November 28, 2010

The Emissions Gap Report Are the Copenhagen Accord pledges sufficient to limit global warming to 2°C or 1.5°C?

by UNEP

- This publication aims to assess the following questions: are countries' pledges of action collectively consistent with and, if implemented, likely to achieve the 2°C and 1.5°C temperature goals? If not, how big is the gap between emission levels consistent with these temperature goals and the emissions expected as a result of the pledges? In responding to these questions, we are confronted with a series of highly complex issues, which result from scientific and political factors.

UNEP (2010). "The Emissions Gap Report Are the Copenhagen Accord pledges sufficient to limit global warming to 2°C or 1.5°C?" United Nations Environment Programme, Nov 2010.

Technical Summary

Report Website

Comparing the Copenhagen Emissions Targets

by Frank Jotzo

- Following the Copenhagen climate Accord, developed and developing countries have pledged to cut their greenhouse gas emissions, emissions intensity or emissions relative to baseline. This analysis puts the targets for the major countries on a common footing, and compares them across different metrics. The findings suggest that targets for most major countries are broadly compatible in important metrics, and that while the overall global ambition falls short of a two degree trajectory, the targets by key developing countries including China can be considered commensurate in the context of what developed countries have pledged.

Jotzo, F. (2010). "Comparing the Copenhagen Emissions Targets." CCEP working paper 1.10, Nov 2010.

Climate Proofing Infrastructure in Bangladesh: the Incremental Cost of Limiting Future Inland Monsoon Flood Damage

by Susmita Dasgupta, Mainul Huq, Zahirul Huq Khan, Md. Sohel Masud, Manjur Murshed Zahid Ahmed, Nandan Mukherjee and Kiran Pandey

- Two-thirds of Bangladesh is less than 5 meters above sea level, making it one of the most flood prone countries in the world. Severe flooding during a monsoon causes significant damage to crops and property, with severe adverse impacts on rural livelihoods. Future climate change seems likely to increase the destructive power of monsoon floods. This paper examines the potential cost of offsetting increased flooding risk from climate change, based on simulations from a climate model of extreme floods out to 2050.

Dasgupta, S., M. Huq, Z.H. Khan, Md.S. Masud, M.M.Z. Ahmed, N. Mukherjee and K. Pandey (2010). "Climate Proofing Infrastructure in Bangladesh: the Incremental Cost of Limiting Future Inland Monsoon Flood Damage." World Bank Policy Research working paper no. WPS 5469, Nov 2010.

Climate Change, Agriculture and Poverty

by Thomas W. Hertel, Stephanie D. Rosch

- Although much has been written about climate change and poverty as distinct and complex problems, the link between them has received little attention. Understanding this link is vital for the formulation of effective policy responses to climate change. This paper focuses on agriculture as a primary means by which the impacts of climate change are transmitted to the poor, and as a sector at the forefront of climate change mitigation efforts in developing countries. In so doing, the paper offers some important insights that may help shape future policies as well as ongoing research in this area.

Hertel, T.W. and S.D. Rosch (2010). "Climate Change, Agriculture and Poverty." World Bank Policy Research working paper no. WPS 5468, Nov 2010.

How Good Politics Results in Bad Policy: The Case of Biofuel Mandates

by Robert Z. Lawrence

- In this paper Lawrence argues that the growing list of concerns about the impact of biofuel targets and mandates are the predictable result of a failure to follow the basic principles of good policy-making. Good policy-making requires developing a policy goal or target (i.e., reducing greenhouse gas emissions, reducing oil consumption, or increasing rural economic development) and designing an instrument to efficiently meet that particular goal. The more precise the goal, the better. In addition, for each target, there should be at least one policy instrument. You cannot meet two goals with only one instrument. Lawrence argues that the current U.S. biofuels mandates do not represent the most efficient or precise instrument to meet any of the policy’s stated goals.

Lawrence, R.Z. (2010). "How Good Politics Results in Bad Policy: The Case of Biofuel Mandates." HKS Faculty Research Working Paper Series RWP10-044, Nov 2010.

