Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights

W. J.Wouter Botzen, Jeroen C.J.M. van den Bergh

Research output: Contribution to journalReview articleResearchpeer-review

23 Citations (Scopus)

Abstract

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. © 2013 Springer Science+Business Media Dordrecht.
Original languageEnglish
Pages (from-to)1-33
JournalEnvironmental and Resource Economics
Volume58
Issue number1
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • Climate change
  • Cost-benefit analysis
  • Discounting
  • Integrated assessment modelling
  • Mitigation
  • Social welfare function
  • Uncertainty

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