October 30, 2011

Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model

 by William D. Nordhaus

- We estimate the SCC using an updated version of the RICE-2011 model. The most important results are: First, the estimated social cost of carbon for the current time (2015) including uncertainty, equity weighting, and risk aversion is $44 per ton of carbon (or $12 per ton CO2) in 2005 US$ and international prices). Second, including uncertainty increases the expected value of the SCC by approximately 8 percent. Third, equity weighting generally tends to reduce the SCC. Finally, the major open issue concerning the SCC continues to be the appropriate discount rate.

William D. Nordhaus (2011). "Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model." NBER Working Paper No. 17540, Oct 2011.

Policy-Instrument Choice and Benefit Estimates for Climate-Change Policy in the United States

by Matthew J. Kotchen, Kevin J. Boyle and Anthony A. Leiserowitz

- This paper provides the first willingness-to-pay (WTP) estimates in support of a national climate-change policy that are comparable with the costs of actual legislative efforts in the U.S. Congress. Based on a survey of 2,034 American adults, we find that households are, on average, willing to pay between $79 and $89 per year in support of reducing domestic greenhouse-gas (GHG) emissions 17 percent by 2020. Even very conservative estimates yield an average WTP at or above $60 per year.

Matthew J. Kotchen, Kevin J. Boyle and Anthony A. Leiserowitz (2011). "Policy-Instrument Choice and Benefit Estimates for Climate-Change Policy in the United States." NBER Working Paper No. 17539, Oct 2011.

Cost-Effectiveness of Electricity Energy Efficiency Programs

by Toshi H. Arimura, Shanjun Li, Richard G. Newell and Karen Palmer

- We analyze the cost-effectiveness of electric utility ratepayer-funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years.

Arimura, T.H., S.L., R.G. Newell and K. Palmer (2011). "Cost-Effectiveness of Electricity Energy Efficiency Programs." NBER Working Paper No. 17556, Oct 2011.

Inducing Low-Carbon Investment in the Electric Power Industry through a Price Floor for Emissions Trading

by Alexander Brauneis and Michael Loretz

- Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter investments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate change policy in the form of a constant or growing price floor on investment decisions of a single firm in a competitive environment.

Brauneis, A. and M. Loretz (2011). "Inducing Low-Carbon Investment in the Electric Power Industry through a Price Floor for Emissions Trading." FEEM Note di lavoro No. 2011.074, Oct 2011.

The Natalist Bias of Pollution Control

by David De La Croix and Axel Gosseries

- For a given technology, two ways are available to achieve low polluting emissions: reducing production per capita or reducing population size. This paper insists on the tension between the former and the latter. Controlling pollution either through Pigovian taxes or through tradable quotas schemes encourages agents to shift away from production to tax free activities such as procreation and leisure. This natalist bias will deteriorate the environment further, entailing the need to impose ever more stringent pollution rights per person. However, this will in turn gradually impoverish the successive generations: population will tend to increase further and production per capita to decrease as the generations pass. One possible solution consists in capping population too.

De La Croix, D. and A. Gosseries (2011). "The Natalist Bias of Pollution Control." CORE Discussion Paper No. 2011-27, Jun 2011.

Sustainable Growth and Modernization Under Environmental Hazard and Adaptation

by Natali Hritonenko and Yuri Yatsenko

- We develop an aggregated model to study rational environmental adaptation policies that
compensate negative consequences of certain environmental hazards and changes. The model
distinguishes three categories of adaptation measures that (a) compensate the decrease of the
environmental amenity value, (b) compensate the decrease of total productivity, (c) develop and
introduce new hazard-protected capital and technology. We analyze the optimal balance among
investment, consumption, and different categories of adaptation investments.

Hritonenko, N. and Y. Yatsenko (2011). "Sustainable Growth and Modernization Under Environmental Hazard and Adaptation." CORE Discussion Paper No. 2011-25, Jun 2011.

Climate Change and the Ethiopian Economy: A Computable General Equilibrium Analysis

by Zenebe Gebreegziabher, Jesper Stage, Alemu Mekonnen and Atlaw Alemu

- This paper analyses the economic impacts of climate change on Ethiopia’s agriculture using a countrywide computable general equilibrium model. The impacts on agriculture are based on results from a Ricardian model where current (and future) agricultural production is analyzed as a function of temperature and precipitation. We project that the effect of overall climate change will be relatively benign until approximately 2030 and then worsen considerably. Our simulation results indicate that, over a 50-year period, the projected reduction in agricultural productivity may lead to 30 percent less average income, compared with the possible outcome in the absence of climate change. Autonomous adaptations that the farmers make and government policies in response will be crucial for Ethiopia’s future development.