Cost Pass-Through of the EU Emissions Allowances: Examining the European Petroleum Markets

by Victoria Alexeeva-Talebi

- Using advanced time-series techniques, this paper explores the ability of European refineries to pass-through costs associated with the introduction of the EU Emissions Trading Scheme (ETS). The paper thereby fills, the gap in the literature by analysing the interactions between petrol prices and emissions allowances allocated to the refining industry under the EU ETS at the single country level. The analysis is conducted within a multi-national framework and as comprehensive as the weekly data permits, covering 14 EU member states.

Alexeeva-Talebi, V. (2010). "Cost Pass-Through of the EU Emissions Allowances: Examining the European Petroleum Markets." ZEW Discussion Paper No. 10-086, Nov 2010.

Cooperative Provision of Indivisible Public Goods

by Pierre Dehez

- A community faces the obligation of providing an indivisible public good that each member is able to provide at a certain cost. The solution is to rely on the player who can do it at the lowest cost with due compensations from the other players. We model this problem as a cost sharing game. It turns out to be a kind of reverse airport game whose core has a regular structure. This is the main result of the paper.

Dehez, P. (2010). "Cooperative Provision of Indivisible Public Goods." CORE Discussion Paper No. 2010.26, Nov 2010.

Keeping a Big Promise: Options for Baselines to Assess "New and Additional" Climate Finance

by Martin Stadelmann, J. Timmons Roberts and Axel Michaelowa

- All major climate policy agreements - the UN Framework Convention, the Kyoto Protocol and recently the Copenhagen Accord - have stated that climate finance for developing countries will be "new and additional". However, the term "new and additional" has never been properly defined. We explore eight different options for a baseline, and assess each according to several criteria: novelty to existing pledges, additionality to development assistance, environmental effectiveness, distributional consequences, and institutional and political feasibility.


Stadelmann, M., J.T. Roberts and A. Michaelowa (2010). "Keeping a Big Promise: Options for Baselines to Assess "New and Additional" Climate Finance." CIS Working Paper No. 66, 2010, Nov 2010.

How to Deal with Indirect Land-Use Change in the EU Renewable Energy Directive?

by J.P.M. Ros, K.P. Overmars and J.G.M. Notenboom

- Biofuels based on agricultural crops have the risk of causing indirect land use change with substantial greenhouse gas emissions. European policy to stimulate innovative solutions without these effects can be strengthened. These are the two main observations of the Netherlands Environmental Assessment Agency in reaction on the consultation of the European Commission on this subject.

Ros, J.P.M., K.P. Overmars and J.G.M. Notenboom (2010). "How to Deal with Indirect Land-Use Change in the EU Renewable Energy Directive?" PBL Report no. 500143008, Nov 2010.

Monitoring Emissions and Actions in the Post-2012 Climate Regime

by S.J.A. Bakker, A. de Vita and J.G.J. Olivier

- This report aims to advance the debate on MRV and focuses on 1) gaining insight into whether and how national greenhouse gas inventories for developing countries can be established, and 2) the balance between transparency and efforts of MRV by defining MRV ability and evaluating it for a number of mitigation actions.

Bakker, S.J.A., A. de Vita and J.G.J. Olivier (2010). "Monitoring Emissions and Actions in the Post-2012 Climate Regime." PBL Report no. 500102033, Oct 2010.

Adaptation and Mitigation in Long-Term Climate Policies

by Thierry Brechet, Natali Hritonenko and Yuri Yatsenko

- The paper analytically explores the optimal policy mix between mitigation and environmental adaptation against climate change at a macroeconomic level. The constructed economic-environmental model is formulated as a social planner problem with the adaptation and abatement investments as separate decision variables. The authors prove the existence of a unique steady state and provide a comparative static analysis of the optimal investment. Data calibration and numerical simulation are provided to illustrate theoretical outcomes.

Brechet, T., N. Hritonenko and Y. Yatsenko (2010). "Adaptation and Mitigation in Long-Term Climate Policies." Core Discussion Paper No. 2010.65, Oct 2010.

