January 25, 2009

An Analysis of the Dismal Theorem

by William Nordhaus

- In a series of papers, Martin Weitzman has proposed a Dismal Theorem. The general idea is that, under limited conditions concerning the structure of uncertainty and preferences, society has an indefinitely large expected loss from high-consequence, low-probability events. Under such conditions, standard economic analysis cannot be applied. The present study is intended to put the Dismal Theorem in context and examine the range of its applicability, with an application to catastrophic climate change. I conclude that Weitzman makes an important point about selection of distributions in the analysis of decision-making under uncertainty. However, the conditions necessary for the Dismal Theorem to hold are limited and do not apply to a wide range of potential uncertain scenarios.

Nordhaus, W. (2009). "An Analysis of the Dismal Theorem." Cowles Foudation Working Paper NO. 1686, Jan 2009.

Probabilistic Forecast for 21st Century Climate Based on Uncertainties in Emissions (without Policy) and Climate Parameters

by A.P. Sokolov, P.H. Stone, C.E. Forest, R.G. Prinn, M.C. Sarofim, M. Webster, S. Paltsev, C.A. Schlosser, D. Kicklighter, S. Dutkiewicz, J. Reilly, C. Wang, B. Felzer, H.D. Jacoby

- The MIT Integrated Global System Model is used to make probabilistic projections of climate change from 1861 to 2100. The new projections are considerably warmer than the 2003 projections, e.g., the median surface warming in 2091 to 2100 is 5.1°C compared to 2.4°C in the earlier study. If recently published data, suggesting stronger 20th century ocean warming, are used to determine the input climate parameters, the median projected warning at the end of the 21st century is only 4.1°C. Nevertheless all our simulations have a very small probability of warming less than 2.4°C, the lower bound of the IPCC AR4 projected likely range for the A1FI scenario, which has forcing very similar to our median projection.

Sokolov, A.P., P.H. Stone, C.E. Forest, R.G. Prinn, M.C. Sarofim, M. Webster, S. Paltsev, C.A. Schlosser, D. Kicklighter, S. Dutkiewicz, J. Reilly, C. Wang, B. Felzer and H.D. Jacoby (2009). "Probabilistic Forecast for 21st Century Climate Based on Uncertainties in Emissions (without Policy) and Climate Parameters." Joint Program Report Series, Report 169, Jan 2009.

Interactions of Reduced Deforestation and the Carbon Market: The Role of Market Regulations and Future Commitments

by Niels Anger, Alistair Dixon and Erich Livengood

- Reducing emissions from deforestation and degradation (REDD) has been proposed as a potentially inexpensive and plentiful source of emission abatement to supplement other longterm climate policies. However, critics doubt that REDD credits are environmentally equivalent to domestic emission reductions, and suggest an excess supply may disrupt carbon markets. In this context, we investigate the economic implications of emissions market regulations and future emissions reduction commitments, as well as uncertainties in REDD credit supply.

Anger, N., A. Dixon and E. Livengood (2009). "Interactions of Reduced Deforestation and the Carbon Market: The Role of Market Regulations and Future Commitments." ZEW Discussion Paper No. 09-001, Mannheim, Jan 2009.

Economy-wide Impacts of Climate Change on Agriculture in Sub-Saharan Africa

by Alvaro Calzadilla, Tingju Zhu, Katrin Rehdanz, Richard S.J. Tol and Claudia Ringler

- Two possible adaptation options to climate change for Sub-Saharan Africa are analyzed under the SRES B2 scenario. The first scenario doubles irrigated areas in Sub-Saharan Africa by 2050, compared to the baseline, but keeps total crop area constant. The second scenario increases both rainfed and irrigated crop yields by 25 percent for all Sub-Saharan African countries. The two adaptation scenarios are analyzed with IMPACT, a partial equilibrium agricultural sector model combined with a water simulation model, and with GTAP-W, a general equilibrium model including water resources.

