Intergenerational equity and discounting

Authors

  • Ferenc L. Tóth Potsdam Institute for Climate Impact Research

Keywords:

integrated assessments, climate change, discounting, equity, climate policy

Abstract

A standard framework is presented as an underlying model for the discounting debate. Views and proposals for the techniques and rates of discounting are assessed. Alternative modeling frameworks for studying intergenerational equity issues are evaluated with the result that the basic insights they provide do not differ very much. Results from model experiments involving different discount rate proposals show that fudging the discount rate does not lead to efficient climate policy. Three major clusters of opinions are identified regarding the applicability of cost-benefit analysis to the climate change problem and the appropriate discount rate to use. It is concluded that under some very special circumstances the cost-benefit rule should be abandoned and cost-effective strategies implying standard discount rates should be sought to reach clearly defined and justified environmental targets.

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Published

2005-10-30

Issue

Section

Articles