While climate change has been recognized as a threat to the future by most scientists and politicians, there is still an ongoing debate on what to do about this. Researchers may not agree on the optimal emission reductions even if they would agree on the natural science background as well as the costs to abate greenhouse gas emissions. The reason is that optimal emission reductions to a large degree depend on equity issues, and how we discount future climate impacts is especially important. However, ethic al issues have not been fully explored in economic models as greenhouse gas abatement not only affects the welfare distribution between present and future generations (impacts will be felt in the future, but the costs have to be taken today), but also the distribution within a generation such as between rich and poor countries. These two equity aspects turn out to be important in finding optimal emissions reductions, and they may actually work in different directions. This project focuses on the two aspec ts on equity in climate change policies, and will explore the implications on these aspects. Note that while we focus on climate change as an example, the discussions in this project are relevant also for other environmental problems where impacts of poll ution are felt in the future.The project consists of three parts:In subproject A we will develop a metodology for how to incorporate the two different inequality aversions in an economic model. It turns out that there may be trade off between the two t ypes of inequality, and we would like to answer the question: Does inequality aversion lead to more or less action to prevent climate change?In subproject B we focus on the choices between reducing inequality today and reducing climate change. Should we spend money on reducing inequality between rich and poor countries today or reducing climate change?In subproject C we will illustrate the results using a computable general equilibrium model.
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