Professor receives EAERE Award for Best Doctoral Dissertation: 'Assessing Climate Change'
Assistant Professor at the Department of Economics, Frikk Nesje, has received a European Association of Environmental and Resource Economists (EAERE) Award for Best Doctoral Dissertations in Environmental and Resource Economics as well as the Norwegian King's Gold Medal for his work.
Management of long-term resources requires balancing the interests of different generations. Climate policy, for example, must balance the costs of cutting climate emissions for the current generation against the benefits of a stable climate for future generations. As the best possible use of resources for society depends on the weights assigned to each generation, such quantification has been described as one of the most important issues in economics.
In the dissertation "Assessing Climate Change", Frikk Nesje finds support for greater emphasis on future generations than is typically the case in analyzes of climate measures. This includes analyzes made by William Nordhaus. In 2018, Nordhaus received the Nobel Prize in Economics for his analyzes of the climate problem.
Why is the emphasis on future generations so important? The following calculation exercise shows how sensitive analyzes of climate measures are. The emphasis on future generations is typically represented by an interest rate. Ask yourself the question: How much is the current generation willing to sacrifice today for 1000 kroner less in climate damage in 100 years (adjusted for inflation)? Nordhaus's interest rate of 4.5 percent implies a willingness to give up 10 kroner today. A lower interest rate, for example 2 percent, gives 150 kroner.
In analyzes of the type Nordhaus gives, the weight of future generations is inferred from observed behavior in the market, for example the market interest rate (adjusted for inflation). The background for this is the claim that observed behavior shows what the current generation is willing to sacrifice for future generations. In the dissertation, Nesje shows that this statement is not true: The market does not show what the current generation is willing to sacrifice for future generations. The interest rate that is in line with this will be lower than the market interest rate. Lower interest rates mean higher emphasis on future generations.
In addition, Frikk Nesje was recently awarded the Norwegian King's Gold Medal for the dissertation.