Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263707 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9777
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
A formula is derived for the social cost of carbon (SCC) that takes account of intragenerational income inequality and its evolution with economic growth. The social discount rate (SDR) should be adjusted to account for intragenerational and intergenerational inequality aversion and for risk aversion. If growth increases (reduces) intra-generational inequality, the SDR is lower (higher) and the SCC higher (lower) than along an inequality-neutral growth path, especially if intra-generational and intergenerational inequality aversion are higher. The same qualitative result is shown for two welfare specifications, one with a representative agent with equally distributed equivalent (EDE) income and the other considers individuals separately across the income distribution. The latter specification causes an additional impact of income inequality on the SDR and SCC because individuals are compared both within and between time periods. Our preferred EDE calibration to a scenario in which global intragenerational inequality declines over time, leads to a SCC in 2020 of $70/tCO2 compared to a value of $85/tCO2 without the effect of inequality.
Subjects: 
social discount rate
social cost of carbon
intra- and intergenerational inequality aversion
risk aversion
inequality
growth
uncertainty
JEL: 
C61
D31
D62
D81
G12
H23
Q54
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.