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 LCE  Vol.7 No.1 , March 2016
Properties of the Social Discount Rate and Intertemporal Negative Externality in the Utility or Production Function
Masayuki Otaki
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Abstract: This study examines the role of the social discount rate, as applied to the efficient allocation of carbon dioxide (CO2) emissions, which provokes serious intertemporal negative externalities such as global warming. Two approaches exist in introducing the intertemporal negative externality brought about by such emissions into economic theory. One is the utility-function approach, and the other is the production-function approach. The former is well-suited to the case in which climate change directly threatens the living standard of human, for example, through a drastic degradation of the environment. The latter approach becomes relevant to case in which global warming is expected to lead to productivity stagnation particular to the additional costs of adaptation.
Keywords: Utility Function with a Negative Externality, Production Function with a Negative Externality, Social Discount Rate, Efficiency in Emissions Allocation
Cite this paper: Otaki, M. (2016) Properties of the Social Discount Rate and Intertemporal Negative Externality in the Utility or Production Function. Low Carbon Economy, 7, 47-53. doi: 10.4236/lce.2016.71005.
References

[1]   Nordhaus, W.D. (2014) Dice-2013R Model of as of November 15, 2013.
http://www.econ.yale.edu/~nordhaus/homepage/Web-DICE-2013-April.htm

[2]   Kuninori, M. and Otaki, M. (2016) Modified Ramsey Rule, Optimal Carbon Tax and Economic Growth. Atmospheric and Climate Sciences. (In Press)

[3]   Uzawa, H. (2009) Economic Theory and Global Warming. Cambridge University Press, Cambridge.

[4]   Otaki, M. (2013) The Endogenous Social Discount Rate, Proportional Carbon tax, and Sustainability: Do We Have the Right to Discount Future Generations’ Utility? Environment Systems Research, 2, 1-8.
http://dx.doi.org/10.1186/2193-2697-2-1

[5]   Otaki, M. (2015) Local Altruism as an Environmental Ethic in CO2 Emissions Control. Atmospheric and Climate Sciences, 5, 433-440.
http://dx.doi.org/10.4236/acs.2015.54035

 
 
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