September 28, 2009

Level versus Equivalent Intensity Carbon Mitigation Commitments

by Huifang Tian and John Whalley

- China and India have argued that in the upcoming UNFCCC negotiations in Copenhagen, any emission reduction targets they take on should be based on their intensity of emissions (emissions/$GDP) on a target date not the level of emissions. They argue that this will allow room for their continued high growth. Much of the policy literature agrees with this position. However, no explicit models or experimental design are used to support this claim. Here we study this issue using a modeling framework in which countries face a business as usual (BAU) growth profile under no mitigation, and can mitigate (reduce consumption) and lower temperature change but with a utility loss.

Tian, H. and J. Whalley (2009). "Level versus Equivalent Intensity Carbon Mitigation Commitments." NBER Working Paper No. 15370, September 2009.

The Economic and Policy Consequences of Catastrophes

by Robert S. Pindyck and Neng Wang

- What is the likelihood that the U.S. will experience a devastating catastrophic event over the next few decades -- something that would substantially reduce the capital stock, GDP and wealth? What does the possibility of such an event imply for the behavior of economic variables such as investment, interest rates, and equity prices? And how much should society be willing to pay to reduce the probability or likely impact of such an event? We address these questions using a general equilibrium model that describes production, capital accumulation, and household preferences, and includes as an integral part the possible arrival of catastrophic shocks.

Pindyck, R.S. and N. Wang (2009). "The Economic and Policy Consequences of Catastrophes." NBER Working Paper No. 15373, September 2009.

Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage

by Ian Ayres, Sophie Raseman, Alice Shih

- By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity and natural gas. We find reductions in energy consumption of 1.2% to 2.1% percent, with the decrease sustained over time.

Ayres, I., S. Raseman and A. Shih (2009). "Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage." NBER Working Paper No. 15386, September 2009.

Shaping Climate-Resilient Development

by the Economics of Climate Adaptation Working Group

- The aim of this report is to provide decision-makers with a systematic way of answering these questions. Focusing specifically on the economic aspects of adaptation, it outlines a fact-based risk management approach that national and local leaders can use to understand the impact of climate on their economies and identify actions to minimize that impact at the lowest cost to society.

Economics of Climate Adaptation Working Group (2009). "Shaping Climate-Resilient Development." September 2009. [6.1 MB]

Analysis of the Proposals for GHG Reductions in 2020 made by UNFCCC Annex I Countries by Mid-August 2009

by Fabian Wagner and Markus Amann

- This report analyzes the implications of the August 2009 negotiation offers (pledges) of UNFCCC parties for the Copenhagen negotiations on a post-2012 climate agreement.

Wagner, F. and M. Amann (2009). "Greenhouse Gas: Air Pollition Interactions and Synergies Gains." International Institute for Applied Systems Analysis (IIASA), GAINS, September 2009.

Structuring International Financial Support to Support Domestic Climate Change Mitigation in Developing Countries

by Karsten Neuhoff, Sam Fankhauser, Emmanuel Guerin, Jean Charles Hourcade, Helen Jackson, Ranjita Rajan, and John Ward

- The shift to low-carbon development trajectories requires that private and public sector investment choices are shifted from energy inefficient and carbon intensive infrastructure and technologies towards low-carbon choices. This requires domestic governments to provide a robust policy framework to attract and shift the corresponding investment volumes. International financial support mechanisms can: support countries in the implementation of policy frameworks by contributing to incremental costs, enhance regulatory stability by creating incentives to maintain effective policy frameworks, facilitate access to finance to support private investors in the transition to low carbon investment.

Neuhoff, K., S. Fankhauser, E. Guerin, J-C Hourcade, H. Jackson, R. Rajan and J. Ward (2009). "Structuring International Financial Support to Support Domestic Climate Change Mitigation in Developing Countries." Climate Strategies, September 2009.

