Environmental and Resource Economics

, Volume 28, Issue 2, pp 195–207 | Cite as

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 γ measures relative risk-aversion and a distinct parameter ρ 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 γ but lower ρ leads to increase emissions control. We also argue that climate-economy models based on intertemporal expected utility maximization, i.e. models where γ = ρ, may misinterpret the sensitivity of the climate policy to risk-aversion.

climate change discounting equity risk-aversion 

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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  1. 1.CNRS-CIREDParisFrance
  2. 2.LEERNA-INRAUniversity of ToulouseFrance

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