Gebreegziabher, Z., J. Stage, A. Mekonnen and A. Alemu (2011). "Climate Change and the Ethiopian Economy: A Computable General Equilibrium Analysis." RFF Discussion Paper EfD 11-09, Oct 2011.

Sustainable Climate Treaties

by Hans Gersbach, Noemi Hummel and Ralph Winkler

- We examine a global refunding scheme for mitigating climate change. Countries pay an initial fee into a global fund that is invested in long-run assets. In each period, part of the fund is distributed among the participating countries in relation to the emission reductions they have achieved in this period. We identify two possible types of sustainable treaty. A first-best sustainable treaty involves varying amounts of refunded wealth and a minimal amount of initial fees inducing socially desirable abatement efforts in each period. In a second-best sustainable treaty with only two parameters - optimally selected initial fees and constant refunds equal to the interest earned on the fund - the stock of greenhouse gases converges to the socially optimal stock. Finally, we suggest ways for countries to raise money for the payment of initial fees that are neutral to tax payers and international capital markets.

Hans Gersbach, Noemi Hummel and Ralph Winkler (2011). "Sustainable Climate Treaties." CER-ETH Working Paper 11/146, Jun 2011.

Optimal Carbon Capture and Storage Policies

by Alain Ayong Le Kama, Mouez Fodha and Gilles Lafforgue

- We develop a simple growth model and exhibit the main driving forces that should determine the optimal CCS policy. We show that, under some conditions on the cost of extractions, CCS may be a long-term solution to curb carbon emissions. Besides, we show that the social planner chooses to decrease over time the rate of capture and sequestration. Next, we derive the decentralized equilibrium outcome by considering the programs of the fossil resource-holder and of the representative consumer. Finally, we determine the environmental policy, i.e. the carbon tax scheme, as well as the the dynamics of the fossil fuel price that implement the optimum.

Le Kama, A.A., M. Fodha and G. Lafforgue (2011). "Optimal Carbon Capture and Storage Policies." LERNA Working Paper, n. 11.13.347, May 2011.

October 24, 2011

A Review of Solar Energy: Markets, Economics and Policies

by Govinda R. Timilsina, Lado Kurdgelashvili, Patrick A. Narbel

- This study analyzes the technical, economic and policy aspects of solar energy development and deployment. While the cost of solar energy has declined rapidly in the recent past, it still remains much higher than the cost of conventional energy technologies. Development and large-scale, market-driven deployment of solar energy technologies world-wide still has to overcome a number of technical and financial barriers. Unless these barriers are overcome, maintaining and increasing electricity supplies from solar energy will require continuation of potentially costly policy supports.

Timilsina, G.R., L. Kurdgelashvili and P.A. Narbel (2011). "A Review of Solar Energy: Markets, Economics and Policies." World Bank Policy Research Working Paper No. WPS 5845, Oct 2011.

Depletion and Development: Natural Resource Supply with Endogenous Field Opening

by Anthony J. Venables

- This paper develops a model in which supply of a non-renewable resource can adjust through two margins: the rate of depletion and the rate of field opening. Faster depletion of existing fields means that less of the resource can ultimately be extracted, and optimal depletion of open fields follows a (modified) Hotelling rule. Opening a new field involves sinking a capital cost, and the timing of field opening is chosen to maximize the present value of the field. Output dynamics depend on both depletion and field opening, and supply responses to price changes are studied. In contrast to Hotelling, the long run equilibrium rate of growth of prices is independent of the rate of interest, depending instead on characteristics of demand and geologically determined supply.

Anthony J. Venables (2011). "Depletion and Development: Natural Resource Supply with Endogenous Field Opening." CESifo Working Paper No. 3608, Oct 2011.

Unravelling the Worldwide Pollution Haven Effect

by Jean-Marie Grether, Nicole A. Mathys and Jaime de Melo

- This paper tackles the "pollution haven" argument by estimating the pollution content of imports (PCI). The PCI is then decomposed into three components: (i) a "deep" component (i.e. traditional variables unrelated to the environmental debate); (ii) a factor endowment component and (iii) a "pollution haven" component reflecting the impact of differences in environmental policies. The estimation is carried out for 1987 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Decompositions based on cross-section econometric estimates suggest a significant pollution haven effect which increases the PCI of the North because of stricter environmental regulations in the North.