Calzadilla, A., T. Zhu, K. Rehdanz, R.S.J. Tol and C. Ringler (2009). "Economy-Wide Impacts of Climate Change on Agriculture in Sub-Saharan Africa." FNU-170, Hamburg University and Centre for Marine and Atmospheric Science, Hamburg, Jan 2009.

Price Caps and Price Floors in Climate Policy- A Quantitative Assessment

by Cédric Philibert

- This study assesses the long-term economic and environmental effects of introducing price caps and price floors in hypothetical climate change mitigation architecture, which aims to reduce global energy-related CO2 emissions by 50% by 2050. Based on abatement costs in IPCC and IEA reports, this quantitative analysis confirms that introducing price caps could significantly reduce economic uncertainty. With price caps, the expected costs could be reduced by about 50% and the uncertainty on economic costs could be one order of magnitude lower.

Philibert, Cédric (2008). "Price Caps and Price Floors in Climate Policy- A Quantitative Assessment." IEA Information Paper Dec 2008.

Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO?

by ZhongXiang Zhang

- To gain some guidance on the scope of trade provisions in a post-2012 climate regime, this paper first discusses the Montreal Protocol in which such trade provisions have been included. The paper argues that while it is unlikely for developing country parties to agree the inclusion of trade-related measures in a post-2012 climate regime, trade-related measures should, at the very least, be contemplated for a set of industrialized countries (Annex I or II countries) as part of the evolving climate regime. The paper argues that the Lieberman-Warner type of border adjustment bill, in its current form, is likely to face WTO-consistency and methodological challenges.

Zhang, ZhongXiang (2008). "Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO?" Available at SSRN, Dec 2008.

From 1st- to 2nd-Generation Biofuel Technologies - An Overview of Current Industry and RD&D Activities

by Ralph Sims, Michael Taylor, Jack Saddler and Warren Mabee

- The current debate over biofuels produced from food crops has pinned a lot of hope on “2nd-generation biofuels” produced from crop and forest residues and from non-food energy crops. This report, produced jointly with IEA Bioenergy, examines the current state-of-the-art and the challenges for 2nd-generation biofuel technologies. It evaluates their costs and considers policies to support their development and deployment.

Sims, R., M. Taylor, J. Saddler and W. Mabee (2008). "From 1st- to 2nd-Generation Biofuel Technologies - Full Report- An Overview of Current Industry and RD&D Activities." International Energy Agency, Nov 2008.

Global Weather Sensitivity: A Comparative Study

by Weatherbill, Inc.

- This study seeks to provide an intuitive and accurate ranking system for weather sensitivity in sixty-eight countries. Results show that countries with extreme temperature variations and high levels of mining and agricultural output are the most sensitive to the weather. Brazil is found to be the most weather sensitive country and Pakistan the least. The US is found to have the largest total weather sensitivity, estimated at $2.5 trillion, or 23 percent of the national economy.

Weatherbill Inc. (2008). "Global Weather Sensitivity: A Comparative Study." Aug 2008.

January 18, 2009

Taxing Energy in the United States: Which Fuels Does the Tax Code Favor?

by Gilbert E. Metcalf

- This report offers a comprehensive overview of the energy-related provisions of the U.S. tax code and their estimated impact on tax revenues. More important, this report indicates where the U.S. tax regime as a whole is likely to direct energy investment. This paper builds on other work on effective tax rates by including in its analysis production and investment tax credits appearing in the code as well as depletion allowances reserved for the petroleum and gas sectors. It also considers energy-specific tax provisions that most previous analyses have not taken into account.

Metcalf, G.E. (2009). "Taxing Energy in the United States: Which Fuels Does the Tax Code Favor?" Center for Energy Policy and the Environment at the Manhattan Institute, Report 4, Jan 2009.

EIA Short-Term Energy Outlook

by Energy Information Administration

- This edition of the Short-Term Energy Outlook is the first to include monthly forecasts through December 2010. The global economic downturn points to declining oil consumption in 2009, while additional production capacity from both OPEC and non-OPEC nations should boost surplus production capacity, reducing the likelihood of a renewed strong upward pressure on prices.

