Accounting for inequality aversion can justify the 2° C goal

Marco Rogna and Carla J. Vogt

No 925, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Impact assessment models are a tool largely used to investigate the benefit of reducing polluting emissions and limiting the anthropogenic mean temperature rise. However, they have been often criticised for suggesting low levels of abatement. Countries and regions, that are generally the actors in these models, are usually depicted as having standard concave utility functions in consumption. This, however, disregards a potentially important aspect of environmental negotiations, namely its distributive implications. The present paper tries to fill this gap assuming that countries\regions have Fehr and Schmidt (1999) (F&S) utility functions, specifically tailored for including inequality aversion. Thereby, we propose a new method for the empirical estimation of the inequality aversion parameters by establishing a link between the well known concept of elasticity of marginal utility of consumption and the F&S utility functions, accounting for heterogeneity of countries/regions. By adopting the RICE model, we compare its standard results with the ones obtained introducing F&S utility functions, showing that, under optimal cooperation, the level of temperature rise is significantly lower in the last scenario. In particular, in the last year of the simulation, the optimal temperature rise is 2.1° C. Furthermore, it is shown that stable coalitions are easier to be achieved when F&S preferences are assumed, even if the advantageous inequality aversion parameter (altruism) is assumed to have a very low value. However, self-sustaining coalitions are far from reaching the environmental target of limiting the mean temperature rise below 2° C despite the adoption of F&S utility functions.

Keywords: Abatement; climate policy; inequality aversion; Paris agreement; RICE model (search for similar items in EconPapers)
JEL-codes: C72 D63 Q54 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ene, nep-env and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/245530/1/1775684857.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:925

DOI: 10.4419/96973082

Access Statistics for this paper

More papers in Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().