September 21, 2009

Regional Climate Change and Adaptation: The Alps Facing the Challenge of Changing Water Resources

by the European Environment Agency

- Troublingly, the alpine climate has changed significantly during the past century, with temperatures increasing more than twice the global average. Drawing on the most recent knowledge of climate change impacts in the Alps and experiences across the region, this report analyses the risks that climate change presents to the region's water supply and quality, identifying needs, constraints, opportunities, policy levers and options for adaptation.

EEA (2009). "Regional Climate Change and Adaptation: The Alps Facing the Challenge of Changing Water Resources." European Environment Agency, Technical report No 9/2009, September 2009. [4.1 MB]

Carbon Markets and Technological Innovation

by Thomas Weber and Karsten Neuhoff

- This paper examines the effects of firm-level innovation in carbon-abatement technologies on optimal cap-and-trade schemes with and without price controls. We characterize optimal cap-and-trade regulation with a price cap and price floor, and compare it to the individual cases of pure taxation and simple emissions cap.

Weber, T. and K. Neuhoff (2009). "Carbon Markets and Technological Innovation." Working Paper: EPRG0917, September 2009.

Slaves to Oil: Exploring Parallels Between the Abolition of Slavery and the Challenge of Climate Change Mitigation

by W.J. Nuttall

- This paper summarises and reviews scholarly and political comment that draws parallels between the current policy challenge of large-scale greenhouse gas emission reduction and the challenge in the late eighteenth and early nineteenth century of slavery abolition. The paper closes, however, with the observation that, just as today slavery is still not eradicated, the issue of problematic greenhouse gas emissions will still be with us long after the key policy breakthrough has been secured.

Nuttall, W.J. (2009). "Slaves to Oil: Exploring Parallels Between the Abolition of Slavery and the Challenge of Climate Change Mitigation." Working Paper EPRG 0921, September 2009.

How Many CERs by 2013?

by Raphaël Trotignon and Benoît Leguet

- This paper exploits the data related to CDM projects currently being implemented around the world and attempts to estimate the future amount of certified emissions reductions (CERs) generated by 2013, i.e. before the end of the third phase of the EU ETS, which is the main demand source for CERs until now.

Trotignon, R. and B. Leguet (2009). "How Many CERs by 2013?" Mission Climat Working Paper, N° 2009-5, September 2009.

Implications of Climate Policy in a Carbon-Intensive Region: Estimating Abatement costs under Deep Policy Uncertainty

by J.P. Muller and Gregory Nemet

- This report looks at the most important uncertain details of climate change mitigation policy, depicts the dispersion of implementation details in existing policy proposals, assesses which ones will have greater cost impacts, and then describes the scenarios that could have major direct economic impacts on Wisconsin utility consumers.

Muller, J.P. and G. Nemet (2009). "Implications of Climate Policy in a Carbon-Intensive Region: Estimating Abatement costs under Deep Policy Uncertainty." La Follette School Working Paper No. 2009-015, September 2009.

The Effect of Uncertainty on Decision Making about Climate Change Mitigation. A Numerical Approach of Stochastic Control

by Thomas S. Lontzek and Daiju Narita

- We apply standardized numerical techniques of stochastic optimization to the climate change issue. The model captures the feature that the effects of uncertainty are different with different levels of agent's risk aversion. A major finding is that the effects of stochasticity differ even in sign as to emission control with varying parameters: introduction of stochasticity may increase or decrease emission control depending on parameter settings, in other words, uncertainties of climatic trends may induce people's precautionary emission reduction but also may drive away money from abatement.

Lontzek, T.S. and D. Narita (2009). "The Effect of Uncertainty on Decision Making about Climate Change Mitigation. A Numerical Approach of Stochastic Control." Kiel Institute for the World Economy Working Paper 1539, August 2009.

Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis

by André Grimaud, Gilles Lafforgue and Bertrand Magnéc

- The paper considers a growth model with climate change and three R&D sectors dedicated to energy, backstop and CCS (Carbon Capture and Storage) efficiency. First, we characterize the set of decentralized equilibria: to each vector of public tools, a carbon tax and a subsidy to each R&D sector, a particular equilibrium is associated. Second, we solve the first-best optimum problem and we implement it by computing the vector of optimal tools. In addition, we focus on the dymanic properties of the optimal carbon tax. Finally, we illustrate the theoretical model using some calibrated functional specications.

Grimaud, A., G. Lafforgue and B. Magnéc (2009). "Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis." Toulouse University, LERNA Working Papers, September 2009.

The Spatial Incidence of a Carbon Tax in Ireland

by Eimear Leahya, Sean Lyonsa, Edgar L.W. Morgenrotha and Richard S.J. Tol

- We estimate carbon dioxide emissions for the 3401 electoral districts of the Republic of Ireland. Consumption emissions dominate total emissions in suburbs and the countryside. Production emissions dominate total emissions in the towns and cities as well as in those electoral districts that have a point source of carbon dioxide. This suggests that new regulation may run into local opposition.

Leahya, E., S. Lyonsa, E.L.W. Morgenrotha and R.S.J. Tol (2009). "The Spatial Incidence of a Carbon Tax in Ireland." Working Paper FNU-174, September 2009.

The Economic Impact of Substantial Sea-Level Rise

by David Anthoff, Robert J. Nicholls and Richard S.J. Tol

- Using the FUND model, an impact assessment is conducted over the 21st century for rises in sea level of up to 2-m/century and a range of socio-economic scenarios downscaled to the national level, including the four SRES storylines. This model balances the costs of retreat with the costs of protection, including the effects of coastal squeeze. While the costs of sea-level rise increase with greater rise due to greater damage and protection costs, the model suggests that an optimum response in a benefit-cost sense remains widespread protection of developed coastal areas, as identified in earlier analyses.

Anthoff, D., R.J. Nicholls and R.S.J. Tol (2009). "The Economic Impact of Substantial Sea-Level Rise." Working Paper FNU-175, September 2009.

An Expanded Three-Part Architecture for Post-2012 International Climate Policy

by Sheila M. Olmstead and Robert N. Stavins

- The major features of a post-2012 international global climate policy architecture are described with three essential elements: a means to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways; an emphasis on an extended time path of targets; and inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity.

Olmstead, S.M. and R.N. Stavins (2009). "An Expanded Three-Part Architecture for Post-2012 International Climate Policy." Discussion Paper 09-29, Harvard Project on International Climate Agreements, September 2009.

Risk Hedging Strategies under Energy System and Climate Policy Uncertainties

by Volker Krey and Keywan Riahi

- This paper introduces a newly developed modeling decision framework with endogenous representation of future uncertainties in the energy sector. We employ stochastic modeling techniques within a system engineering model of the global energy system and implement several alternative representations of risk. We aim to identify salient characteristics of least-cost risk hedging strategies that are adapted to considerably reduce future risks and are hence robust against a wide range of future uncertainties.

Krey, V. and K. Riahi (2009). "Risk Hedging Strategies under Energy System and Climate Policy Uncertainties." IIASA Interim Report IR-09-028, September 2009.

Assessment of Air Pollution and GHG Mitigation Strategies in Pakistan Using the GAINS Model

by Tahira Munir

- This report presents a first analysis of potential implications of the current economic development plans of Pakistan on local and regional air pollution, and explores alternative approaches that could limit the envisaged deterioration of air quality. It also explores the co-benefits of air pollution control measures on the emissions of greenhouse gases that cause climate change. The analysis has been carried out with the GAINS (Greenhouse gas - Air pollution Interaction and Synergies) model.

Munir, T. (2009). "Assessment of Air Pollution and GHG Mitigation Strategies in Pakistan Using the GAINS Model." IIASA Interim Report IR-09-027, September 2009.

