Risk aversion, intergenerational equity and climate change

Abstract : Using intergenerational recursive preferences, we examine both theoretically and numerically how social preferences with respect to equity and risk affect the optimal management of a stock externality. We show that higher relative risk aversion increases short run control of pollution. On the contrary, resistance to intertemporal substitution and discounting tend to decrease today's pollution control. A climate policy model is used to explore the sensitivity of an optimal energy tax to the utility function. This sensitivity is several times more important when equity and risk preferences are separated than when they are assumed equal.
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Contributor : Minh Ha-Duong <>
Submitted on : Monday, October 6, 2003 - 8:37:31 PM
Last modification on : Friday, March 29, 2019 - 9:10:40 AM
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Minh Ha-Duong, Nicolas Treich. Risk aversion, intergenerational equity and climate change. Environmental and Resource Economics, Springer, 2004, 28, pp.195-207. ⟨halshs-00000680v1⟩

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