Jean-Marie Grether, Nicole A. Mathys and Jaime de Melo (2011). "Unravelling the Worldwide Pollution Haven Effect." FEEM Note di Lavoro No. 2011.075, Oct 2011.

What Role for Trade in a Post 2012 Global Climate Policy Regime

by John Whalley

- This paper discusses the role that trade can potentially play in both negotiating and operating a post Kyoto/post 2012 global climate policy regime. As an addition to the bargaining set for a global climate negotiation, trade in principle widens the range of jointly beneficial potential outcomes and can in this sense be a potential facilitator of an agreed global climate regime. In short, trade added to the emerging post 2012 climate regime can both expand the bargaining set for both (effectively linked) negotiations, and additionally provide an instrument for the implementation of an agreed outcome.

John Whalley (2011). "What Role for Trade in a Post 2012 Global Climate Policy Regime." NBER Working Paper No. 17498, Oct 2011.

The Design and Implementation of U.S. Climate Policy: An Introduction

by Don Fullerton and Catherine Wolfram

- While economic models have already proven useful to analyze big picture questions about climate policy such as the choice between a carbon tax or cap-and-trade permit system, the 19 chapters in this book show how economic models also are useful to address the many remaining smaller questions that arise as policy is implemented. For example, chapters consider: the tradeoffs policymakers confront in deciding whether to implement the policy upstream on energy producers or downstream on energy users; how to monitor and enforce climate policy; how Federal actions might interact with climate policies at other levels of government or with other non-climate policies; the distributional effects of different policy variations; policies that might impact particular sectors, including residential energy use, agriculture and transportation; and specific questions regarding offsets, trade, innovation, and adaptation.

Don Fullerton and Catherine Wolfram (2011). "The Design and Implementation of U.S. Climate Policy: An Introduction." NBER Working Paper No. 17499, Oct 2011.

Prices vs Quantities with Multiple Pollutants

by Stefan Ambec and Jessica Coria

- We examine the choice of policy instrument price, quantity, or a mix of the two when two pollutants are regulated and firms’ abatement costs are private information. A key parameter that affects this choice is the technological externality between the abatement efforts involved, i.e., whether they are substitutes or complements. If they are complements, a mix policy instrument with a tax on one pollutant and a quota on the other is sometime preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, the mix policy is dominated by taxes or quotas.

Ambec, S. and J. Coria (2011). "Prices vs Quantities with Multiple Pollutants." LERNA Working Paper No. 11.17.351, Oct 2011.

Assessing the Energy Efficiency Information Gap: Results from a Survey of Home Energy Auditors

by Karen L. Palmer, Margaret A. Walls, Hal Gordon and Todd Gerarden

- This paper reports the results of a survey of nearly 500 home energy auditors and contractors that Resources for the Future conducted in summer 2011. The survey asked about the characteristics of these businesses and the services they provide, the degree to which homeowners follow up on their recommendations, and the respondents’ opinions on barriers to home energy retrofits and the role for government. Findings from the survey suggest that the audit industry only partially is filling the information gap. Not enough homeowners know about or understand audits, and the follow-through on recommendations once they do have audits is incomplete. But the survey findings suggest that low energy prices and the high cost of retrofits may be more responsible for these outcomes than failures of information.

Karen L. Palmer, Margaret A. Walls, Hal Gordon and Todd Gerarden (2011). "Assessing the Energy Efficiency Information Gap: Results from a Survey of Home Energy Auditors." RFF Discussion Paper No. 11-42, Oct 2011.

Optimal CCS and Air Capture from Heterogeneous Energy Consuming Sectors


by Jean-Pierre Amigues, Gilles Lafforgue and Michel Moreaux

- We characterize the optimal exploitation paths of two primary energy resources, a non-renewable polluting resource and a carbon-free renewable one. Both resources can supply the energy needs of two sectors. Sector 1 is able to reduce its carbon footprint at a reasonable cost owing to a CCS device. Sector 2 has only access to the air capture technology, but at a signi cantly higher cost. We assume that the atmospheric carbon stock cannot exceed some given ceiling. We show that there may exist paths along which it is optimal to begin by fully capturing the sector 1's emissions before the ceiling has been reached. Also there may exist optimal paths along which both capture devices have to be activated, in which case the sector 1's emissions are rst fully abated and next sector 2 partially abates.

