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The Trade-off between Intra- and Intergenerational Equity in Climate Policy

Author

Listed:
  • Snorre Kverndokk
  • Eric Nævdal
  • Linda Nøstbakken
Abstract
This paper focuses on two equity dimensions of climate policy, intra- and intergenerational, and analyzes the implications of equity preferences on climate policy, and on the production and consumption patterns in rich and poor countries. We develop a dynamic two-region model, in which each region suffers from global warming, but also has an inequality aversion over current consumption allocations. Inequality aversion generally lifts the consumption path of the poor region, while the rich region must take a greater share of the climate burden. Furthermore, with inequality aversion, the optimal climate policy generally leads to higher investment in clean capital in the North and in dirty capital in the South, thereby allowing the South to pollute more and develop faster. The optimal policy may even require the poor region to increase emissions relative to the uncoordinated business-as-usual case. Introducing local pollution, transfers and loans confirm the main results. However, loans to poor countries to reduce inequality may result in permanent inequality, and hence, debt remittance may be part of the optimal climate policy.

Suggested Citation

  • Snorre Kverndokk & Eric Nævdal & Linda Nøstbakken, 2013. "The Trade-off between Intra- and Intergenerational Equity in Climate Policy," CESifo Working Paper Series 4285, CESifo.
    • Handle: RePEc:ces:ceswps:_4285
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2016. "Development Aid and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 429-450, February.
    2. G. Cornelis van Kooten & Mark E. Eiswerth & Jonathon Izett & Alyssa R. Russell, 2021. "Climate Change and the Social Cost of Carbon: DICE Explained and Expanded," Working Papers 2021-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    3. Lea S. Svenningsen & Bo Jellesmark Thorsen, 2020. "Preferences for Distributional Impacts of Climate Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(1), pages 1-24, January.
    4. Saulė Milčiuvienė & Julija Kiršienė & Enrique Doheijo & Rolandas Urbonas & Darius Milčius, 2019. "The Role of Renewable Energy Prosumers in Implementing Energy Justice Theory," Sustainability, MDPI, vol. 11(19), pages 1-16, September.
    5. Chen, Shuyang & Wang, Can, 2023. "Inequality impacts of ETS penalties: A case study on the recent Chinese nationwide ETS market," Energy Policy, Elsevier, vol. 173(C).
    6. Yuhong Shuai & Liming Yao, 2021. "Adjustable Robust Optimization for Multi-Period Water Allocation in Droughts Under Uncertainty," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 35(12), pages 4043-4065, September.
    7. Rashidi, Hamidreza & GhaffarianHoseini, Ali & GhaffarianHoseini, Amirhosein & Nik Sulaiman, Nik Meriam & Tookey, John & Hashim, Nur Awanis, 2015. "Application of wastewater treatment in sustainable design of green built environments: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 845-856.
    8. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2013. "Equity, Development Aid and Climate Finance," GRI Working Papers 123, Grantham Research Institute on Climate Change and the Environment.
    9. Lea Skræp Svenningsen, 2017. "Distributive outcomes matter: Measuring social preferences for climate policy," IFRO Working Paper 2017/11, University of Copenhagen, Department of Food and Resource Economics.
    10. Martinet, Vincent & Del Campo, Stellio & Cairns, Robert D., 2022. "Intragenerational inequality aversion and intergenerational equity," European Economic Review, Elsevier, vol. 144(C).
    11. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Pan, 2020. "Resolving intergenerational conflict over the environment under the Pareto criterion," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    12. Michael O. Hoel & Sverre A. C. Kittelsen & Snorre Kverndokk, 2019. "Correcting the Climate Externality: Pareto Improvements Across Generations and Regions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 449-472, September.
    13. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Pan, 2018. "A way to resolve intergenerational conflict over the environment under the Pareto criterion using green bonds," ISU General Staff Papers 201808240700001070, Iowa State University, Department of Economics.
    14. Michael Hoel & Sverre A.C. Kittelsen & Snorre Kverndokk, 2015. "Pareto Improving Climate Policies: Distributing the Benefits across Generations and Regions," CESifo Working Paper Series 5487, CESifo.
    15. Lea S. Svenningsen, 2019. "Social preferences for distributive outcomes of climate policy," Climatic Change, Springer, vol. 157(2), pages 319-336, November.
    16. Arsenio, Elisabete & Martens, Karel & Di Ciommo, Floridea, 2016. "Sustainable urban mobility plans: Bridging climate change and equity targets?," Research in Transportation Economics, Elsevier, vol. 55(C), pages 30-39.

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    More about this item

    Keywords

    intragenerational equity; intergenerational equity; inequality aversion; climate policy; economic development; local pollution; international transfers;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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