is not only their non renewable nature but also a combination of two other important characteristics related to their economic functions in their role as an input resources serve as an esseptial factor in the production of final goods moreover because their usefulness remains intact until they are consumed in the process of production they may also serve as a store of value in the absence of other types of marketable assets this latter characteristic enables the owner of the resource to achieve through optimal resource management his desired time profile of consumption corresponding to these two economic functions are two possible motives for international trade in exhaustible resources first in connection with their role as a productive input trade in resources promotes efficiency in the allocation of factors of production throughout the world economy on the basis of this motive for trade countries with a relatively high per capita endowment of the resource should be expected to export the resource in exchange for final goods second in connection with their asset function trade in resources may be viewed as a means of achieving efficiency in the intertemporal allocation of consumption goods among countries economies with a relatively high rate of time preference desire a relatively high ratio of current to future consumption accordingly impatient countries might be expected to import consumption goods in exchange for the resource in the present and export consumption goods in the future the interaction between these two motives for trade is examined in the present paper within a simple two period two country model traded objects are assumed to be an exhaustible resource and a single consumption good although the possibility of trade in consumption loans is also considered later in the paper the consumption good is produced in both countries with the aid of labor and the resource because the latter has the dual role of being a productive input as well as a store of value in the model international trade is viewed both as a means of reallocating the world s endowment of the resource so as to ensure

targets for global climate policy an overview a survey of the economic impact of climate change and the marginal damage costs shows that carbon dioxide emissions are a negative externality the estimated pigou tax and its growth rate are too low to justify the climate policy targets set by political leaders a lower discount rate or greater concern for the global distribution of income would justify more stringent climate policy but would imply an overhaul of other public policies catastrophic risk justifies more stringent climate policy but only to a limited extent

specifications of social welfare in economic studies of climate policy overview of criteria and related policy insights an important assumption in economic studies of climate policy is the social welfare function this paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control notably if climate change impacts are uncertain first decision criteria in current climate economic studies are reviewed next the most important alternatives are discussed including their mathematical formalization and incorporation in economy climate models most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach however several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy we conclude that there is clear need for systematic research on this theme for which the current review provides a solid basis

on the value of life in rich and poor countries and distributional weights beyond utilitarianism this paper discusses the use ofdistributional weights in cba based on a generalbergson samuelson swf in particular it illustratessome consequences of applying a swf characterized byconstant inequality aversion which includes classicalutilitarianism as a special case together with aconstant relative risk aversion utility function whencalculating the damage costs of global warming itextends and clarifies earlier unintuitive results andemphasizes that utility must be seen as fully cardinalin terms of levels in this context in the specialcase of utilitarianism on the other hand it issufficient to be able to make interpersonalcomparisons of utility changes

the relationship between the income elasticities of demand and willingness to pay abstract the relationship between income and willingness to pay for collectively provided public environmental goods is investigated we show that while the income elasticity of willingness to pay and the ordinary income elasticity of demand are related knowledge of one is insufficient to determine the magnitude or even the sign of the other the income elasticity of willingness to pay is influenced by additional factors which are generally unobservable examples are provided to illustrate the degree to which the two income elasticities may diverge our results indicate that even when goods are demand luxuries they may or may not have income elasticities of willingness to pay which are greater than one

the damage costs of climate change toward more comprehensive calculations it is argued that estimating the damage costs of a certain benchmark climate change is not sufficient what is needed are cost functions and confidence intervals although these are contained in the integrated models and their technical manuals this paper brings them into the open in order to stimulate discussion after briefly reviewing the benchmark climate change damage costs region specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate furthermore cost functions are assumed to be quadratic as an approximation of the unknown but presumably convex functions results from the damage module of the integrated climate economy model fund are presented next uncertainties are incorporated and expected damages are calculated it is shown that because of convex loss functions and right skewed uncertain ties the risk premium is substantial calling for more action than analysis based on best guess estimates the final section explores some needs for further scientific research

level and volatility factors in macroeconomic data abstract macroeconomic models typically focus on innovations in the level of fundamentals as driver of business cycles because modeling of volatility can be demanding this paper suggests a simple methodology that can separate the level from the volatility factors without directly estimating the volatility processes this is made possible by exploiting features in the second order approximation of equilibrium models and using information in a large panel of data to estimate the factors augmenting the factors to a var shed light on the effects of the level and volatility shocks and their relative importance