Agreeing to disagree on climate policy

Area of Science:

• Environmental Economics
• Climate Policy Analysis
• Ethical Theory

Background:

• The utility discount rate is central to climate policy intensity debates.
• Disagreements over the discount rate's value lead to divergent policy recommendations.
• No consensus exists on a single, correct discount rate value.

Purpose of the Study:

• To address the ethical impasse in climate change economics stemming from discount rate disagreements.
• To propose a novel approach for determining an appropriate discount rate for climate policy.
• To reconcile competing ethical positions in economic analyses of climate change.

Main Methods:

• Conceptualizing the discount rate choice as an ethical primitive.
• Advocating a social choice-based approach to aggregate diverse individual discount rates.
• Developing a time-dependent discount rate derived from population-level aggregation.

Main Results:

• Efficient aggregation of individual discount rates yields a monotonically declining time-dependent rate.
• This proposed discounting scheme offers a compromise between differing ethical viewpoints.
• Application to US government's social cost of carbon calculations demonstrates its utility.

Conclusions:

• The choice of discount rate in climate policy is fundamentally ethical, not purely technical.
• A social choice aggregation method provides a viable resolution to the discount rate debate.
• The resulting time-dependent discount rate offers a balanced approach to climate change economics.