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This chapter reviews the ethical foundations of both national and international policies designed to counter global climate change. Four moral theories are identified and are shown under certain circumstances to recommend the same formula for determining policies. The discussion is focused on the idea of social discount rates. The moral theories are then applied to discount rates. It is shown that disagreements among economists over energy policies that shape the long run can be traced to differences in the quantitative values used for discount rates. It is argued that the common formula in use is based on defective reasoning: it has no place for the idea of personhood. It is shown that personhood can be accommodated in a moral theory that takes justice among the generations seriously. The proposed theory involves the use of two sets of discount rates, one for the short run, the other for the long run. It is shown that disagreements among economists writing on global climate change can be traced to one group using short‐run discount rates, and the other group using long‐term discount rates, which would be expected to be considerably lower. Projects that have an impact on both the short and long run should be evaluated by means of discount rates that lie somewhere between the pair of sets in current use among economists.

Many policies impact on inter-temporal consumption choices, with taxes on capital income being the most obvious example. This chapter examines the welfare effects of linear and non-linear personal income taxes, as well as taxes on corporate income, in a two-period setting. The shadow discount rate obtained by Harberger (1969) and Sandmo and Dre_ze (1971) is personalized in the presence of non-linear income taxes, while the corporate tax is included using the Miller (1977) equilibrium, in which consumers specialize in holding debt or equity, solely on the basis of their tax preferences. A risk premium is included in the social discount rate using the capital asset pricing model (CAPM), and arguments by Arrow and Lind (1970) for using a lower risk premium for public sector projects are also examined.

Scrutinizes a class of accounting prices that has been the object of regular misunderstanding: social discount rates. The topic is over 40 years old, yet controversy rages over matters that have long been settled, involving as they do technical economics. Many who express views on social discount rates overlook the literature and make incorrect claims. I point to a few as the occasions warrant.

This chapter sketches some serious disputes between rival economic analyses of climate change. Such disputes result in vastly different policy recommendations, and involve serious differences in fundamental assumptions. The chapter argues that, contrary to initial appearances, these differences do not reflect narrow technical issues within economic theory, but rather deep ethical claims that fill fundamental gaps in that theory. Moreover, it claims that the most common recent arguments do not fill these gaps, and neither does the (perhaps heroic) claim that some appropriate kind of economic modeling must in principle be possible. While this does not mean that good climate economics is not worth pursuing, it does suggest that we are far from the position where we can confidently rely on such analysis when deciding how to shape the future of the planet.

Recent debates have made it clear that the choice of a social discount rate has enormous consequences for the amount of carbon abatement that will be recommended. The social discount rate determines how future costs are to be compared to present costs. Philosophers have been almost unanimous in endorsing the view that the only acceptable social rate of time preference is zero, a view that, taken literally, has either absurd or extremely radical implications. The first goal of this chapter is to show that the standard arguments against temporal preference are much less persuasive than they are usually taken to be. The second goal is to explore three different avenues of argument that could be adopted in order to show that temporal discounting of welfare may be permissible. The chapter concludes with a suggestion for how deontologists could accept a pure time preference derived from the current global death rate.

The debate on the economics of climate change has focused primarily on the choice of the social discount rate, which plays a key role in determining the desirability of climate policies given the long-term impacts of climate damages. Discounted utilitarianism and the Ramsey Rule dominate the debate on discounting. The chapter examines the appropriateness of the utilitarian framework for evaluating public policies. More specifically, it focuses on the risky dimension of climate change, and on the failure of utilitarianism in expressing both concerns for the distribution of risks across the population and concerns for the occurrence of catastrophic outcomes. The chapter shows how a shift to the prioritarian paradigm is able to capture those types of concerns, and briefly sketches the main implications for the choice of the social discount rate.

The social cost of carbon (SCC) is a central concept in climate change economics. This chapter explains the SCC and investigates it philosophically. As is widely acknowledged, any SCC calculation requires the analyst to make choices about the infamous topic of discount rates. But to understand the nature and role of discount rates, one must understand how each of these economic concepts—and indeed the SCC concept itself—is yoked to the concept of a value function, whose job is to take ways the world could be across indefinite timespans and to rank them from better to worse. A great deal, therefore, turns on the details of the value function and on just what is meant by “better” and “worse.” This chapter seeks to explicate these and related issues, and then to situate them within the evolving landscape of federal climate policy in the United States.

This chapter commences with the most basic dynamic, or capital theoretic, economic model of the fishery, one that is essentially a dynamic version of the Gordon-Schaefer model examined in chapter 2. This model, although elementary, introduces us to a fundamental investment rule for determining the optimal stock of this form of natural capital. The fundamental investment rule will be encountered many times in the chapters to follow. The chapter then proceeds to develop the basic model, by relaxing a few of the initial highly restrictive assumptions. Non-linear and non-autonomous versions of the basic model are examined. The chapter concludes by demonstrating that, while the economic model of the fishery explored in the chapter is no more than basic, it can be used to analyse complex real world policy problems.