The Benefits of Cooperation under Uncertainty: the Case of Climate Change

by Thierry Brechet, Julien Thenien, Thibaut Zeimes and Stéphane Zuber

- This article presents an analysis of the behavior of countries defining their climate policies in an uncertain context. The analysis is made using the S-CWS model, a stochastic version of an integrated assessment growth model. The model includes a stochastic definition of the climate sensitivity parameter. We show that the impact of uncertainty on policy design critically depends on the shape of the damage function. We also examine the benefits of cooperation in the context of uncertainty: we highlight the existence of an additional benefit of cooperation, namely risk reduction.

Brechet, T., J. Thenien, T. Zeimes and S. Zuber (2010). "The Benefits of Cooperation under Uncertainty: the Case of Climate Change." CORE Discussion Paper No. 2010.62, Oct 2010.

Tradable Pollution Permits in Dynamic General Equilibrium: Can Optimality and Acceptability be Reconciled?

by Thierry Brechet, Pierre-André Jouvet and Gilles Rotillon

- In this paper we study the optimal growth path and its decentralization in a two-sector overlapping generations model with pollution. One sector (power generation) is polluting and the other (final good) is not. Pollution is regulated by tradable emission permits. The issue is whether the optimal growth path can be replicated in equilibrium with pollution permits, given that some permits must be issued free of charge for the sake of political acceptability. We provide a policy rule that allows optimality and acceptability to be reconciled.

Brechet, T., P.-A. Jouvet and G. Rotillon (2010). "Tradable Pollution Permits in Dynamic General Equilibrium: Can Pptimality and Acceptability be Reconciled?" CORE Discussion Paper No. 2010.56, Oct 2010.

Climate Business for Poverty Reduction? The Role of the World Bank

by Axel Michaelowa and Katharina Michaelowa

- Our econometric analysis of over 2000 projects registered until May 2010 under the Clean Development Mechanism (CDM) of the Kyoto Protocol allows us to compare the activities of the Bank with those of other, primarily private actors. The results indicate that hardly any of the CDM projects can be considered as strongly pro-poor. Nevertheless, in comparison to the rest of the CDM projects, the Bank’s portfolio shows a relatively clearer orientation towards poor countries. Within these countries, however, the Bank tends to implement those projects which are commercially most attractive.

Michaelowa, A. and K. Michaelowa (2010). "Climate Business for Poverty Reduction? The Role of the World Bank." CIS Working Paper No. 59, Aug 2010.

Old Wine in New Bottles? The Shift of Development Aid towards Renewable Energy and Energy Efficiency

by Axel Michaelowa and Katharina Michaelowa

- Since the UN Conference on Environment and Development in Rio 1992, bi- and multilateral donors stress that development assistance has increasingly been oriented towards climate friendly interventions. With respect to energy aid, this should lead to a substantial increase of projects related to renewable energy and energy efficiency. We use the new project-level aid (PLAID) database of over 750,000 aid activities for 21 OECD DAC donor countries to assess whether such a reorientation has indeed taken place.

Axel Michaelowa and Katharina Michaelowa (2010). "Old Wine in New Bottles? The Shift of Development Aid towards Renewable Energy and Energy Efficiency." CIS Working Paper No. 58, Jul 2010.

Climate Change Governance

by Thomas Bernauer and Lena Schaffer

- We start with an overview of the climate change problem (section 2), followed by a discussion of international institutions that have thus far been established to cope with the challenge (section 3). We then look at the reasons why global cooperation for climate change mitigation is difficult to achieve (section 4).

Bernauer, T. and L. Schaffer (2010). "Climate Change Governance." CIS Working Paper Nr. 60, Jul 2010.

Rationing Public Goods by Cooperation or Pecuniary Incentives: Evidence from the Spare-the-Air Program

by Steven E. Sexton

- This paper examines the extent to which free transit fares and appeals for car trip avoidance reduce car pollution on smoggy days. Using data on freeway traffic volumes and transit ridership, public appeals for cooperation are shown to reduce car trips. The marginal effect of free transit fares, however, is to increase car trips. Public appeals are shown to increase carpooling but not transit ridership. Free fares increase transit ridership but not carpooling.

Sexton, S.E. (2010). "Rationing Public Goods by Cooperation or Pecuniary Incentives: Evidence from the Spare-the-Air Program." Department of Agricultural and Resource Economics, UC Berkeley, CUDARE Working Paper No. 1107, Jul 2010.