EIA (2009). "Short-Term Energy Outlook." Jan 2009.

Sustainability and Discounted Utilitarianism in Models of Economic Growth

by Geir B. Asheim and Tapan Mitra

- Discounted utilitarianism treats generations unequally and leads to seemingly unappealing consequences in some models of economic growth. Instead, this paper presents and applies sustainable discounted utilitarianism (SDU). SDU respects the interests of future generations and resolves intergenerational conflicts by imposing on discounted utilitarianism that the evaluation be insensitive to the interests of the present generation if the present is better off than the future.

Asheim, G.B. and T. Mitra (2009). "Sustainability and Discounted Utilitarianism in Models of Economic Growth." CESifo Working Paper No. 2521, Jan 2009.

Optimal Energy Efficiency Policies and Regulatory Demand-Side Management Tests: How Well Do They Match?

by Timothy J. Brennan

- Under conventional models, subsidizing energy efficiency requires electricity to be priced below marginal cost. Its benefits increase when electricity prices increase to finance the subsidy. With high prices, subsidies are counterproductive unless consumers fail to make efficiency investments when private benefits exceed costs. If the gain from adopting efficiency is only reduced electricity spending, capping revenues from energy sales may induce a utility to substitute efficiency for generation when the former is less costly. This goes beyond standard "decoupling" of distribution revenues from sales, requiring complex energy price regulation

Brennan, T.J. (2009). "Optimal Energy Efficiency Policies and Regulatory Demand-Side Management Tests: How Well Do They Match?" RFF Discussion Paper 08-46, Jan 2009.

Economic Costs of Extratropical Storms Under Climate Change: An Application of FUND

Daiju Narita, Richard S.J. Tol and David Anthoff

- Extratropical cyclones have attracted some attention in climate policy circles as a possible significant damage factor of climate change. This study conducts an assessment of economic impacts of increased storm activities under climate change with the integrated assessment model FUND 3.4. In the base case, the direct economic damage of enhanced storms due to climate change amounts to $2.4 billion globally (approximately 35% of the total economic loss of storms at present) at the year 2100, while its ratio to the world GDP is 0.0007%. The paper also shows various sensitivity runs exhibiting up to 4 times the level of damage relative to the base run.

Narita, D., R.S.J. Tol and D. Anthoff (2009). "Economic Costs of Extratropical Storms Under Climate Change: An Application of FUND." ESRI Working Paper 274, Jan 2009.

Implied Market Price of Weather Risk

by Wolfgang Karl Hardl and Brenda Lpez Cabrera

- This paper implements a pricing methodology for weather derivatives that can increase the precision of measuring weather risk. We applied continous autoregressive models (CAR) with seasonal variation to model the temperature in Berlin and with that to get explicite nature of non-arbitrage prices for temperature derivatives. We infer the implied market price from Berlin cumulative monthly temperature futures that are traded at the Chicago Mercantile Exchange (CME), which is an important parameter of the associated equivalent martingale measures used to price and hedge weather future/options in the market. We propose to study the market price of risk, not only as a piecewise constant linear function, but also as a time dependent.

Hardl, K.W. and B. Lopez Cabrera (2009). "Implied Market Price of Weather Risk." SFB 649 Discussion Paper 2009-001 Humboldt-Universität, Jan 2009.

An Analysis of a Demand Charge Electricity Grid Tariff in the Residential Sector

by Andreas V. Stokke, Gerard L. Doorman and Torgeir Ericson

- This paper analyses the demand response from residential electricity consumers to a demand charge grid tariff. The tariff charges the maximum hourly peak consumption in each of the winter months January, February and December, thus giving incentives to reduce peak consumption. We use hourly electricity consumption data from 443 households, as well as data on their network and power prices, the local temperature, wind speed and hours of daylight.

