Catastrophic Climate Change, Population Ethics and Intergenerational Equity
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Catastrophic climate change, population ethics and intergenerational equity Aurélie Méjean∗1, Antonin Pottier2, Stéphane Zuber3 and Marc Fleurbaey4 1CIRED - CNRS, Centre International de Recherche sur l’Environnement et le Développement (CNRS, Agro ParisTech, Ponts ParisTech, EHESS, CIRAD) 2Centre d’Economie de la Sorbonne 3Paris School of Economics - CNRS 4Woodrow Wilson School of Public and International Affairs, Princeton University Abstract Climate change raises the issue of intergenerational equity. As climate change threatens ir- reversible and dangerous impacts, possibly leading to extinction, the most relevant trade-off may not be between present and future consumption, but between present consumption and the mere existence of future generations. To investigate this trade-off, we build an integrated assessment model that explicitly accounts for the risk of extinction of future generations. We compare different climate policies, which change the probability of catastrophic outcomes yielding an early extinction, within the class of number-dampened utilitarian social welfare functions. We analyze the role of inequality aversion and population ethics. A preference for large populations and low inequality aversion favour the most ambitious climate policy, although there are cases where the effect of inequality aversion on the preferred policy is reversed. This is due to two effects: a higher inequality aversion reduces both the welfare gained when postponing climate policy to increase the consumption of present generations and the welfare gained when delaying extinction. We also show that the risk of extinction is the main driver of the preferred policy over climate damages affecting consumption. Keywords: Climate change; Catastrophic risk; Equity; Population; Climate-economy model JEL Classification: D63 ; Q01 ; Q54 ; Q56 ; Q5. ∗Corresponding author: [email protected] - CIRED, 45 bis avenue de la Belle Gabrielle, 94736 Nogent- sur-Marne, France 1 1 Introduction The risk of abrupt and irreversible changes to the climate is one of the five reasons for concern identified by the IPCC (McCarthy et al., 2001; Field et al., 2014). Such abrupt changes are generally associated with tipping points (Lenton et al., 2008), like the shutoff of the Atlantic thermohaline circulation, the collapse of the West Antarctic ice sheet or the dieback of the Amazon rainforest. They may have indirect impacts, for instance through increased migration and conflicts (Reuveny, 2007; Hsiang et al., 2013). Catastrophic outcomes can also arise from discontinuities in the response of socio-economic systems to climate change. From the very beginning, taking these catastrophes into account has been a daunting task of the economics of climate change (Dowlatabadi, 1999; Tol, 2003; Azar and Lindgren, 2003). Following the seminal work of Cline(1992) and Nordhaus(1994), the economics literature has mainly considered climate change as an issue of intertemporal consumption trade-off, where the costs of climate change mitigation lower consumption today, but increase consumption in the future as some damages due to climate change are avoided. In this framework, catastrophes are accounted for in three different ways: as the certainty-equivalent loss of risky castastrophic damages (Nordhaus and Boyer, 2000), as a sudden jump in climate damages when the temperature rises above a given temperature threshold (Ambrosi et al., 2003; Pottier et al., 2015), or through a power law damage function with a large exponent (Hope, 2006; Ackerman et al., 2010; Weitzman, 2012). The stochastic nature of catastrophes is also sometimes explicitly accounted for, see for instance Peck and Teisberg(1995) and recent works on climate tipping points (Lontzek et al., 2015; Lemoine and Traeger, 2016). A smaller strand of literature (Gjerde et al., 1999; Tsur and Zemel, 2009) considers that abrupt climate change introduces an irreversible regime shift in the sense that post-catastrophe welfare is independent from pre-catastrophe actions (usually it is assumed to be zero or constant), in the tradition of modelling environmental catastrophes of Cropper(1976) or Clarke and Reed(1994). The trade-off is then not only between present and future consumption, but also between present consumption and catastrophic risk reduction (Weitzman, 2009). In this context, Bommier et al. (2015) show that the representation of preferences in terms of risk aversion greatly matters for the appropriate level of mitigation. The possibility that social welfare may drop to zero after the catastrophe can be interpreted as human extinction. This is indeed an outcome considered in the Stern Review (2007), which 2 uses the possible extinction of humanity to justify