Uncertain Long-Run Emissions Targets, CO2 Price and Global Energy Transition: a General Equilibrium Approach

by Olivier Durand-Lasserve, Axel Pierreu and Yves Smeers

- The persistent uncertainty about mid-century CO2 emissions targets is likely to affect not only the technological choices that energy-producing firms will make in the future but also their current investment decisions. We illustrate this effect on CO2 price and global energy transition within a MERGE-type general-equilibrium model framework, by considering simple stochastic CO2 policy scenarios. In these scenarios, economic agents know that credible long-run CO2 emissions targets will be set in 2020, with two possible outcomes: either a "hard cap" or a "soft cap".

Durand-Lasserve, O., A. Pierreu and Y. Smeers (2010). "Uncertain Long-Run Emissions Targets, CO2 Price and Global Energy Transition: a General Equilibrium Approach." CORE Discussion Paper No 2010.27, Jun 2010.

Interemporal Risk Aversion - or - Wouldn't it be Nice to Tell Whether Robinson Crusoe is Risk

by Christian P. Traeger

- The paper introduces a new notion of risk aversion that is independent of the good under observation and its measure scale. The representational framework builds on a time consistent combination of additive separability on certain consumption paths and the von Neumann & Morgenstern (1944) assumptions. In the one-commodity special case, the new notion of risk aversion closely relates to a disentanglement of standard risk aversion and intertemporal substitutability.

Traeger, Christian P. (2010). "Interemporal Risk Aversion - or - Wouldn't it be Nice to Tell Whether Robinson Crusoe is Risk." Department of Agricultural and Resource Economics, UC Berkeley, CUDARE Working Paper No. 1102, May 2010.

Subjective Risk, Confidence, and Ambiguity

by Christian P. Traeger

- The paper extends a dynamic version of the classical von Neumann-Morgenstern setting to incorporate a degree of confidence in or subjectivity of probabilistic beliefs. It provides a simple axiomatic characterization of a new preference representation that addresses ambiguity from a simple perspective, employing only basic tools from risk analysis. Conceptually, the paper renders the concept of smooth ambiguity aversion more precise and extends it to a more general notion of aversion to the subjectivity of belief. The representation maintains the normatively desirable axioms of the standard setting including the von Neumann-Morgenstern axioms and time consistency.

Traeger, C.P. (2010). "Subjective Risk, Confidence, and Ambiguity." Department of Agricultural and Resource Economics, UC Berkeley, CUDARE Working Paper No. 1103, May 2010.

November 15, 2010

Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate

by Jon Strand

- I study climate policy choices for a "policy bloc" of fuel-importers, when a "fringe" of other fuel importers have no climate policy, fuel exporters consume no fossil fuels, and importers produce no such fuels. The policy bloc and exporter blocs act strategically in fossil fuel markets.

Strand, J. (2010). "Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate." CESifo Working Paper No. 3233, Nov 2010.

The Carbon-Budget Approach to Climate Stabilization: Cost-Effective Subglobal versus Global Action

by Thomas Eichner and Rüdiger Pethig

- Scientific expertise suggests that mitigating extreme world-wide climate change damages requires avoiding increases in the world mean temperature exceeding 2°C. To achieve the two degree target, the cumulated global emissions must not exceed some limit, the so-called global carbon budget. In a two-period two-country general equilibrium model with a finite stock of fossil fuels we compare the cooperative cost-effective policy with the unilateral cost-effective policy of restricting emissions to the global carbon budget.

Eichner, T. and R. Pethig (2010). "The Carbon-Budget Approach to Climate Stabilization: Cost-Effective Subglobal versus Global Action." CESifo Working Paper No. 3232, Nov 2010.

Do Permit Allocations Matter?

by Harrie A. A Verbon and Cees A. Withagen

- In the standard setting a system of tradable permits is effective and cost-efficient in attaining the policy objective of pollution reduction. This outcome is challenged in case of a tradable permit system in a federal system/constitution with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness and efficiency of the system, under various institutional arrangements, through the initial allocation of permits.