Stokke, A.V., G.L. Doorman and T. Ericson (2009). "An Analysis of a Demand Charge Electricity Grid Tariff in the Residential Sector." Discussion Papers 574 - Statistics Norway, Jan 2009.

Global Carbon Markets: Are There Opportunities for Sub-Saharan Africa?

by Elizabeth Bryan, Wisdom Akpalu, Mahmud Yesuf, and Claudia Ringler

- This review paper begins with an overview of global carbon markets, including opportunities for carbon trading, and the current involvement of developing countries, with a focus on Sub-Saharan Africa. This is followed by an assessment of the mitigation potential and options involving agriculture, land use, and forestry. The major constraints to the participation of Sub-Saharan Africa in global carbon markets are discussed, and options for integrating the region into global carbon markets are proposed.

Bryan, E., W. Akpalu, Y. Mahmud and C. Ringler (2009). "Global Carbon Markets: Are There Opportunities for Sub-Saharan Africa?" Discussion Paper No. 832, Dec 2008.

January 12, 2009

The Perils of the Learning Model For Modeling Endogenous Technological Change

by William D. Nordhaus

- Learning or experience curves are widely used to estimate cost functions in manufacturing modeling. They have recently been introduced in policy models of energy and global warming economics to make the process of technological change endogenous. It is not widely appreciated that this is a dangerous modeling strategy.

Nordhaus, W.D. (2009). "The Perils of the Learning Model For Modeling Endogenous Technological Change." NBER Working Paper No. 14638, Jan 2009.

Responsibility for Climate Change, by the Numbers

by David A. Weisbach

- This paper examines the data on responsibility for climate change due to past emissions. It addresses two aspects of responsibility. First it shows that the data present a mixed picture. By some measures, developed or wealthy countries are responsible for most past emissions while on other means, responsibility is spread widely with poor countries responsible for a majority of emissions. The differences in the measurements are due two factors: whether the data uses a comprehensive measure of emissions and the extent to which the data is aggregated into regions. The more comprehensive the measure and the less aggregation, the more that poor countries are responsible for past emissions.

Weisbach, D.A. (2009). "Responsibility for Climate Change, by the Numbers." U of Chicago Law & Economics, Olin Working Paper No. 448; U of Chicago, Public Law Working Paper No. 255, Jan 2009. Available at SSRN.

Revenues from Carbon Pricing: Why Their Use Is, in Essence, Funded by a Capitation Tax

by Steven E. Stoft

- Cap-and-trade and carbon-tax policies generate streams of tax revenue or of valuable allowances. The common ownership of the atmospheric commons suggests equal ownership of the value stream it provides. If equal ownership is granted, governmental appropriation of carbon revenues becomes an equal-dollar-per-person (capitation) tax.

Stoft, S.E. (2009). "Revenues from Carbon Pricing: Why Their Use Is, in Essence, Funded by a Capitation Tax." Jan 2009. Available at SSRN.

Design of a Carbon Tax

by Gilbert E. Metcalf and David A. Weisbach

- The authors consider the design of a tax on greenhouse gas emissions for a developed country such as the United States. Three sets of issues are considered: the optimal tax base, issues relating to the rate (including the use of the revenues and rate changes over time) and trade. A well-designed carbon tax can capture about 80% of U.S. emissions by taxing fewer than 3,000 taxpayers and up to almost 90% with a modest additional cost.

Metcalf, G.E. and D.A. Weisbach (2009). "Design of a Carbon Tax." U of Chicago Law & Economics, Olin Working Paper No. 447; U of Chicago, Public Law Working Paper No. 254. Available at SSRN.

Overreaction to Fearsome Risks

by Cass R. Sunstein and Richard Zeckhauser

- This essay focuses on fearsome risks -- those that stimulate strong emotional responses, such as fear and anxiety. Such risks, which usually involve high consequences, tend to have extremely low probabilities. This papers shows that in the face of a fearsome risk, people often exaggerate the benefits of preventive, risk-reducing, or ameliorative measures. In both personal life and politics, the result is damaging overreactions to risks.