A Note on Optimal Transfer Schemes, Stable Coalition for Environmental Protection and Joint Welfare Maximization Assumption

by Dritan Osmani

- We examine the implementation mechanism of Optimal Transfer Sharing Scheme (Carraro et al., 2006) which try to enable the existence of stable coalitions for environmental protection by side transfers. There are many coalitions where the OPTS can possibly be implemented. However, the implementation mechanism is almost impossible as it requests the flow of welfare from a few countries to the rest of coalition members, which is unrealistic. If the joint welfare maximization assumption is replaced with the assumption that the emission levels of coalition members are uniformly deceased by a constant percentage in comparison to fully non-cooperative coalition structure, then the free riding incentives are significantly weakened.

Osmani, D. (2009). "A Note on Optimal Transfer Schemes, Stable Coalition for Environmental Protection and Joint Welfare Maximization Assumption." September 2009.

September 13, 2009

Stepping up International Climate Finance: A European Blueprint for the Copenhagen Deal

- This policy paper presents a blueprint for scaling up international finance to help developing countries combat climate change. It recognises that the financing issue is central to prospects for reaching an ambitious agreement in Copenhagen.

European Commission (2009). "Stepping Up International Climate Finance: A European Blueprint for the Copenhagen Deal." Commissin Staff Working Document, September 2009.

Download also the Staff Working Document.

Regional Climate Change and Adaptation: The Alps Facing the Challenge of Changing Water Resources

- Drawing on the most recent knowledge of climate change impacts in the Alps and experiences across the region, this report analyses the risks that climate change presents to the region's water supply and quality, identifying needs, constraints, opportunities, policy levers and options for adaptation. It extracts policy guidance on adaptation practice and aims to assist regional and local stakeholders in developing robust adaptation strategies.

EEA (2009). "Regional Climate Change and Adaptation: The Alps Facing the Challenge of Changing Water Resources." European Environmental Agency, Technical report No 9/2009, September 2009. [4.1Mb]

Environmental Kuznets Curves for Carbon Emissions: A Critical Survey

by Nektarios Aslanidis

- Focusing on the prime example of carbon emissions, the present article provides a critical review of the new econometric techniques that have questioned the baseline polynomial specification in the EKC literature. We discuss issues related to the functional form, heterogeneity, "spurious" regressions and spatial dependence to address whether and to what extent the EKC can be observed. Despite these new approaches, there is still no clear-cut evidence supporting the existence of the EKC for carbon emissions.

Aslanidis, N. (2009). "Environmental Kuznets Curves for Carbon Emissions: A Critical Survey." FEEM Working Paper No, 75.09, September 2009.

Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits

by Lawrence H. Goulder, Mark R. Jacobsen, Arthur A. van Benthem

- Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted this action would significantly reduce emissions from new cars in these states, but ignored possible offsetting emissions increases from policy-induced adjustments in new car markets in other (non-adopting) states and in the used car market. This research examines a particular instance of a general issue of policy significance namely, problems from "nested" federal and state environmental regulations. Such nesting implies that similar leakage difficulties are likely to arise under several newly proposed state-level initiatives.

Goulder, L.H., M.R. Jacobsen and A.A. van Benthem (2009). "Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits." NBER Working Paper No. 15337, September 2009.

Hurricane Insurance in Florida

by Mario Jametti and Thomas von Ungern-Sternberg

- This paper studies the evolution of hurricane insurance in Florida over the last decades. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens Property Insurance Corporation (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners.

Jametti, M. and T. von Ungern-Sternberg (2009). "Hurricane Insurance in Florida." CesIfo Working Paper No. 2768, August 2009.

Internationally Coordinated Emission Permit Policies: An Option for Withdrawers from the Kyoto Protocol?

by Birgit Bednar-Friedl and Karl Farmer

- This paper investigates the welfare costs of unilateral versus internationally coordinated emission permit policies in a two-country overlapping generations model with producer carbon emissions. We show that, for a net foreign debtor country, the domestic welfare costs of a unilateral domestic permit policy are larger than of an internationally coordinated policy if the world economy is dynamically efficient. From the perspective of a net foreign debtor country that has withdrawn from the Kyoto Protocol, an internationally coordinated permit policy is dominated by climate political inaction also in the post-Kyoto era since bearing the costs of foreign actionism is cheaper, in terms of welfare, than agreeing on international policy coordination - unless the world economy becomes dynamically inefficient.

Bednar-Friedl, B. and K. Farmer (2009). "Internationally Coordinated Emission Permit Policies: An Option for Withdrawers from the Kyoto Protocol?" CesIfo Working Papers No, 2764, August 2009.

On Interfuel Substitution: Some International Evidence

by Apostolos Serletis, Govinda R. Timilsina and Olexandr Vasetsky

- This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the national and sector levels. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional forms, and provides evidence consistent with neoclassical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity).

Serletis, A., G.R. Timilsina and O. Vasetsky (2009). "On Interfuel Substitution: Some International Evidence." World Bank Policy Research Working Paper, no. WPS 5026, August 2009.

Lock-in Effects of Road Expansion on CO2 Emissions: Results from a Core-Periphery Model of Beijing

by Alex Anas and Govinda R. Timilsina

- The analysis confirms that improving the transit travel time in Beijing's core would reduce the city's overall carbon dioxide emissions, whereas the opposite would be the case if peripheral road capacity were expanded. This effect is robust to perturbations in the model's calibrated parameters. In particular, the effect persists for a wide range of assumptions about how location choice depends on travel time and a wide range of assumptions about other aspects of consumer preferences.

Anas, A. and G.R. Timilsina (2009). "Lock-in Effects of Road Expansion on CO2 Emissions: Results from a Core-Periphery Model of Beijing." World Bank Policy Research Working Paper no. WPS 5017. August 2009.

The Dynamics of Climate Agreements

by Bard Harstad

- I provide a novel dynamic model with private provision of public bads and investments in technologies. The analysis is tractable and the MPE unique. By adding incomplete contracts, I derive implications of and for international climate treaties. While the non-cooperative equilibrium is bad, short-term agreements are worse due to hold-up problems. A long-term agreement should be more ambitious if it is relatively short-lasting and the technological externality large. The length itself should increase in this externality. With renegotiation, the outcome is first best. The technological externalities are related to trade agreements, making them strategic substitutes to climate treaties.

Harstad, B. (2009). "The Dynamics of Climate Agreements." Discussion Paper 09-28, Harvard Project on International Climate Agreements, July 2009.

September 6, 2009

Geoengineering the Climate: Science, Governance and Uncertainty

by John Shepherd et al

- The Royal Society has published the findings of a major study into geoengineering the climate. The study was chaired by Professor John Shepherd.

Shepherd, J. et al (2009). "Geoengineering the Climate: Science, Governance and Uncertainty." The Royal Society, September 2009.

Uncertain Outcomes and Climate Change Policy

by Robert S. Pindyck

- Focusing on tail effects, I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. I estimate the fraction of consumption w*(tau) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to tau. Using information on the distributions for temperature change and economic impact from studies assembled by the IPCC and from "integrated assessment models" (IAMs), I fit displaced gamma distributions for these variables. The fitted distributions for temperature change and economic impact generally yield values of w*(tau) below 2%, even for small values of tau, unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution.

Pindyck, R.S. (2009). "Uncertain Outcomes and Climate Change Policy." NBER Working Paper No. 15259, August 2009.

Impacts of Alternative Emissions Allowance Allocation Methods under a Federal Cap-and-Trade Program

by Lawrence H. Goulder, Marc A. C. Hafstead, Michael S. Dworsky

- This paper examines the implications of alternative allowance allocation designs under a federal cap-and-trade program to reduce emissions of greenhouse gases. We focus on the impacts on industry profits and overall economic output, employing a dynamic general equilibrium model of the U.S. economy. The model's unique treatment of capital dynamics permits close attention to profit impacts.

Goulder, L.H., M.A.C. Hafstead and M.S. Dworsky (2009). "Impacts of Alternative Emissions Allowance Allocation Methods under a Federal Cap-and-Trade Program." NBER Working Paper No. 15293, August 2009.

Explaining the Price of Voluntary Carbon Offsets

by Marc N. Conte and Matthew J. Kotchen

- This paper investigates factors that explain the large variability in the price of voluntary carbon offsets. We estimate hedonic price functions using a variety of provider- and project-level characteristics as explanatory variables. We find that providers located in Europe sell offsets at prices that are approximately 30 percent higher than providers located in either North America or Australasia. Contrary to what one might expect, offset prices are generally higher, by roughly 20 percent, when projects are located in developing or least-developed nations. We find evidence that forestry-based offsets sell at lower prices.

Conte, M.N. and M.J. Kotchen (2009). "Explaining the Price of Voluntary Carbon Offsets." NBER Working Paper No. 15294, August 2009.

Climate Change Assessment and Agriculture in General Equilibrium Models: Alternative Modeling Strategies

by Ruslana Rachel Palatnik and Roberto Roson

- Agricultural sectors play a key role in the economics of climate change. The aim of this study is to overview some proposed modelling strategies, by reviewing the available literature and highlighting the different trade-offs involved in the various approaches.

Palatnik, R.R. and R. Roson (2009). "Climate Change Assessment and Agriculture in General Equilibrium Models: Alternative Modeling Strategies." FEEM Working Paper No. 67.09, August 2009.

Think Again: Higher Elasticity of Substitution Increases Economic Resilience

by P. Dumas and S. Hallegatte

- This paper shows that, counter-intuitively, a higher elasticity of substitution in model production function can lead to reduced economic resilience and larger vulnerability to shocks in production factor prices. This result is due to the fact that assuming a higher elasticity of substitution requires a recalibration of the production function parameters to keep the model initial state unchanged.

Dumas, P. and S. Hallegatte (2009). "Think Again: Higher Elasticity of Substitution Increases Economic Resilience." FEEM Working Paper No. 66.09, August 2009.

The Role of Forests as Carbon Sinks: Land-Use and Carbon Accounting

by Renato Rosa, Chiara Costa Duarte and Maria A. Cunha-e-Sá

- The use of forests as carbon sinks is examined by introducing carbon sequestration benefits’ accounting in a multi-vintage land allocation model. Following the IPCC, three carbon accounting methods are considered. We compare the results in each case with those without carbon sequestration, as well as the performances of the ton-year and the average methods (second-best) to the carbon flow (first-best) concerning optimal land allocation between forestry and alternative uses, total carbon sequestered, timber production and social welfare.

Rosa, R., C. Costa Duarte and M.A. Cunha-e-Sá (2009). "The Role of Forests as Carbon Sinks: Land-Use and Carbon Accounting." FEEM Working Paper No 61.09, August 2009.

September 2, 2009

Alternative Policies and Sea-Level Rise in the RICE-2009 Model

by William Nordhaus

- The present study extends earlier research by presenting the results of a new and updated version of the RICE model (Regional Integrated model of Climate and the Economy), labeled the RICE-2009 model. These new estimates indicate that coordinated international policies have a substantial economic benefit. The optimal carbon tax is estimated to be $29 per ton carbon ($8 per ton CO2) for 2010 in 2005 prices. The economic optimum would limit global temperature rise to an average of 2.5 °C over 1900 levels for the 22nd and 23rd century.

Nordhaus, W. (2009). "Alternative Policies and Sea-Level Rise in the RICE-2009 Model." Cowles Foundation Discussion Paper No. 1716, August 2009.

Sharing the Burden of Adaptation Financing: An Assessment of the Contributions of Countries

by Rob Dellink, Michel den Elzen, Harry Aiking and Emmy Bergsma

- Climate change may cause most harm to countries that contribute least to greenhouse gas emissions. This paper identifies deontology, solidarity and consequentialism as the principles that can serve as a basis for a fair international burden sharing scheme of adaptation costs. We translate these principles into criteria that can be applied in assigning contributions of individual countries, namely historical responsibility, equality and capacity to pay.

Dellink, R., M. den Elzen, H. Aiking and E. Bergsma (2009). "Sharing the Burden of Adaptation Financing: An Assessment of the Contributions of Countries." FEEM Working Paper No. 59.09, August 2009.

How Harmful are Adaptation Restrictions

by Kelly C. de Bruin and Rob B. Dellink

- The dominant assumption in economic models of climate policy remains that adaptation will be implemented in an optimal manner. There are, however, several reasons why optimal levels of adaptation may not be attainable. This paper investigates the effects of suboptimal levels of adaptation. Several adaptation restrictions are identified and then simulated in a revised DICE model, extended with adaptation (AD-DICE).

de Bruin, K.C. and R.B. Dellink (2009). "How Harmful are Adaptation Restrictions." FEEM Working Paper No. 58.09, August 2009.

Biofuels, Climate Policy and the European Vehicle Fleet

by Gitiaux, X., S. Paltsev, J. Reilly and S. Rausch

- We examine the effect of biofuels mandates and climate policy on the European vehicle fleet, considering the prospects for diesel and gasoline vehicles. We use the MIT Emissions Prediction and Policy Analysis (EPPA) model, which is a general equilibrium model of the world economy. We find that harmonizing fuel taxes reduces the welfare cost associated with renewable fuel policy and lowers the share of diesel vehicles in the total fleet to 21% by 2030 compared to 25% in 2010. We also find that eliminating tariffs on biofuel imports, which under the existing regime favor biodiesel and impede sugar ethanol imports, is welfare-enhancing and brings about further substantial reductions in CO2 emissions.

Gitiaux, X., S. Paltsev, J. Reilly and S. Rausch (2009). "Biofuels, Climate Policy and the European Vehicle Fleet." Report 176, MIT Joint Program Report Series, August 2009.

Conflicting Goals: Energy Security versus GHG Reductions under the EISA Cellulosic Ethanol Mandate

by Arthur G. Fraas, Robert Johansson

- Increasing energy security and lowering greenhouse gas (GHG) emissions have been prominent goals in recent energy and environmental policies. While these goals are often complementary, there may also be cases where they conflict. A case in point is the Energy Independence and Security Act of 2007 (EISA). This paper identifies some of the key factors that affect the cost-effectiveness of the energy security and climate change goals of EISA. The cost-effectiveness of the EISA energy security goal will depend on (1) constraints on biomass production, that is, the extent to which the EISA mandate may crowd out the use of biomass to generate electricity; (2) the world oil price; and (3) the social cost of carbon.

Fraas, A.G. and R. Johansson (2009). "Conflicting Goals: Energy Security versus GHG Reductions under the EISA Cellulosic Ethanol Mandate." RFF Discussion Paper 09-24, August 2009.

Forest Inventories: Discrepancies and Uncertainties

by Paul E. Waggoner

- Credits for sequestered carbon augment forests’ already considerable value as natural habitat and as producers of timber and biomass, making their accurate inventory more critical than ever before. This article examines discrepancies in inventories of forest attributes and their sources in four variables: area, timber volume per area, biomass per timber volume, and carbon concentration. Documented discrepancies range up to a multibillion-ton difference in the global stock of carbon in trees.

Waggoner, P.E. (2009). "Forest Inventories: Discrepancies and Uncertainties." RFF Discussion Paper 09-29, August 2009.

A Third Benefit of Joint Non-OPEC Carbon Taxes: Transferring OPEC Monopoly Rent

by Yan Dong and John Whalley

- This paper highlights the potential for joint OECD (or non-OPEC) carbon taxes to reduce OPEC’s monopoly rent and provide benefit to non-OPEC countries provided jointly agreed trigger strategies are adhered to. We develop a multi-region general equilibrium structure with endogenously determined oil supply for the purpose in which emissions are endogenously determined. Our analytics and numerical simulation results highlight how a uniform carbon tax used by all non-OPEC countries will increase the buyer’s price of oil but decrease the supplier’s price of oil, thus decreasing non-OPEC countries’ oil demand, and transferring OPEC monopoly rent to non-OPEC countries.

Dong, Y. and J. Whalley (2009). "A Third Benefit of Joint Non-OPEC Carbon Taxes: Transferring OPEC Monopoly Rent." CESifo Working Paper No. 2741, August 2009.

Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy

by Rudiger Pethig and Chrisian Wittlich

- We study the incidence of carbon-reduction and green-energy promotion policies in an open fossil-fuel importing general equilibrium economy. The focus is on mixed price-based or quantity-based policies. Instruments directed toward promoting green energy are shown to reduce also carbon emissions and vice versa. Their direct effects are stronger than their side effects, the more so, the greater is the elasticity of substitution in consumption between en-ergy and the consumption good.

Pethig, R. and C. Wittlich (2009). "Interaction of Carbon Reduction and Green Energy Promotion in a Small Fossil-Fuel Importing Economy." CESifo Working Paper No. 2749, August 2009.

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

by Nicole Grunewald and Inmaculada Martínez-Zarzoso

- 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 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. Martínez-Zarzoso (2009). "Driving Factors of Carbon Dioxide Emissions and the Impact from Kyoto Protocol." CESifo Working Paper No. 2758, August 2009.

Assessing the Costs of Adaptation to Climate Change: A Critique of the UNFCCC Estimates

by Martin Parry, Nigel Arnell, Pam Berry, David Dodman, Samuel Fankhauser, Chris Hope, Sari Kovats, Robert Nicholls, David Sattherwaite, Richard Tiffin, Tim Wheeler

- This book takes another look at the costs of adapting to climate change. The estimates for 2030 used by the UN Framework Convention on Climate Change are likely to be substantial under-estimates. Professor Martin Parry and his co-authors look at the estimates from a range of perspectives, and conclude that: (1) the current cost assessments do not include some key sectors, such as ecosystems, energy, manufacturing, retailing, and tourism, (2) some of the sectors included have been only partially covered in cost estimates, (3) the additional costs of adaptation have sometimes been calculated as ‘climate mark-ups’ against low levels of assumed investment.

Parry, M., N. Arnell, P. Berry, D. Dodman, S. Fankhauser, C. Hope, S. Kovats, R. Nicholls, D. Sattherwaite, R. Tiffin, T. Wheeler (2009). "Assessing the Costs of Adaptation to Climate Change: A Critique of the UNFCCC Estimates." International Institute for Environment and Development and the Grantham Institute for Climate Change, Imperial College London, August 2009.

Forecasting Local Climate for Policy Analysis: A Pilot Application for Ethiopia

by Brian Blankespoor, Kiran Dev Pandey and David Wheeler

- This paper describes an approach to forecasting future climate at the local level using historical weather station and satellite data and future projections of climate data from global climate models (GCMs) that is easily understandable by policymakers and planners. It describes an approach to synthesize the myriad climate projections, often with conflicting messages, into an easily-interpreted set of graphical displays that summarizes the basic implications of the ensemble of available climate models.

Blankespoor, B., K.D. Pandey and D. Wheeler (2009). "Forecasting Local Climate for Policy Analysis: A Pilot Application for Ethiopia." World Bank Policy Research Working Paper no. WPS 5004, July 2009.