Climate change and the ethics of discounting

Abstract

Climate policy-making requires a balancing, however rudimentary, of the costs of reducing greenhouse gas emissions against the benefits of reduced risks of climate change. Since those creating and those facing the risks of climate change belong to different generations, striking the balance is preeminently a matter of ethics. In climate policy-making, this issue of intergenerational ethics is hidden behind the choice of the discount rate, a parameter used in economic analysis to compare changes in consumption occurring in different years. There is a long-standing debate in ethics and economics as to whether discounting the future is morally justifiable. Some economists have argued that the future should always be discounted against the marginal rate of return on alternative investments, whether for reasons of efficiency, or for reasons of consumer sovereignty and democracy. Other authors, however, have argued against this position, instead proposing discount rates based on a variety of moral principles. Although these counterarguments may be convincing, the debate between the two positions is far from settled. Neither has the debate been settled as to which moral theory the discount rate should be based on. This is hardly surprising, though, given the fact that within ethics itself, the debate over the various moral principles is still ongoing.