Amigues, J-P, G. Lafforgue and M. Moreaux (2011). "Optimal CCS and Air Capture from Heterogeneous Energy Consuming Sectors." LERNA Working Paper No. 11.16.350, Sept 2011.

Long-term trend in global CO2 emissions. 2011 report

by Jos G.J. Olivier, Greet Janssens-Maenhout, Jeroen A.H.W. Peters and Julian Wilson

- After a 1% decline in 2009, global carbon dioxide (CO2) emissions increased by more than 5% in 2010, which is unprecedented in the last two decades, but similar to the increase in 1976 when the global economy was recovering from the first oil crisis and subsequent stock market crash. CO2 emissions went up in most of the major economies, led by China and India with increases of 10% and 9% respectively. The average annual growth rate in CO2 emissions over the last three years of the credit crunch, including a 1% increase in 2008 when the first impacts became visible, is 1.7%, almost equal to the long-term annual average of 1.9% for the preceding two decades back to 1990. However, most industrialised countries have not recovered fully from their decreases in emissions of 7 to 12% in 2009.

Olivier, J.G.J., G. Janssens-Maenhout, J.A.H.W. Peters and J. Wilson (2011). "Long-term trend in global CO2 emissions - 2011 report." PBL Working Paper No. 500253004, JRC Technical Note No. JRC65918, Jul 2011.

A Mechanism Design Approach to Climate Agreements

by David Martimort and Wilfried Sand-Zantman

- We analyze environmental agreements in contexts with asymmetric information, voluntary participation by sovereign countries and possibly limited enforcement. Taking a mechanism design perspective, we study how countries can agree on effort levels and compensations to take into account multilateral externalities. We delineate conditions for efficient agreements and trace out possible inefficiencies to the conjectures that countries hold following disagreement. We show how optimal mechanisms admit simple approximations with attractive implementation properties. Finally, we also highlight how limits on commitment strongly hinder performances of optimal mechanisms.

Martimort, D. and W. Sand-Zantman (2011). "A Mechanism Design Approach to Climate Agreements." IDEI Working Paper No. 682, Aug 2011.

Stable and Efficient Coalitional Networks

by Jean-François Caulier, Ana Mauleon, Jose J. Sempere-Monerris and Vincent Vannetelbosh

- We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with her coalition members and with individuals outside her coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concepts of strong stability and of contractual stability. Contractual stability imposes that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. Requiring the consent of coalition members under the simple majority or unanimity decision rule may help to reconcile stability and efficiency. Moreover, this new framework can provide insights that one cannot obtain if coalition formation and network formation are tackled separately and independently.

Jean-François Caulier, Ana Mauleon, Jose J. Sempere-Monerris and Vincent Vannetelbosh (2011). "Stable and Efficient Coalitional Networks." Core Discussion Paper No. 2011/39, Jul 2011.

Effects of the Uncertainty about Global Economic Recovery on Energy Transition and CO2 Price

by Olivier Durand-Lasserve, Axel Pierru and Yves Smeers

- This paper examines the impact that uncertainty over economic growth may have on global energy transition and CO2 prices. We use a general-equilibrium model derived from MERGE, and define several stochastic scenarios for economic growth. Each scenario is characterized by the likelihood of a rapid global economic recovery. More precisely, during each decade, global economy may - with a given probability - shift from the EIA's (2010) loweconomic-growth path to the EIA's (2010) high-economic-growth path. The climate policy considered corresponds in the medium term to the commitments announced after the Copenhagen conference, and in the long term to a reduction of 25% in global energy-related CO2 emissions (with respect to 2005).

Durand-Lasserve, O., A. Pierru and Y. Smeers (2011). "Effects of the Uncertainty about Global Economic Recovery on Energy Transition and CO2 Price." Core Discussion Paper No. 2011/28, Jul 2011.

Emissions and targets of greenhouse gases not included in the Emission Trading System 2013-2020. Analysis of the impact of the European Effort Sharing Decision for the Netherlands

by Martijn Verdonk

- This report evaluates the European Commission’s (EC) proposal to calculate Member States’ targets for emissions not included in the Emission Trading System (ETS). It is concluded that, for the Netherlands, the non-ETS emission caps as proposed by the EC would result in an emission cap of 105 Mt CO2 equivalent by 2020. Emission caps have also been calculated for the years between 2013 and 2020. Non-ETS emission levels by 2020 would be around the calculated ESD cap for 2020. Policies of the current Dutch Government have not been included in this update.