pure time discounting (see also Dasgupta and Heal(1979) for an early proposal). Because climate change and climate policy affect the size of Earth’s population in these models, evaluating climate policies then raises the issue of valuing varying population sizes (Broome, 2012). Introducing the risk of human extinction compels to spell out the collective attitudes towards population size, a question that has been largely ignored in the literature and should be treated in an explicit way to inform climate policy analysis (Millner, 2013; Kolstad et al., 2014). When the risk of climate catastrophe entails a risk of extinction of the human population, pop- ulation ethics and risk preferences matter. In this paper, we examine the trade-off between consumption and the existence of future generations. To do so, we build an integrated assess- ment model that explicitly accounts for the risk of extinction of future generations. We evaluate different climate policies within the class of number-dampened utilitarian social welfare func- tions, and we analyze the role of inequality aversion and population ethics. This paper is thus at the crossroads of the literature on catastrophic climate change and the fledgling litterature on population ethics applied to climate change. If the importance of population growth for future greenhouse gas emissions has long been recognized (Gaffin and O’Neill, 1997; Kelly and Kolstad, 2001), and thus population control has been mentioned as a possible way to mitigate climate change (see Cafaro(2012) for an advocacy), it is only very recently that the role of population ethics for climate policy analysis has started to be discussed. Adler and Treich(2015) propose a prioritarian framework to evaluate scenarios with variable population in the case of climate change. Scovronick et al.(2017) show that putting a larger weight on population size warrants tighter climate policy whereas Lawson and Spears(2018) discuss how the preference for large populations can be overturned when environmental constraints are accounted for. In this paper, the climate catastrophe is defined as the extinction of the human population. We thus account for the risk of extinction. Note that due to the speculative nature of the risk studied, our analysis should be taken mainly as a thought experiment, pointing to orders of magnitude and qualitative judgements instead of sharp, quantitative statements. This paper differs from previous work as it explicitly defines the population ethics adopted for the purpose of evaluating climate impacts on population size. It explores the impact of inequality aversion and of attitudes towards population size on the preferred climate policy when the possibility of such a catastrophe is accounted for. It adopts number-dampened utilitarianism (Ng, 1986) to evaluate and order climate policies. We use the integrated assessment model RESPONSE 3 (Ambrosi et al., 2003; Pottier et al., 2015), representing the interaction between climate and the economy, to assess the impacts of three scenarios (a business-as-usual case and two climate policies with different levels of stringency) in terms of future consumption paths and associated climate change. Our method differs from the standard approach in climate change economics, which computes the optimal climate policy (often the optimal carbon tax or the social cost of carbon) and examines its sensitivity to various model parameters. Instead, we follow the insight of Michal Kalecki who defines planning as “variant thinking” (Sachs, 1977). Other authors have used a method similar to ours, evaluating a set of exogenous climate policies defined in terms of yearly CO2 emissions, along with a business-as-usual scenario, see for instance Nordhaus and Boyer(1999), Nordhaus(2010), Dietz and Asheim(2012) and more recently Dietz and Matei (2016). The rationale behind our choice is for the analysis to be relevant to on-going policy debates on future emission trajectories. The paper is structured as follows. Section2 presents the framework used to evaluate the effects of climate policies. The analytical results presented in section3 demonstrate that we cannot predict the impact of changes of ethical parameters (the inequality aversion coefficient and the population ethics coefficient) on policy decisions. This is because the preferred climate policy depends on the relative impact of these ethical parameters on the welfare gained due to a lower hazard rate and the welfare lost due to a lower consumption stream. In the numerical analysis presented in section4, we find cases where increasing inequality aversion favours the most ambitious climate policy. This rather unusual result is explained by the relative effect of inequality aversion on the risk and consumption components of the welfare difference. We also find that the risk of extinction is