So far international negotiations designed to reduce carbon emissions have come up against the clash of views as to the equitable way of sharing out the ‘burden’ among countries. In this article we show that the main criteria that have been discussed, including ‘historical responsibility’, ability to pay, demographic and ‘needs’, are all subject to statistical difficulties as well as ethical objections, particularly the historical responsibility criterion. Any equitable compromise between the different possible criteria needs to take account of these obstacles to their being made operational.

Any comparison of the costs and benefits of climate change is dominated by the chosen discount rate. But, although the Stern Review emphasises the ethical nature of the parameters entering into its choice of a relatively low discount rate, its discussion of the ‘pure time preference’ parameter is unbalanced. In particular, no consideration is given to the role of ‘agent-relative ethics’, which (i) has a wellestablished philosophical pedigree going back to David Hume; (ii) is likely to correspond closely to world-wide public attitudes towards intergenerational welfare; and (iii) would entail discounting a unit of welfare accruing to future generations compared to an equal unit accruing to people alive today at a positive rate. The authors also discuss the other ethical parameter upon which the discount rate depends, namely the elasticity of marginal utility with respect to consumption. In the conventional model, this simultaneously reflects different aspects of inequality aversion as well as risk aversion, which complicates its interpretation. Finally, they discuss the divergence between market rates of discount and the low rate chosen in the Review, and the limitations—on the one hand—on the normative significance of market rates, as well as the danger—on the other hand—of relying on rates chosen by elites or philosopher kings.

The use of pollution charges or tradeable permits to reduce pollution has been condemned by many environmentalists and some philosophers on the grounds that (i) pollution is inherently immoral; (ii) environmental assets are not appropriately valued in monetary terms; and (iii) the sale of ‘environmental indulgencies’ is inequitable since it unfairly favours the rich. In this article it is argued that all these arguments are invalid.

The OECD report is almost exclusively about environmental policy (on which it contains a mass of useful data and discussion). There is, commendably, hardly any discussion of the implications of the usual core condition in consensus definitions of sustainable development, namely that there should be no future decline in per capita welfare. Economists would also do well to ignore this condition, and hence the problem of a possible conflict between optimality and sustainability. And, insofar as it is believed that there is a conflict, we should opt for optimality since the ethical grounds for not doing so—e.g. that pure time preference over generations is unethical or that we have to respect the rights of future generations—are weak. A second major omission is more serious and is the report’s failure to get to grips with crucial constitutive and instrumental components of sustainable development, notably civil and political liberties.