Verdonk, M. (2011). "Emissions and targets of greenhouse gases not included in the Emission Trading System 2013-2020." PBL Report No. 500253003, Jun 2011.

Modeling Energy and Non-Energy Substitution: A Survey of Elasticities

by Manuel Frondel

- Estimating the degree of substitution between energy and non-energy inputs is key for any evaluation of environmental and energy policies. Yet, given the large variety of substitution elasticities, the central question arises as to which measure would be most appropriate. Apparently, ALLEN’s elasticities of substitution have been the most-used measures in applied production analysis. This paper argues that cross-price elasticities are preferable for many practical purposes. This conclusion is based on a survey of classical substitution measures, such as those from ALLEN, MORISHIMA, and MCFADDEN. The survey also highlights the fact that cross-price elasticities are their essential ingredients.

Frondel, M. (2011). "Modeling Energy and Non-Energy Substitution: A Survey of Elasticities." Ruhr Economic Papers No. 256, May 2011.

Optimal Policies to Preserve Tropical Forests

by Gilles Lafforgue and Helene Olliviery

- We develop a North/South growth model to investigate the normative question of international transfers to preserve tropical forests. The South converts forest lands into agricultural lands to produce a final consumption good which is consumed by the North. We consider two ways of incorporating the externality coming from de-forestation in the utility of the North: i) through an amenity value, which reflects a continuous willingness to preserve forests, or ii) through a minimum stock of tropical forests to be preserved.

Lafforgue, G. and H. Ollivier (2011). "Optimal Policies to Preserve Tropical Forests." LERNA Working Paper No. 11.14.348, Feb 2011.

October 3, 2011

When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves

by Adrien Vogt-Schilb and Stéphane Hallegatte

- The article investigates the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. It shows that introducing inertia, in the form of the "cost in time" of available options, changes significantly the message from MACCs. With an abatement objective in cumulative emissions (e.g., emitting less than 200 GtCO2 in the 2000-2050 period), it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. With abatement targets expressed in terms of emissions at one point in time (e.g., reducing emissions by 20 percent in 2020), it can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant.

Vogt-Schilb, A., et S. Hallegatte (2011). "When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves." World Bank Policy Research Working Paper, Sept 2011.

Climbing the Electricity Ladder Generates Carbon Kuznets Curve Downturns

by Paul J. Burke

- This paper examines why some countries have experienced environmental Kuznets curve (EKC)-type reductions in carbon dioxide (CO2) emissions, while others have not. The hypothesis that climbing to the upper rungs of the electricity ladder (nuclear power and modern renewables) has been the primary mechanism via which countries have achieved substantial reductions in per capita CO2 emissions is tested using a binomial dependent variable modelling approach for a sample of 105 countries. The findings suggest that electricity mix transitions caused by long-run growth in per capita incomes are indeed the primary determinant of carbon Kuznets curve downturns.

Burke, P.J. (2011). °Climbing the electricity ladder generates carbon Kuznets curve downturns." CAMA Working Paper 31/2011, Sept 2011.

Using the Market to Address Climate Change: Insights from Theory and Experience

by Joseph Aldy and Robert N. Stavins

- We examine alternative designs of carbon taxes, cap-and-trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy.

Aldy, J., and R.N. Stavins (2011). "Using the Market to Address Climate Change: Insights from Theory and Experience." HKS Faculty Research Working Paper Series RWP11-038, Sept 2011.

Distributional implications of climate change in India

by Hanan Jacoby, Mariano Rabassa, Mariano and Emmanuel Skoufias

- Global warming is expected to heavily impact agriculture, the dominant source of livelihood for the world's poor. Yet, little is known about the distributional implications of climate change at the sub-national level. Using a simple comparative statics framework, this paper analyzes how changes in the prices of land, labor, and food induced by modest temperature increases over the next three decades will affect household-level welfare in India. The authors predict a substantial fall in agricultural productivity, even allowing for farmer adaptation.

Jacoby, H., M. Rabassa and E. Skoufias (2011). "Distributional implications of climate change in India."  World Bank Policy Research working paper No. WPS 5623, Aug 2011.

