The price of climate: revealed preferences of French consumers

Cavailhes , Jean
        INRA
         .
         UMR 1041 Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux; Joly , Daniel
        . UMR 6049 ThéMA; Cardot , Hervé
        . Institut de Mathématiques. UMR CNRS 5584; Hilal , Mohamed
        INRA
         .
         UMR 1041 Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux; Brossard , Thierry
        . UMR 6049 ThéMA

The price of climate: revealed preferences of French consumers

2009

Cavailhes , Jean (INRA (France). UMR 1041 Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux) | Joly , Daniel (Centre National de la Recherche Scientifique, Besançon(France). UMR 6049 ThéMA) | Cardot , Hervé (Université de Dijon(France). Institut de Mathématiques. UMR CNRS 5584) | Hilal , Mohamed (INRA (France). UMR 1041 Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux) | Brossard , Thierry (Centre National de la Recherche Scientifique, Besançon(France). UMR 6049 ThéMA)

We use the hedonic price method to study consumer preferences for climate (temperature, very hot or cold days, and rainfall) in France, a temperate country with varied climates. Data are for (i) individual attributes and prices of houses and workers and (ii) climate attributes interpolated from weather stations. We show that the French households value warmer temperatures while very hot days are a nuisance. Such climatic amenities are attributes of consumers’ utility function;nevertheless, global warming assessments by economists, such as the Stern Review Report (2006), ignore these climatic preferences. The social welfare assessment is changed when the direct consumption of climate is taken into account: from the estimated hedonic prices, we calculate that GDP rises by about 1% for a 1 °C rise in temperature.

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