The ethical dimensions of climate change

As stated before, climate change is the biggest negative externality of our century, and that means that the free market will inevitably fail on asigning the right allocation of prices, quantities and the overall scale of the economic activity.

The cost of climate change is distributed across the world at difference levels, since some areas are going to be more damage than others, and across generations, since our generation will suffer much less than our grandchildren, and the next generations to come. It also fails to assign the cost to those who contribute the most, both historically and per capita, meaning that an equal effort per country is neither fair nor consistent with an appropiate taxing schema.

While there is a great consensus among economist towards taxing carbon, there is little consensus on how this will be implemented per country and what is the fair load per country and generation.

If we look at the current per capita contributions of each country, we can enconter up to 50000% more contributions from the richest to the poor, even if the delocation of the production towars poorests country has not been properly assign towards its consumers. A historical accumulative analysis, would also show that the cumulative emissions per country diverge even more. That suggest that when stablishing contraints on the emissions, and hence the economic activity, the amount of contribution of country per capita has to be considered [4].

The next big difference between economists is the amount of discounting between generations when defining the current benefit and costs of each temperature scenario. While authors as  Nordhaus [3] advocates for a discount rate that reflects current consumer willingness to pospose consumption (via the real interest rate), some other authors like Roemer and Silvestre [1], consider there is not ethical foundation to impose to future generations the increasing load of not facing today greenhouse emision mitigation. Can we decide on behalf of future generations the amount of costs and required mitigation expenses they will have to cover? Probably the most fair and equitable approach would be to ensure that future generations are as well off as we are today, and nothing less.

I find particularly appealing the approach followed in [2], where the authors propose a constant utility  solution across generations at infinitum. That means that all future generations will have at least the same utility as the current ones. they define utility not only in terms of consumption as done in [3], but also consider the education and the air quality as parts of the well being inputs. Including not only consumption in our wellfare make more sense, since culture and air/water quality are basic foundations of a prosperous society.

The next question would be, what would be the required efforts in a world where utility is to be kept at least constant among generations? [2]

• In terms of consumption, it will imply sacrificing current consumption levels and investing more on education and capital stock. Overall utility will not be sacrificed, as more components as the education and air quality add up to the utility.
• In terms of convergence between economies, the poorer countries will manage to converge in utility with the richest within a century, as long as contraints in the amounts of economic growth are set on the richest countries.
• A significantly higher price on emissions have to be implemented in order to keep economic collapse at low probabilities.
• Knowledge stock is assume to increase productivity indefinitely in order to ensure future utility growth, and avoid utility stagnation.

 To summarize, it is possible to maintain current utility levels across generations as long as significant investment is taken now  to keep productivity growth and emissions agreements, while economic convergence happen across the world within a century.

And again...

the request of leadership is critical to come up with such plan. We can create a thousands of models in order to proof that sustainable wellbeing is possible, but the work needs policy action and social coordination to push for inmediate policy.


[1] Llavador H, Roemer JE, Silvestre J. Sustainability for a warming planet. In: ; 2015:xi-xi.

[2] Abrahamson, D. E. (2015). The climate casino: Risk, uncertainty, and economics for a warming world. Ecological Economics, 114, 243-244. doi:10.1016/j.ecolecon.2015.02.024

[3] Nordhaus, W. (2013). The climate casino: Risk, uncertainty, and economics for a warming world. (pp. xiii-xiii)

[4] http://alanfortunysicart.blogspot.com/2018/03/tecno-optimistas-winnie-de-po-y-otros.html