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Risk aversion, intergenerational equity and climate change.

Abstract : The paper investigates a climate-economy model with an iso-elastic welfare function in which one parameter gamma measures relative risk-aversion and a distinct parameter rho measures resistance to intertemporal substitution. We show both theoretically and numerically that climate policy responds differently to variations in the two parameters. In particular, we show that higher gamma but lower rho leads to increase emissions control. We also argue that climate-economy models based on intertemporal expected utility maximization, i.e. models where gamma = rho, may misinterpret the sensitivity of the climate policy to risk-aversion.
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Contributor : Minh Ha-Duong <>
Submitted on : Monday, July 18, 2005 - 11:57:26 PM
Last modification on : Friday, July 17, 2020 - 9:20:35 AM
Long-term archiving on: : Friday, September 17, 2010 - 5:46:27 PM


  • HAL Id : halshs-00000680, version 2


Minh Ha-Duong, Nicolas Treich. Risk aversion, intergenerational equity and climate change.. Environmental and Resource Economics, Springer, 2004, 28 (2), pp.195-207. ⟨halshs-00000680v2⟩



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