Journal Article

Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights

Botzen, W. J. Wouter, van den Bergh, Jeroen C. J. M.

2014

Overview

An important assumption in economic studies of climate policy is the social welfare function. This paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control, notably if climate change impacts are uncertain. First, decision criteria in current climate-economic studies are reviewed. Next, the most important alternatives are discussed, including their (mathematical) formalization and incorporation in economy-climate models. Most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach. However, several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy. We conclude that there is clear need for systematic research on this theme, for which the current review provides a solid basis.

• Publisher: Springer Netherlands,Springer Nature B.V
• Subject: climate / Climate change / Climate models / Climate policy / Climate studies / Consumption / Cost benefit analysis / Costs / Criteria / Decision making / Discount rates / Economic analysis / Economic conditions / Economic Policy / Economics / Economics and Finance / Emissions control / Environmental Economics / Environmental impact / Environmental Law/Policy/Ecojustice / Environmental Management / Environmental policy / Expected utility / Pollution control / public policy / Social function / Social welfare / Studies / Uncertainty / Utilitarianism / Utility functions