Sunstein, C.R. and R. Zeckhauser (2009). "Overreaction to Fearsome Risks." Harvard Kennedy School Faculty Research Working Papers Series Working Paper Number: RWP08-079, Jan 2009.

Valuing Plug-In Hybrid Electric Vehicles' Battery Capacity using a Real Options Framework

by Derek Lemoine

- Plug-in hybrid electric vehicles (PHEVs) allow their drivers to choose whether to use electricity or gasoline, but this fuel flexibility benefit requires the purchase of additional battery capacity relative to most other vehicles. The authors value this fuel exibility by representing the purchase of the battery as the purchase of a strip of call options on the price of transportation. They find that using a real options approach instead of a discounted cash flow analysis can substantially raise the retail battery price at which the battery pays for itself.

Lemoine, D. (2009). "Valuing Plug-In Hybrid Electric Vehicles' Battery Capacity using a Real Options Framework." USAEE Working Paper No. 08-015, Jan 2009. Available at SSRN.

Application of the Emissions Trading Directive by EU Member States

by the European Environmental Agency

- The European Union is running the largest multi-country, multi-sector greenhouse gas emission trading scheme (ETS) world-wide. The first trading period (2005-2007) terminated last year. This report presents the experiences from Member States on the implementation of the trading system. The report for reporting year 2008 covers both specific information on the trading year 2007 as well as some findings from the whole first trading period. The report also contains a short discussion around the risk of carbon leakage.

EEA (2008). "Application of the Emissions Trading Directive by EU Member States." Technical report No 13/2008, Dec 2008.

January 4, 2009

Assessing the Consequences of Natural Disasters on Production Networks: a Disaggregated Approach

by Stéphane Hallegatte and Fanny Henriet

- This article proposes a framework to investigate the consequences of natural disasters. This framework is based on the disaggregation of Input-Output tables at the business level, through the representation of the regional economy as a network of production units. This framework suggests that disaster costs depend on the heterogeneity of losses and on the structure of the affected economic network. The model reproduces economic collapse, suggesting that it may help understand the difference between limited-consequence disasters and disasters leading to systemic failure.

Hallegatte, S. and F. Henriet (2008). "Assessing the Consequences of Natural Disasters on Production Networks: a Disaggregated Approach." FEEM Nota di Lavoro 100.08, Dec 2008.

Enforcement and Environmental Quality in a Decentralized Emission Trading System

by Alessio D'Amato and Edilio Valentini

- This paper addresses the issue of whether the powers of monitoring compliance and allocating tradeable emissions allowances within a federation of countries should be appointed to a unique federal regulator or decentralized to several local regulators. To this end, the authors develop a two stage game played by environmental regulator(s) and the polluting industries of two countries.

D'Amato, A. and E. Valentini (2008). "Enforcement and Environmental Quality in a Decentralized Emission Trading System." FEEM Nota di Lavoro 97.08, Dec 2008.

Technology Diffusion, Abatement Cost, and Transboundary Pollution

by Nori Tarui and Geoffrey Heal

- This paper studies countries' incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. At the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case.

Taraui, N. and G. Heal (2008). "Technology Diffusion, Abatement Cost, and Transboundary Pollution." FEEM Nota di Lavoro 96.08, Dec 2008.

A U.S. Innovation Strategy for Climate Change Mitigation

by Richard G. Newell

- The strategy proposed in this paper has two main parts to directly confront two market problems that affect technology innovation relevant to mitigating greenhouse gases: lack of private incentive to reduce GHGs by adopting low-GHG technologies, and underinvestment by industry in research and development (R&D). It is proposed to increase both the demand for and the supply of GHG-reducing innovations by (1) inducing innovation in industry through a stable, long-term price on GHGs, reinforced by permanent R&D tax credits, and (2) complementing this innovation through increased public support for targeted climate mitigation research.