Implications of a Lowered Damage Trajectory for Mitigation in a Continuous-Time Stochastic Model

by Jon Strand

- This paper provides counterexamples to the idea that mitigation of greenhouse gases causing climate change, and adaptation to climate change, are always and everywhere substitutes. The author considers optimal policy for mitigating greenhouse gas emissions when climate damages follow a geometric Brownian motion process with positive drift, and the trajectory for damages can be down-shifted by adaptive activities, focusing on two main cases: 1) damages are reduced proportionately by adaptation for any given climate impact ("reactive adaptation"); and 2) the growth path for climate damages is down-shifted ("anticipatory adaptation").

Strand, J. (2011). "Implications of a Lowered Damage Trajectory for Mitigation in a Continuous-Time Stochastic Model." Policy Research Working Paper No. WPS 5724, Jul 2011.

A Practical Approach to Offset Permits in Post Kyoto Climate Policy

by Peter Heindl and Sebastian Voigt

- In this paper we analyse the possible demand and supply for offsets for the period from 2013 to 2020. The analysis is based on the assumptions that developed countries (Annex I) implement the emissions reduction pledges made after the 15th Conference of the Parties in Copenhagen ("Copenhagen Pledges"). Further we assume that international emissions trading will be continued after 2012.We calculate the potential annual demand for offset permits in Annex I countries based on the PACE model.

Heindl, Peter and Sebastian Voigt (2011). "A Practical Approach to Offset Permits in Post Kyoto Climate Policy." ZEW Discussion Paper No. 11-043, Jun 2011.

Under what Conditions does a Carbon Tax on Fossil Fuels Stimulate Biofuels?

by Govinda R. Timilsina, S. Csordas and S. Mevel

- Using a multi-sector, multi-country computable general equilibrium model, this study shows first that a carbon tax with the entire tax revenue recycled to households through a lump-sum transfer does not stimulate biofuel production significantly, even at relatively high tax rates. This reflects the high cost of carbon dioxide abatement through biofuels substitution, relative to other energy substitution alternatives; in addition, the carbon tax will have negative economy-wide consequences that reduce total demand for all fuels.

Timilsina, G.R., S., Csordas, and S. Mevel (2011). "Under what Conditions does a Carbon Tax on Fossil Fuels Stimulate Biofuels?" World Bank Policy Research working paper No. WPS 5678, Jun 2011.

The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

by Peter Heindl

- In this paper we present a model that highlights the importance of technological complexity and firm-size in environmental regulation. If regulated firms emit a relatively small amount of pollutants, possible efficiency gains from abatement are also relatively small. If there are high informational costs for abatement options and costs to be identified because of complex technology, small emitters might face a threshold for searching for abatement technology. This could effectively hamper the implementation of existing abatement technologies and the invention of new ones.

Heindl, Peter (2011). "The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme." ZEW Discussion Paper No. 11-040.

Strategic Climate Policy with Offsets and Incomplete Abatement: Carbon Taxes Versus Cap-and-Trade

by Jon Strand

- This paper provides a first analysis of optimal offset policies by a "policy bloc" of fossil fuel importers implementing a climate policy, facing a (non-policy) fringe of other importers, and a bloc of fuel exporters. The policy bloc uses either a carbon tax or a cap-and-trade scheme, jointly with a fully efficient offset mechanism for reducing emissions in the fringe. The policy bloc is then shown to prefer a tax over a cap-and-trade scheme.

Strand, J. (2011). "Strategic climate policy with offsets and incomplete abatement: carbon taxes versus cap-and-trade." World Bank Policy Research working paper No. WPS 5675, Jun 2011.

The Poverty Impacts of Climate Change: a Review of the Evidence

by Emmanuel Skoufias, Mariano Rabassa and Sergio Olivieri

- This paper conducts an up-to-date review of three main strands of the literature analyzing the poverty impacts of climate change : (i) economy-wide growth models incorporating climate change impacts to work out consistent scenarios for how climate change might affect the path of poverty over the next decades; (ii) studies focusing on the poverty impacts of climate change in the agricultural sector; and (iii) studies exploring how past climate variability impacts poverty. The analysis finds that the majority of the estimates of the poverty impacts tend to ignore the effect of aggregate economic growth on poverty and household welfare.

Skoufias, E., M. Rabassa and S. Olivieri (2011). "The poverty impacts of climate change: a review of the evidence." World Bank Policy Research working paper No. WPS 5622, Apr 2011.