Intertemporal Redistributive Policies in Environmental Economics: An Overlapping Generations approach to Intergenerational Equity and Intergenerational Redistributive Justice

The Overlapping Generations model provides a comprehensive framework for the evaluation of policy designs with long time horizons. Indeed, the OLG approach gains its relevance in enabling economists to address the direct impacts of such policies on distinct consecutive generations. As there isn’t a need for the imposition of a social welfare function that would substantially discount the utility of individuals as the time horizon progresses, the utility of each distinct generation can be weighted equally by the policymaker. Since the OLG model represents a significantly fitting approach for policy evaluations with long time horizons, it is very suitable for the analysis of environmental policy designs aimed at reducing the levels of greenhouse gas emissions and of the Mean Global Temperature. In the OLG model, however, the environmental policy can also be aimed at establishing intergenerational equity through emission taxes and through the possibility of introducing intergenerational transfers. This thesis studies the effects of how the policymaker’s willingness or ability to pursue intergenerational equity affects the long-run levels of greenhouse gas emissions and Mean Global Temperatures. This analysis will be conducted on the basis of the OLG model and numerical simulations formulated by economist Richard B. Howarth’s article An Overlapping Generations Model of Climate-Economy Interactions published in The Scandinavian Journal of Economics in 1998.