Newell, R.G. (2008). "A U.S. Innovation Strategy for Climate Change Mitigation." The Hamilton Project at Brookings, Discussion Paper 2008-15, Dec 2008.

Towards a Global Compact for Managing Climate Change

by Ramgopal Agarwala

- This paper presents an approach where the perspectives of the developing and developed countries on a new climate compact are sought to be reconciled. A credible global compact for climate change must satisfy five criteria: it must be comprehensive, equitable, realistic, efficient and effective. Based on these criteria, it seems that the target of at least 50% reduction in CO2 emissions by 2050 is unrealistic. A more realistic target is stabilization of CO2 emissions at present levels until 2050 and a 50% reduction by 2100.

Agarwala, R. (2008). "Towards a Global Compact for Managing Climate Change." Discussion Paper 08-22, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008.

A Sectoral Approach as an Option for a Post-Kyoto Framework

by Akihiro Sawa

- This paper seeks to explore the potential of sectoral approaches as a post-Kyoto framework. This paper will propose the Policy-Based Sectoral Approach, under which sectoral approaches would be employed to establish national emission targets and governments would internationally pledge the implementation of policies and measures to achieve the targets. The paper also discusses how to proceed with negotiations and what incentives would encourage developing countries to participate and how to ensure cost effectiveness.

Sawa, A. (2008). "A Sectoral Approach as an Option for a Post-Kyoto Framework." Discussion Paper 08-23, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008.

Climate Accession Deals: New Strategies for Taming Growth of Greenhouse Gases in Developing Countries

by David G. Victor

- This essay offers a new strategy for engaging the developing countries in global climate change control. The author first shows that the conventional strategies for engaging developing countries are unlikely to have much impact. Second, he shows that there are many large policy shifts that are in these countries’ interests and which also, fortuitously, reduce warming gases. Third, he offers a design for the institutions that could facilitate this deal-oriented approach to engaging the reluctant nations. The model presented in this paper is based heavily on accession to the World Trade Organization (WTO).

Victor, D.G. (2008). "Climate Accession Deals: New Strategies for Taming Growth of Greenhouse Gases in Developing Countries." Discussion Paper 08-18, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008.

What Do We Expect from an International Climate Agreement? A Perspective from a Low-income Country

by E. Somanathan

- This paper suggests that an international agreement involving developing countries should, at least in the coming round of negotiations, confine itself to promoting technical cooperation between regulators and other entities from all countries. It should include financial support from the developed countries for spreading energy conservation technologies and practices. Tropical agriculture will need a major thrust to develop new varieties that will withstand climate change.

Somanathan, E. (2008). "What Do We Expect from an International Climate Agreement? A Perspective from a Low-income Country." Discussion Paper 08-27, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008.

Reconciling Human Development and Climate Protection: Perspectives from Developing Countries on Post-2012 International Climate Change Policy

by Jing Cao

- This paper first discusss a multi-stage framework to gradually engage developing countries, which can be adapted to incorporate Kyoto Protocol flexibility instruments such as cap-and-trade. Then a clear and potentially acceptable burden-sharing principle that takes into accoung historical carbon emissions back to the 19th century.

Cao, J. (2008). "Reconciling Human Development and Climate Protection: Perspectives from Developing Countries on Post-2012 International Climate Change Policy." Discussion Paper 08-25, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008. Summary for policy makers.

Technology and International Climate Policy

by Leon Clarke, Kate Calvin, James A. Edmonds, Page Kyle and Marshall Wise

- This paper explores the interactions of international policy architecture and technology availability on the limitation of atmospheric CO2 concentrations to 500 ppm in the year 2095. The authors find that technology is even more important to reducing the costs of emissions mitigation when international policy structures deviate from immediate and full participation.

Clarke, Leon, Kate Calvin, James A. Edmonds, Page Kyle, and Marshall Wise. "Technology and International Climate Policy." Discussion Paper 08-21, Cambridge, Mass.: Harvard Project on International Climate Agreements, Dec 2008.

Bankable Pollution Permits under Uncertainty and Optimal Risk Management Rules: Theory and Empirical Evidence

by Julien Chevallier, Johanna Etner and Pierre-André Jouvet

- The well known economic advantage of tradable permits over command and control obviously vanishes if firms do not trade because of regulatory uncertainty. Based on a two-period partial equilibrium framework, results in this paper suggest that the banking provisions may be used as a tool of policy risk control and that it is possible to define optimal risk sharing rules in order to respond to political decision changes. Finally, an empirical discussion attempts to put the theoretical results concerning firms’ banking and pooling behaviors in the context of the recent development of the European Union Emisions Trading scheme (EU ETS).

Chevallier, J., J. Etner and P-A Jouvet (2008). "Bankable Pollution Permits under Uncertainty and Optimal Risk Management Rules: Theory and Empirical Evidence." EconomiX, Document de travail 2008-25, Nov 2008.

Climate Change: What Role for Insurance?

by IIASA

- Experts expect climate change to affect not just average temperature, but also weather variability and extreme weather events. The effects, including economic and human losses, impose a disproportionate burden on vulnerable developing countries. How can insurance, including public-private arrangements with international support, play a role in helping vulnerable countries adapt? This Policy Brief offers practical guidance to olicymakers shaping the post-Kyoto adaptation strategy.

IIASA (2008). "Climate Change: What Role for Insurance?" IIASA Risk and Vulnerability Program Policy Brief #4, Dec 2008.

Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program

by Joel Bluestein

- This paper provides an overview of the different point-of-regulation options for covering greenhouse gas emissions from natural gas under a cap-and-trade program. The paper assesses the percentage of emissions covered under the different options and the type and number of entities and facilities regulated.

Bluestein, J. (2008). "Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program." Solutions White Paper Series, The Pew Center on Global Climate Change, Dec 2008.

The Strategic Value of Unilateral Abatement in Games of Climate Change Policy

by Derek Lemoine and Alexander E. Farrell

- Unilateral abatement of greenhouse gas emissions is not often explicitly considered in game-theoretic models of climate policy adoption and in reality is often justified on grounds of non-climatic benefits. This paper develops one non-cooperative static game and two non-cooperative dynamic games that show how allowing players to respond to commitments to unilaterally abate emissions expands the range of parameter values that support joint abatement.

Lemoine, D. and A.E. Farrell (2008). "The Strategic Value of Unilateral Abatement in Games of Climate Change Policy." USAEE Working Paper No. 08-016, Dec 2008.

Integrating Bioenergy into Computable General Equilibrium Models: A Survey

by Bettina Kretschmer and Sonja Peterson

- This paper intends to give an overview of existing approaches to integrate bioenergy into computable general equilibrium models and to critically assess their respective power. Grouping different approaches into categories and highlighting their advantages and disadvantages is important for giving a structure to this rather recent and rapidly growing research area and to provide a guidepost for future work.


Kretschmer, B. and S. Peterson (2008). "Integrating Bioenergy into Computable General Equilibrium Models: A Survey." Kiel Institute for the World Economy, Working Paper No. 1473, Dec 2008.

How to Negotiate and Update Climate Agreements

by Bard Harstad

- Any climate change agreement ought to be negotiated and updated later on, as we learn more about the costs and benefits of abatements. Anticipating such negotiations, countries may distort domestic decisions (regarding R&D and adaptation, for example) trying to increase their future bargaining power. This can make a situation with an agreement worse than no agreement at all, unless one specifies rules governing the negotiation process. This paper argues that harmonization and the use of formulas, the time span for the agreement, the default outcome if the negotiations should fail, the voting rule and a minimum participation requirement can all be efficiency enhancing rules. Each rule would be more credible and efficient if the climate agreement is linked to a trade agreement.

Harstad, B. (2008). "How to Negotiate and Update Climate Agreements." Discussion Paper 08-19, Cambridge, Mass.: Harvard Project on International Climate Agreements, Nov 2008. Also available as short summary for policy makers.