Next Article in Journal
The Output Gap and Youth Unemployment: An Analysis Based on Okun’s Law
Previous Article in Journal
The Effects of Commodity Discoveries on Small Open Economies: Empirical Evidence from the Falkland Islands
Open AccessArticle

Embedding Preference Uncertainty for Environmental Amenities in Climate Change Economic Assessments: A “Random” Step Forward

1
Department of Agricultural Economics & Rural Development, Agricultural University of Athens, 11855 Athens, Greece
2
Department of Mining, National Technical University of Athens, 15780 Zografou, Greece
3
Department of Mechanical Engineering, University of Western Macedonia, 50100 Kozani, Greece
4
Center for Renewable Energy Sources, 19009 Pikermi, Greece
5
Department of Economics, University of Bath, Bath BA2 7AY, UK
*
Author to whom correspondence should be addressed.
Economies 2019, 7(4), 107; https://doi.org/10.3390/economies7040107
Received: 20 April 2019 / Revised: 23 October 2019 / Accepted: 24 October 2019 / Published: 28 October 2019
While there is a considerable debate regarding the choice of proper discount rates for assessing climate change projects and policies, only a tiny body of literature emphasizes “what to discount”. Usually, climate change economic assessments rely on tools and methods that employ strong simplifications, assuming, among others, given and fixed preferences about the values of man-made and environmental goods. Aiming to fill a gap in the literature, this paper leaves aside the issue of discounting and focuses on the nature and impact of preference uncertainty on the economic estimates of future climate change damages on ecosystem non-market goods and services. To this end, a general random walk-based stochastic model is proposed, combining a number of parameters, e.g., the growth of income, depletion of environmental assets, the elasticity of income and demand, and the change in preferences towards the environment. The illustrative application of the model shows that the value of environmental losses is significantly affected by the change in preferences. By doing so, the model allows the analyst to visualize future paths of preference evolutions and to bring future values of damaged environmental assets realistically to the fore. If these elements are neglected when estimating climate change-related future damages to environmental goods and services, the results may be too narrow from a policy perspective. View Full-Text
Keywords: future preferences; ecosystem values; random walk modeling; climate change impact assessment future preferences; ecosystem values; random walk modeling; climate change impact assessment
Show Figures

Figure 1

MDPI and ACS Style

Skourtos, M.; Damigos, D.; Kontogianni, A.; Tourkolias, C.; Hunt, A. Embedding Preference Uncertainty for Environmental Amenities in Climate Change Economic Assessments: A “Random” Step Forward. Economies 2019, 7, 107.

Show more citation formats Show less citations formats
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop