May 26, 2009

Some Basic Economics of Extreme Climate Change

by Martin L. Weitzman

- Climate change is characterized by deep structural uncertainty in the science coupled with an economic inability to evaluate meaningfully the welfare losses from high temperature changes. The probability of a disastrous collapse of planetary welfare from too much CO2 is non-negligible, even if this low probability is not objectively knowable. This paper attempts to explain (in not excessively technical language) some of the most basic issues in modeling the economics of catastrophic climate change. The paper builds to a tentative conclusion that, no matter what else is done realistically to slow CO2 buildups, economic analysis lends some support to undertaking serious research now into the prospects of fast geoengineering preparedness as a state-contingent emergency option offering at least the possibility of knocking down catastrophic temperatures rapidly.

Weitzman, M.L. (2009). "Some Basic Economics of Extreme Climate Change." Harvard University, Mimeo, February 2009.

Reactions to the Nordhaus Critique

by Martin L. Weitzman

- In this paper I comment on the reactions of William Nordhaus to a recent article of mine entitled "On Modeling and Interpreting the Economics of Catastrophic Climate Change" that appeared in the February 2009 issue of the Review of Economics and Statistics. My target audience here is PhD-level general economists, but this paper could also be viewed as a somewhat less technical supplement to my article, which some interested non-economist readers might conceivably find useful on its own account.

Weitzman, M.L. (2009). "Reactions to the Nordhaus Critique." Harvard University, Mimeo, March 2009.

Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting

by Martin L. Weitzman

- This paper in applied theory argues that there is a loose chain of reasoning connecting the following three basic links in the economics of climate change: 1) additive damages may be more appropriate for analyzing the impacts of global warming than multiplicative damages; 2) an uncertain feedback-forcing coefficient, which might be near one with infinitesimal probability, can cause the distribution of the future time trajectory of global temperatures to have fat tails and a high variance; 3) when high-variance additive damages are discounted at an uncertain rate of pure time preference, which might be near zero with infinitesimal probability, it can make expected present discounted disutility very large. Some possible implications for welfare analysis and climate-change policy are briefly noted.

Weitzman, M.L. (2009). "Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting." Harvard University, Mimeo, April 2009.

Voluntary Carbon Markets: What the Standards Say

by Pierre Guigon, Valentin Bellassen and Philippe Ambrosi

- Although still accounting for a small segment of the global carbon market, the voluntary carbon market is a place for innovation where original solutions are proposed to deal with some challenges faced by the regulatory market, including efforts to value the occasional ancillary benefits of climate action, to simplify methodologies, or to guarantee the permanence of forestry assets. These innovations are reflected in the different standards used for voluntary offset projects and may provide some valuable lessons for on-going post-2012 negotiations. This study analyses two aspects of these standards: the type of projects they attract, and the transaction costs entailed by their procedures.

Guigon, P., V. Bellassen and P. Ambrosi (2009). "Voluntary Carbon Markets: What the Standards Say." April 2009.

Volatility Transmission in the CO2 and Energy Markets

by Maria Mansanet-Bataller and Pilar Soriano

- The aim of this paper is to study the volatility transmission between CO2 and energy markets. Specifically, our particular interest is to examine whether or not conditional volatility is transmitted across those markets since the start the EU ETS. We consider not only non-linearity in the variance of each series but we also allow for the possibility that changes in volatility in one of the markets may spill over to the others. The results show that CO2 is directly affected by its own volatility, and directly and indirectly (through the covariance) affected by the oil and natural gas volatility. Additionally, shocks originated in the CO2 and oil markets have an impact on CO2 volatility. Finally, the behaviour of oil volatility is similar to CO2 volatility in what concerns volatility transmission but this is not the case for natural gas volatility.

Mansanet-Bataller, M. and P. Soriano (2009). "Volatility Transmission in the CO2 and Energy Markets." March 2009.

Technologies for Hybrid and Electric Vehicles

by Brieuc Bougnoux and André Douaud

- This working paper contains a detailed analysis of technological and economic issues concerning hybrid and electric vehicles. It has been produced as part of the work for the Efonet (Energy Foresight Network), a program initiated by the European Commission which aims to exchange experiences and issuing policy recommendations for road transport up to 2050.

Bougnoux, B. and A. Douaud (2009). "Technologies for Hybrid and Electric Vehicles." Energy Foresight Network, November 2008.

Technologies for Hydrogen and Fuel Cell Vehicles

by Brieuc Bougnoux and André Douaud

- This working paper contains a detailed analysis of technological and economic issues concerning hydrogen and fuel cell vehicles. It has been produced as part of the work for the Efonet (Energy Foresight Network), a program initiated by the European Commission which aims to exchange experiences and issuing policy recommendations for road transport up to 2050.

Bougnoux, B. and A. Douaud (2009). "Technologies for Hydrogen and Fuel Cell Vehicles." Energy Foresight Network, April 2009.

Tackling Leakage in a World of Unequal Carbon Prices

by Susanne Dröge

- This paper summarizes a number of investigations conducted on the potential for leakage from specific energy-intensive sectors and on the remedies against carbon leakage. While the EU ETS Directive foresees free allocation of emission rights for "sectors at risk", the project has paid special attention to adjusting carbon costs at the border. This touches upon a number of issues around trade and climate policies in the legal, practical and political dimension. The project is not limited to the EU, but includes the approaches for future carbon pricing in the US and Japan.

Dröge, S. (2009). "Tackling Leakage in a World of Unequal Carbon Prices." Climate Strategies, May 2009.

Allocation Scenarios for the Electricity Sector under a CO2 Cap-and-Trade Policy

by Anthony Paul, Dallas Burtraw and Karen Palmer

- This technical paper presents the results of simulations of a national electricity market model representing three different approaches to the allocation of carbon dioxide (CO2) emissions allowances in the electricity sector under a cap-and-trade policy. The method by which allowances are distributed to states for ultimate distribution to local electricity distribution companies can have a substantial impact on the distribution of burden borne by electricity consumers in different parts of the country. Regional outcomes are presented in a series of color-coded maps. The method proposed in the Waxman-Markey bill leads to the greatest increases in electricity price in regions that are among the lowest emitting and already have the highest electricity prices in the nation.

Paul, A., D. Burtraw and K. Palmer (2009). "Allocation Scenarios for the Electricity Sector under a CO2 Cap-and-Trade Policy." Resources for the Future, May 2009.

Energy Efficiency: Efficiency or Monopsony?

by Timothy J. Brennan

- The cliché in the electricity sector, the "cheapest power plant is the one we don’t build," seems to neglect the benefits of the energy that plant would generate. Those overall benefits could be countered by benefits to consumers if "not building that plant" was the result of monopsony. A regulator acting as a monopsonist may need to avoid rationing demand at monopsony prices. Subsidizing energy efficiency to reduce electricity demand at the margin can solve that problem, if energy efficiency and electricity use are substitutes.

Brennan, T.J. (2009). "Energy Efficiency: Efficiency or Monopsony?" RFF Discussion Paper 09-20, May 2009.

Teaching Opportunity Cost in an Emissions Permit Experiment

by Charles Holt, Erica Myers, Markus Wråke, Svante Mandell and Dallas Burtraw

- This paper describes an individual choice experiment that can be used to teach students how to correctly account for opportunity costs in production decisions. Students play the role of producers who require a fuel input and an emissions permit for production. Given fixed market prices, they make production quantity decisions on the basis of their costs. Permits have a constant price throughout the experiment. This experiment motivates classroom discussion of opportunity costs and emissions permit allocation under cap-and-trade schemes.

Holt, C., E. Myers, M. Wråke, S. Mandell and D. Burtraw (2009). "Teaching Opportunity Cost in an Emissions Permit Experiment." RFF Discussion Paper 09-22, May 2009.

Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions

by Carolyn Fischer and Alan Fox

- Emissions regulations like carbon pricing raise the price of covered sector goods and thus can interact with and exacerbate other preexisting distortions in the economy. Another is emissions "leakage" due to the lack of comparable emissions pricing abroad or among other emitting sectors at home. A potential response is to combine the emissions tax with a rebate to production to mitigate the price increases. We use an optimal tax framework to solve for the optimal emissions tax and output rebate, given these distortions. We then employ a multisector computable general equilibrium model based on the GTAP framework to simulate the effects of a $50 per-ton carbon tax on the major emissions-intensive sectors in the U.S. economy and estimate optimal rebates by sector.

Fisher, C. and A. Fox (2009). "Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions." RFF Discussion Paper 09-12, May 2009.

Linking Emissions Trading Schemes

by Andreas Tuerk, Wolfgang Sterk, Erik Haites, Michael Mehling, Christian Flachsland, Regina Betz and Frank Jotzo

- The aim of this study is to: (1) evaluate the feasibility of different forms of linking, with an emphasis on variations among bilateral and unilateral forms of linking; (2) assess the barriers and the time frames for implementing different forms of linkages; (3) determine the legal and institutional requirements for successful trading across jurisdictions; and (4) ascertain the roles for linking in post-2012 climate architectures.

Tuerk, A., W. Sterk, E. Haites, M. Mehling, C. Flachsland, R. Betz and F. Jotzo (2009). "Linking Emissions Trading Schemes." Climate Strategies, May 2009.

Is the New 'Climate Doctrine' Marking a Turning Point in Russian Policy?

by Anna Korppoo

- The ‘climate doctrine’ recently discussed and approved by the Russian Cabinet could mark a shift in the thinking of the Russian high-level policy-makers similar to that of the Stern review in the UK. The costs of climate change were first time reported in the headlines, and it was argued that mitigation policies would be good for the Russian economy. But to re-enforce these positive Russian developments they should be recognized internationally. This paper provides an update on Russian climate policy following the Climate Strategies ‘East-West Investment’ project, which was completed last year.

Korppoo, A. (2009). "Is the New 'Climate Doctrine' Marking a Turning Point in Russian Policy?" Climate Strategies, May 2009.

Climate Change Governance

by James Meadowcroft

- This paper examines long-term climate governance, particularly in relation to overcoming "institutional inertia" that hampers the development of an effective and timely response. It argues that when the influence of groups that fear adverse consequences of mitigation policies is combined with scientific uncertainty, the complexity of reaching global agreements, and long time frames, the natural tendency is for governments to delay action, to seek to avoid antagonizing influential groups, and to adopt less ambitious climate programs.

Meadowcroft, J. (2009). "Climate Change Governance." World Bank Policy Research Working Paper no. WPS 4941, May 2009.

Cognitive and Behavioral Challenges in Responding to Climate Change

by Karie Marie Norgaard

- This paper summarizes international and national differences in levels of knowledge and concern regarding climate change, and the existing explanations for the worldwide failure of public response to climate change, drawing from psychology, social psychology and sociology. On the whole, the widely presumed links between public access to information on climate change and levels of concern and action are not supported. The paper's key findings emphasize the presence of negative emotions in conjunction with global warming (fear, guilt, and helplessness), and the process of emotion management and cultural norms in the construction of a social reality in which climate change is held at arms length.

Norgaard, K.M. (2009). "Cognitive and Behavioral Challenges in Responding to Climate Change." World Bank Policy Research Working Paper no. WPS 4940, May 2009.

Social and Governance Dimensions of Climate Change: Implications for Policy

By Roberto Foa

- This paper addresses two vital concerns in the debate on adaptation to climate change. First, how can countries prepare to manage the impact of climate-change induced natural disasters? Second, how can countries ensure that they have the governmental institutions required to manage the phenomenal challenge of adaptation to climate change? A range of economic and institutional measures are tested for their potential effects on natural disaster resilience and the quality of environmental governance.

Foa, R. (2009). "Social and Governance Dimensions of Climate Change: Implications for Policy." World Bank Policy Research Working Paper no. WPS 4939, May 2009.

Beyond Mitigation: Potential Options for Counter-Balancing the Climatic and Environmental Consequences of the Rising Concentrations of GHG

by Mike MacCracken

- Substantial new research is needed before comparison of the relative benefits and risks of intervening is possible. A first step in determining whether geoengineering is likely to be a useful option is the initiation of research on four interventions to limit the increasing serious impacts: limiting ocean acidification by increasing the removal of carbon dioxide from the atmosphere and upper ocean; limiting the increasing intensity of tropical cyclones; limiting the warming of the Arctic and associated sea level rise; and sustaining or enhancing the existing sulfate cooling influence.

MacCracken, M. (2009). "Beyond Mitigation: Potential Options for Counter-Balancing the Climatic and Environmental Consequences of the Rising Concentrations of Greenhouse Gases." World Bank Policy Research Working Paper no. WPS 4938, May 2009.

Tax Policy to Reduce Carbon Emissions in South Africa

by Shantayanan Devarajan, Delfin S. Go, Sherman Robinson and Karen Thierfelder

- Noting that South Africa may be one of the few African countries that could contribute to mitigating climate change, the authors explore the impact of a carbon tax relative to alternative energy taxes on economic welfare. Using a disaggregate general-equilibrium model of the South African economy, they capture the structural characteristics of the energy sector, linking a supply mix that is heavily skewed toward coal to energy use by different sectors and hence their carbon content. The authors consider a "pure" carbon tax as well as various proxy taxes such as those on energy or energy-intensive sectors.

Devarajan, S., D.S. Go, S. Robinson and K. Thierfelder (2009). "Tax Policy to Reduce Carbon Emissions in South Africa." World Bank Policy Research Working Paper, no. WPS 4933, May 2009.

Assessment of Technologies for Compliance with the Low Carbon Fuel Standard

by Sonia Yeh, Nicholas P. Lutsey and Nathan C. Parker

- California’s low carbon fuel standard (LCFS) was designed to incentivize a diverse array of available strategies for reducing transportation greenhouse gas (GHG) emissions. It provides strong incentives for fuels with lower GHG emissions, while explicitly requiring a 10% reduction in California’s transportation fuel GHG intensity by 2020. This paper investigates the potential for cost-effective GHG reductions from electrification and expanded use of biofuels. This research approach could be generalizable to a national U.S. standard and to similar programs in Europe and Canada.

Yeh, S., N.P. Lutsey and N.C. Parker (2009). "Assessment of Technologies for Compliance with the Low Carbon Fuel Standard." Available at SSRN, May 2009.

China’s Energy Situation and Its Implications in the New Millennium

by Hengyun Ma, Les Oxley and John Gibson

- Many are interested in China’s energy situation, however, numerous energy related issues in China still remain unanswered. For example, what are the potential forces driving energy demand and supply? Previous reviews focused only on fossil fuel based energy and ignored other important elements including renewable and ‘clean’ energy sources. The work presented here is intended to fill this gap by bringing the research on fossil-based and renewable energy economic studies together and identifying the potential drivers behind both energy demand and supply to provide a complete picture of China’s energy situation in the new millennium.

Ma, H., L. Oxley and J. Gibson (2009). "China’s Energy Situation and Its Implications in the New Millennium." Motu Working Paper 09-04, May 2009.

EU Climate Change Policy 2013-2020: Using the Clean Development Mechanism More Effectively

by Paul K. Gorecki, Seán Lyons and Richard S. J. Tol


- Under European Union proposals for CO2 emission reduction between 2013 and 2020, a Member State can transfer to another Member State the right to use its unused Clean Development Mechanism ("CDMs") credits. The paper addresses three issues in relation to these CDM Warrants ("CDMW"). First, how should the Member State treat the CDMW in making decisions concerning emission reduction? Second, what mechanism should be used to facilitate the exchange of CDMWs? Third, who should realise the value of CDMWs - the State, existing polluters etc?

Gorecki, P.K., S. Lyons and R.S.J. Tol (2009). "EU Climate Change Policy 2013-2020: Using the Clean Development Mechanism More Effectively." ESRI Working Paper 299, May 2009.

May 17, 2009

Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production

by Michael I. Cragg and Matthew E. Kahn

- Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas.

Cragg, M.I. and Matthew E. Kahn (2009). "Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production." NBER Working Paper No. 14963, May 2009.

Simple Model Frameworks for Explaining Inefficiency of the Clean Development Mechanism

by Knut Einar Rosendahl and Jon Strand

- This paper discusses various ways in which CDM projects do not imply full offset of emissions, thus leading to an overall increase in global GHG emissions when considering the Annex-B emissions increase allowed by the offsets. The authors focus on two ways in which this may occur: baseline manipulation and leakage.

Rosendahl, K.E. and J. Strand (2009). "Simple Model Frameworks for Explaining Inefficiency of the Clean Development Mechanism." World Bank Policy Research Working Paper, WPS 4931, May 2009.

How Clean is Clean? Incremental Versus Radical Technological Change in Coal-Fired Power Plants

by Klaus Rennings, Peter Markewitz and Stefan Vögele

- In the discussion on innovations for sustainable development, radical innovations are often seen as necessary to establish eco-efficient technological systems. This hypothesis is, however, not supported by empirical evidence. Against the background of a globally increasing use of coal-burning power plants and the environmental impacts to be expected, the hypothesis that radical innovations are superior to incremental innovations is reflected in this paper. We examine the diffusion of radical innovations in the field of power plants and the basic obstacles these innovations were confronted with.

Rennings, K., P. Markewitz and S. Vögele (2009). "How Clean is Clean? Incremental Versus Radical Technological Change in Coal-Fired Power Plants." ZEW Discussion Paper No. 09-021, Mannheim, May 2009.

Looking Back on Looking Forward: a Review of Evaluative Scenario Literature

by the European Environmental Agency

- Faced with risk and uncertainty, environmental policy-makers are increasingly using scenario planning to guide decision-making. Yet even well-crafted scenarios can fail to have their intended policy impact if they present irrelevant information, lack support from relevant actors, are poorly embedded into relevant organisations or ignore key institutional context conditions. Unfortunately, the shortage of research on scenario planning and its influence means that there is limited guidance on how to optimise scenarios, in terms of both outputs and uptake by policy-makers. This technical report addresses this lack of information, presenting a review of relevant academic and non-academic literature on the issue.

EEA (2009). "Looking Back on Looking Forward: a Review of Evaluative Scenario Literature." Technical report No 3/2009, April 2009.

Driving Factors of Carbon Dioxide Emissions and the Impact from Kyoto Protocol

by Nicole Grunewald and Inmaculada Martínez-Zarzoso

- Recent evidence rejects the Environmental Kuznets Curve (EKC) hypothesis for GHG emissions in a broad sense. In this paper we aim to investigate whether the EKC behavior for CO2 emissions could be proved on the behalf of institutional regulations. We analyze the driving factors of Carbon Dioxide Emissions (CO2) for developed and developing countries to test the theory of the EKC in the context of environmental regulations using a static and dynamic panel data model.

Grunewald, N. and I. Martinez-Zarzoso (2009). Driving Factors of Carbon Dioxide Emissions and the Impact from Kyoto Protocol."" Georg-August-Universität Göttingen Discussion Papers Nr. 190, May 2009.

Assessing the Impacts of Climate Change: A Literature Review

by Stéphanie Jamet and Jan Corfee-Morlot

- The purpose of this review is twofold. First, it is to summarise current estimates of the impacts of climate change and to explain how these estimates are built in order to identify the main sources of uncertainty and approximation affecting them. Second, the paper discusses how this uncertainty should influence policymaker's decisions. A main conclusion of the review is that there are large uncertainties, which are not fully reflected in existing estimates of global impacts of climate change in monetary units. Nonetheless, despite these uncertainties, policy action may be justified.

Jamet, S. and J. Corfee-Morlot (2009). "Assessing the Impacts of Climate Change: A Literature Review." OECD Economics Department Working Papers, No. 691, OECD. April 2009.

Clean Technology Adoption and its Influence on Tradeable Emission Permit Prices

by María Eugenia Sanin and Skerdilajda Zanaj

- In this paper we give an example in which the price of tradeable emission permits increases despite firms' adoption of a less polluting technology. This is in contrast with Montero (2002) and Parry (1998), among others. If two Cournot players switch to a cleaner technology, the price for permits may increase due to an increase in the net demand for permits and a decrease in net supply of permits after the clean technology is adopted. This is only the case when output demand is elastic.

Sanin, M.E. and S. Zanaj (2009). "Clean Technology Adoption and its Influence on Tradeable Emission Permit Prices." Core Discussion Paper 2009/29, April 2009.

A General Equilibrium View of Global Rebound Effects

by Taoyuan Wei

- How do energy efficiency gains affect energy consumption? The effects are generally called "rebound effects" in the literature. The present article expands Wei (2007)'s general analysis to explore the rebound effects at global level, using general forms of production functions. The analysis provides new insights related to rebound effects. For example, we highlight the role of energy supply as a determinant of rebound and we predict that long term rebound may be lower than short term rebound.

Wei, T. (2009). "A General Equilibrium View of Global Rebound Effects." Center for International Climate and Environmental Research (CICERO), Available at SSRN, April 2009.

Long-Run GDP Growth Framework and Scenarios for the World Economy

by Romain Duval and Christine de la Maisonneuve

- This paper develops and applies a simple "conditional growth" framework to make long-term GDP projections for the world economy, taking as a starting point recent empirical evidence about the importance of total factor productivity and human capital in explaining current cross-country disparities in GDP per capita levels. In the baseline projection, world GDP would grow in PPP terms by about 3 ¾ % per year on average over the period 2005-2050. When expressed in constant market exchange rates this projection falls roughly in the middle of the range of long-run scenarios recently developed in the context of greenhouse gas emission projections.

Duval, Romain and Christine de la Maisonneuve (2009). "Long-Run GDP Growth Framework and Scenarios for the World Economy." OECD Economics Department Working Papers, No. 663, February 2009.

May 13, 2009

Expected Net Present Value, Expected Net Future Value, and the Ramsey Rule

by Christian Gollier

- Weitzman (1998) showed that when future interest rates are uncertain, using the expected net present value implies a term structure of discount rates that is decreasing to the smallest possible interest rate. On the contrary, using the expected net future value criterion implies an increasing term structure of discount rates up to the largest possible interest rate. We reconcile the two approaches by introducing risk aversion and risk-neutral probabilities. We show that if the aggregate consumption path is optimized, the two criteria are equivalent. Moreover, they are also equivalent to the Ramsey rule extended to uncertainty.

Gollier, C. (2009). "Expected Net Present Value, Expected Net Future Value, and the Ramsey Rule." CESifo Working Paper No. 2643, May 2009.

Designing Climate Mitigation Policy

by Joseph E. Aldy, Alan J. Krupnick, Richard G. Newell, Ian W.H. Parry and William A. Pizer

- This paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs, damage valuation, policy instrument choice, technological innovation, and international climate policy.

Aldy, J.E., A.J. Krupnick, R.G. Newell, I.W.H. Parry and W.A. Pizer (2009). "Designing Climate Mitigation Policy." RFF Discussion Paper 08-16, May 2009.

Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment

by Magnus Hennlock

- Imperfect measurement of uncertainty in climate sensitivity is introduced in a two-sectoral integrated assessment model with endogenous growth, based on an extension of DICE. The household expresses ambiguity aversion and can use robust control via a 'shadow ambiguity premium' on social carbon cost to identify robust climate policy feedback rules that work well over a range such as the IPCC climate sensitivity range (IPCC, 2007a).

Henlock, M. (2009). "Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment." RFF Discussion Paper 09-19, May 2009.

The Competitiveness Impacts of Climate Change Mitigation Policies

by Joseph E. Aldy and William A. Pizer

- A close look at the historical relationship between energy prices and U.S. production and consumption of energy-intensive goods suggests that energy-intensive manufacturers are likely to face only modest "competitiveness" impacts under a U.S. greenhouse gas cap-and-trade program, according to this report.

Aldy, J.E. and W.A. Pizer (2009). "The Competitiveness Impacts of Climate Change Mitigation Policies." The Pew Center on Global Climate Change, May 2009.

Attitudes to Personal Carbon Allowances: The Effect of Trust in Politicians, Perceived Fairness and Ideology

by Sverker C. Jagers, Åsa Löfgren and Johannes Stripple

- The idea of Personal Carbon Allowances (PCAs) was presented by the British Environment Secretary David Miliband in 2006. The purpose of this paper is to analyse some critical aspects of the public’s support for a PCA scheme. We focus on the relations between attitude towards a PCA scheme and trust in politicians, perceived fairness and ideology, respectively. We also analyse the relation between the respective attitudes towards an increase in the current tax rate and towards an implementation of a PCA scheme. We base our study on a mail questionnaire sent out to a random, representative sample in Sweden.

Jagers, S.C., Å. Löfgren and J. Stripple (2009). "Attitudes to Personal Carbon Allowances: The Effect of Trust in Politicians, Perceived Fairness and Ideology." University of Gothenburg School of Business, Economics and Law, Working Papers in Economics 360.

The Environmental Integrity of the CDM Mechanism: A legal Analysis of its Institutional and Procedural Shortcomings

by Joëlle de Sépibus

- This study highlights some of the CDM’s major institutional and procedural shortcomings. It examines, in particular, how the baseline and the additionality requirements have been interpreted and sheds some light on the verification process and the oversight by he Executive Body (EB). Finally, it shows that the CDM is inadequate to foster significant policy reforms which are a prerequisite for any meaningful change in the emission trends of developing countries

de Sépibus, J. (2009). "The Environmental Integrity of the CDM Mechanism: A legal Analysis of its Institutional and Procedural Shortcomings." Working Paper No 2009/24 NCCR Trade Working Paper, May 2009.

EPA's Preliminary Analysis of the Waxman-Markey Discussion Draft

by Environmental Protection Agency

- On February 27, 2009 the House Energy and Commerce Committee Chairman Waxman and Energy and Environment Subcommittee Chairman Markey requested that EPA estimate the economic impacts of the comprehensive climate legislation being developed by the committee. The committee released the Waxman-Markey Discussion Draft of the American Clean Energy and Security Act of 2009 on March 31, 2009. This document represents EPA’s preliminary analysis of the Waxman-Markey Discussion Draft.


EPA (2009). "EPA's Preliminary Analysis of the Waxman-Markey Discussion Draft." EPA’s Office of Atmospheric Programs, April 2009.

Executive Summary
Appendix

Prospects of linking EU and US Emission Trading Schemes

by Wolfgang Sterk, Michael Mehling and Andreas Tuerk

- This paper analyses the designs of the EU ETS, the US Waxman-Markey and Lieberman-Warner proposals for a federal US ETS, and the US Western Climate Initiative (WCI) to assess whether these (proposed) systems have design features that would lead to negative environmental or economic impacts in the case of linking.

Sterk, W., M. Mehling and A. Tuerk (2009). "Prospects of linking EU and US Emission Trading Schemes: Comparing the Western Climate Initiative, the Waxman-Markey and the Lieberman-Warner Proposals." Climate Strategies Working Paper, April 2009.

Innovation and Climate Change Policy

by Joshua S. Gans

- This paper examines then notion that more stringent climate change policy will induce innovation in environmentally friendly technologies. While past work has been concerned that such policies may stimulate such innovation at the expense of innovation elsewhere in the economy, the model presented here challenges the presumption that environmentally friendly innovation will itself be increased.

Gans, J.S. (2009). "Innovation and Climate Change Policy." Available at SSRN, April 2009.

May 4, 2009

The Cost of Climate Policy in the United States

by Sergey Paltsev, John M. Reilly, Henry D. Jacoby and Jennifer F. Morris

- We consider the cost of meeting emissions reduction targets consistent with a G8 proposal of a 50 percent global reduction in emissions by 2050, and an Obama Administration proposal of an 80 percent reduction over this period. We apply the MIT Emissions Prediction and Policy Analysis (EPPA), modeling these two policy scenarios if met by applying a national cap-and-trade system.

Paltsev, S., J.M. Reilly, H.D. Jacoby and J.F. Morris (2009). "The Cost of Climate Policy in the United States." Joint Program Report Series, Report 173, April 2009.

On the Self-interested Use of Equity in International Climate Negotiations

by Andreas Lange, Andreas Löschel, Carsten Vogt and Andreas Ziegler

- We discuss self-interested uses of equity arguments in international climate negotiations. Using unique data from a world-wide survey of agents involved in international climate policy, we show that the perceived support of different equity rules by countries or groups of countries may be explained by their economic costs. Despite being self-interested, equity arguments may be perceived as being used for different reasons, for example, out of fairness considerations or in order to facilitate negotiations.

Lange, A., A. Löschel, C. Vogt and A. Ziegler (2009). "On the Self-interested Use of Equity in International Climate Negotiations." NBER Working Paper No. 14930, April 2009.

Three Epochs of Oil

by Eyal Dvir and Kenneth S. Rogoff

- We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply.

Dvir, E. and K.S. Rogoff (2009). "Three Epochs of Oil." NBER Working Paper No. 14927, April 2009.

Environmental Policy Design and the Fragmentation of International Markets for Innovation

by Nick Johnstone and Ivan Hascic

- It has long been argued that the implementation of market-based environmental policy instruments such as environmentally-related taxes and tradable permits is likely to lead to greater technological innovation than more direct forms of regulation such as technology-based standards. While the theoretical case for the use of "flexible" policy instruments is well-developed, empirical evidence remains limited. Drawing upon a database of patent applications from a cross-section of countries evidence is provided for the positive effect of "flexibility" of the domestic environmental policy regime on the propensity for the inventions induced to be diffused widely in the world economy.

Johnstone, N. and I. Hascic (2009). "Environmental Policy Design and the Fragmentation of International Markets for Innovation." CESifo Working Paper No. 2630, April 2009.

Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model

by Marc Germain, Henry Tulkens and Alphonse Magnus

- This article deals with cooperation issues in international pollution problems in a two dimensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we define at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions.

Germain, M., H. Tulkens and A. Magnus (2009). "Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model." Core Discussion Paper 2009/21, April 2009.

Can Education be Good for Both Growth and the Environment?

by Thierry Brechet and Fabien Prieur

- We develop an overlapping generations model of growth and the environment with public policy on education. Beyond the traditional mechanisms through which knowledge, growth and the environment interplay, we stress out the role played by education on environmental awareness. Assuming first that environmental awareness is constant, we show the existence of a balanced growth path along which environmental quality increases continually.

Brechet, T. and F. Prieur (2009). "Can Education be Good for Both Growth and the Environment?" Core Discussion Paper 2009/19, March 2009.

Argentinean Soy Based Biodiesel: An Introduction to Production and Impacts

by Julia Tomei and Paul Upham

- This working paper explores the economic, social and environmental context, drivers and impacts of increased demand for Argentine soy-based biodiesel. It is based on extensive stakeholder interviews in Argentina, including those in government, academia and the third sector; participant observation with communities in soy cultivation areas; and review of relevant academic and grey literature.

Tomei, J. and P. Upham (2009). "Argentinean Soy Based Biodiesel: An Introduction to Production and Impacts." Tyndall Centre Working Paper 133, May 2009.