Dual-rate discounting in dynamic economic–environmental modeling

Yang, Zili

doi:10.1016/s0264-9993(02)00060-3

Cited by 35 publications

(27 citation statements)

References 11 publications

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“…Yang (2003) justifies discounting environmental quality at a low environmental discount rate by assuming different utility discount rates for environmental quality and goods consumption (the former being lower than the latter). Yang‗s assumption of different utility discount rates has however been criticised by Tol (2004) as being an ad hoc assumption that lacks theoretical foundation.…”

Section: Resultsmentioning

confidence: 99%

“…5 Note however that according to Gollier (2008) in a framework with uncertainty, not applied to the present paper, dual-rate discounting has important advantages over the classical approach. In addition, in another online-comment on an earlier version of my paper, Reyer Gerlagh comments that only assuming a lower utility discount rate for environmental quality than for goods consumption gives enough credit to what the -inventors‖ of dual-rate discounting, Yang (2003) and Hasselmann et al (1997), actually had in mind. As mentioned before, Yang's assumption requires use of dual-rate discounting.…”

Section: Introductionmentioning

confidence: 95%

“…However, the justification of a very low discount rate with ethical considerations has been heavily criticised by many economists as being paternalistic. 1 Earlier, Yang (2003), assuming a model with utility from goods consumption and environmental quality, proposed an alternative justification for the emission reductions of the Kyoto Protocol, namely dual-rate discounting. More specifically, he suggests that environmental quality should be discounted at an environmental discount rate that is lower than the consumption discount rate, which is used for goods consumption.…”

Section: Introductionmentioning

confidence: 99%

“…As a better alternative, he suggests a model in which income growth might increase the willingness-to-pay for environmental quality (WTP) and in which this rising WTP is reflected in parameter shifts towards a lower environmental discount rate. 2 The crucial difference between the model assumption of Yang (2003) and the model assumption of Tol (2004) is that dual-rate discounting is required for modelling environmental concerns according to Yang's assumption, while modelling it according _________________________ 1 Among the critics are Nordhaus (2007), Yohe and Tol (2007), and Weitzman (2007).…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

On the Relation between Discounting of Climate Change and Edgeworth-Pareto Substitutability

Kögel

2009

Economics

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To justify substantial carbon emission reductions, recent literature on cost-benefit analysis of climate change suggests discounting environmental quality at a lower discount rate than the standard consumption discount rate. Recent literature also shows that a theoretical foundation for such a lower environmental discount rate requires rising willingness-to-pay for environmental quality (WTP). A widely believed better alternative is however to adjust instead future environmental benefits for rising WTP and to discount those benefits at the consumption discount rate. According to this latter approach, rising WTP is usually assumed not to change the consumption discount rate itself. Assuming environmental resource scarcity, the present paper shows that an unchanged consumption discount rate is however, by and large, only an appropriate assumption in the knife-edge case in which environmental quality and goods consumption are neither substitutes nor complements in the Edgeworth-Pareto sense (substitutes, respectively, complements in the Edgeworth-Pareto sense implies the marginal utility of goods consumption to be decreasing, respectively, increasing in environmental quality).Special issue "Discounting the Long-Run Future and Sustainable Development" JEL: H43, Q51, Q54

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Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 95%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

On the Relation between Discounting of Climate Change and Edgeworth-Pareto Substitutability

Kögel

2009

Economics

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“…Le second est plus faible que le premier dès lors que les préoccupations environnementales augmentent au cours du temps (équation (3)). Notons que ceci ne justi…e absolument pas de recourir dans l'analyse coûts-béné…ces à deux taux di¤érents, l'un pour les projets indépendants des questions environnementales et l'autre pour les projets à fort contenu environnemental, comme il a pu être proposé par certains auteurs (Yang (2003) par exemple).…”

Section: Critère Utilitariste Escompté Et Taux D' Escompte Socialunclassified