Equitable CBA of Climate Change Policies Richard S.J Tol Ecological Economics (2001) 36: Amy McNally Econ 539 April 25, 2007

Research Questions How can we introduce equity into the analysis of how much emission abatement is desirable? How can welfare maximization be extended to consider justice?

Three Methods to Consider Equity Kant & Rawls: Max. present net welfare, cost are evenly distributed No-Envy: Overall decrease of emissions until Costs and of Climate Change = Cost of Emission Reduction Non-Linear Aggregation of Welfare: International cooperation and aversion to inequity

Methods The Climate Framework for Uncertainty, Negotiation and Distribution (FUND) It links population, technology, economic activity, emissions, concentrations, climate, sea level, impacts

Data Used Model runs from 1950 to 2200, for 9 major world regions *fwd thinking not for policy Emissions scenarios from Intergovernmental Panel on Climate Change (IPCC) Population- World Resource Database Value of life = $250, * per capita income

Data and Assumptions Costs of CO 2 emissions - IPCC (1996) and Rose and Steven (1993) Cost of climate change – Tol (1995,1996) Cost of Emission Reduction < Cost of Climate Change, thus restrict analysis to Cost of CC

Results Kant and Rawls scenario: emissions are not substantially reduced i.e. Europe can easily absorb Africa’s costs No-Envy scenario: emissions are significantly reduced but maintain current inequities Welfare Aggregation: emissions are reduced depending on how equitable rich countries chose to be

Policy Implications Emissions need to be reduced Governments would have to make a commitment to cooperate and reduce inequity. There are different market approaches to handle the effects of climate change and its inequitable distribution.

Decrease vulnerability or decrease threat? Tol (2002) conducted a CBA that hypothesized that development aid to poor countries is more beneficial than spending that money on emission controls. The results were location dependant.

Questions?