TIME PREFERENCE, ABATEMENT COSTS, AND INTERNATIONAL CLIMATE POLICY: AN APPRAISAL OF IPCC 1995

This paper appraises current economic methodologies used in analyzing the social rate of time preference and discounting, abatement costs, and value of life estimates as they relate to climate change. It makes a case for choosing an appropriate rate of time preference when assessing climate policies, including both positive and normative considerations. Furthermore, the paper argues that the currently estimated disparity in the cost of greenhouse gas abatement between developed countries and developing countries may be inaccurate. Integrating discount rates, abatement costs, and value of life estimates highlights important and contrasting implications of international climate policy for developing and high-income countries. The context of the paper is the forthcoming Second Assessment Report of Working Group III of the Intergovernmental Panel on Climate Change. Copyright 1996 Western Economic Association International.