The Weitzman Premium on the Social Cost of Carbon (opens in new tab)

Preference heterogeneity massively increases the social cost of carbon. We call this the Weitzman premium. Uncertainty about an exponential discount rate implies a hyperbolic discount rate, which in the near term is equal to the average discount rate but in the long term falls to the minimum discount rate. We generalise Weitzman's (2001, AER) gamma discounting to zero-inflation and two dimensions but find that the analytical solution is a po...