Distributional biases in the analysis of climate change

The economic analysis of global warming is dominated by models based on optimal growth theory. These representative-agent models have an intrinsic distributional bias in favor of the rich. The bias is compounded by the use of 'revenue-neutrality' in the allocation of emission permits. The result is mitigation recommendations that are biased downwards.

► Integrated assessment models in the Nordhaus tradition have an intrinsic distributional bias against the poor. ► The bias reduces the 'optimal' amount of mitigation. ► Standard assumptions about the allocation of emission permits aggravate the distributional bias.