HOME HELP FEEDBACK SUBSCRIPTIONS ARCHIVE SEARCH TABLE OF CONTENTS		QUICK SEARCH:   [advanced] Author: Keyword(s): Year:  Vol:  Page:

This Article Full Text (PDF) Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Howarth, R. B. Search for Related Content

Discounting and Uncertainty in Climate Change Policy Analysis

Economic studies of climate change commonly discount the future at a rate equal to the long-run return on corporate stocks. Stock market returns, however, are dominated by a risk premium, while climate change mitigation measures would reduce important risks to future welfare. Drawing on the theory of investment behavior under uncertainty, this paper argues that the benefits of climate stabilization policies should be discounted at a rate equal to the annual return on risk-free financial assets, which attains an empirical value between 0 and 2.6%. In addition, expected benefits must be adjusted to account for the value of risk abatement. (JEL Q21)

This article has been cited by other articles:

				J. Gowdy and R. Julia Global Warming Economics in the Long Run: A Conceptual Framework Land Economics, January 1, 2010; 86(1): 117 - 130. [Abstract] [PDF]

				R. B. Howarth Discounting, Uncertainty, and Revealed Time Preference Land Economics, January 1, 2009; 85(1): 24 - 40. [Abstract] [PDF]

				K. A. Brekke and O. Johansson-Stenman The behavioural economics of climate change Oxf. Rev. Econ. Policy, June 1, 2008; 24(2): 280 - 297. [Abstract] [Full Text] [PDF]