Verbon, H.A.A. and C.A. Withagen (2010). "Do Permit Allocations Matter?." CESifo Working Paper No. 3236, Nov 2010.

REDD in the Carbon Market: A General Equilibrium Analysis

by Francesco Bosello, Fabio Eboli, Ramiro Parrado and Renato Rosa

- In this paper we analyze the impact of introducing avoided deforestation credits into the European carbon market using a multiregional Computable General Equilibrium model. Taking into account political concerns over a possible "flooding" of REDD credits, various limits to the number of REDD allowances entering the carbon market are considered. Finally, unlike previous studies, we account for both direct and indirect effects occurring on land and timber markets resulting from lower deforestation rates.

Bosello, F., F. Eboli, R. Parrado and R. Rosa (2010). "REDD in the Carbon Market: A General Equilibrium Analysis." FEEM Note di lavoro No. 2010.142, Nov 2010.

The European Emission Trading Scheme and Renewable Energy Policies: Credible Targets for Incredible Results?

by Simone Borghesi

- This paper discusses the merits and limits of the recent European energy policy aimed at reducing carbon emissions, devoting particular attention to the European Trading System of carbon permits and to the measures that the European Union has adopted to promote renewable energy sources. From the comparison of past goals and present results, it is argued that more credible targets for carbon emission reductions and renewable shares would probably help the transition towards an alternative energy system and the necessary reduction of greenhouse gases.

Borghesi, S. (2010). "The European Emission Trading Scheme and Renewable Energy Policies: Credible Targets for Incredible Results?" FEEM Note di lavoro No. 2010.141, Nov 2010.

Climate Change Adaptation, Development, and International Financial Support: Lessons from EU Pre-Accession and Solidarity Funds

by Valentin Przyluski and Stéphane Hallegatte

- Funding adaptation requires adequate governance and there are different ways to organise and channel the funds to where it is most efficient and most necessary. This paper investigates this issue and studies the practical implementation of a development under conditionality, namely adaptation-development, and its requirement in terms of financing architecture.

Przyluski, V. and S. Hallegatte (2010). "Climate Change Adaptation, Development, and International Financial Support: Lessons from EU Pre-Accession and Solidarity Funds." FEEM Note di Lavoro No. 2010.137, Nov 2010.

The Taxation of Fuel Economy

by James Sallee

- Policy-makers have instituted a variety of fuel economy tax policies -- polices that tax or subsidize new vehicle purchases on the basis of fuel economy performance -- in the hopes of improving fleet fuel economy and reducing gasoline consumption. This article reviews existing policies and concludes that while they do work to improve vehicle fuel economy, the same goals could be achieved at a lower cost to society if policy-makers instead directly taxed fuel.

James Sallee (2010). "The Taxation of Fuel Economy." NBER Working Paper No. 16466, Oct 2010.

Understanding Transitory Rainfall Shocks, Economic Growth and Civil Conflict

by Edward Miguel, Shanker Satyanath

- Miguel, Satyanath and Sergenti (2004) use rainfall variation as an instrument to show that economic growth is negatively related to civil conflict in sub-Saharan Africa. In the reduced form regression they find that higher rainfall is associated with less conflict. Ciccone (2010) claims that this conclusion is ‘erroneous’ and argues that higher rainfall levels are actually linked to more conflict. In this paper we show that the results in Ciccone’s paper are based on incorrect STATA code, outdated conflict data, a weak first stage regression and a questionable application of the GMM estimator.

Miguel, E. and S. Satyanath (2010). "Understanding Transitory Rainfall Shocks, Economic Growth and Civil Conflict." NBER Working Paper No. 16461, Oct 2010.

Carbon Prices and Automobile Greenhouse Gas Emissions: The Extensive and Intensive Margins

by Christopher R. Knittel and Ryan Sandler

- This paper analyzes how pricing carbon through either a cap and trade system or carbon tax might affect greenhouse gas emissions from the transportation sector by estimating how changes in gasoline prices alter consumer behavior. We analyze their effect on both the intensive (e.g., vehicle miles travelled) and extensive (e.g., vehicle scrapping) margins. We find large effects on both margins.

Knittel, C.R. and R. Sandler (2010). "Carbon Prices and Automobile Greenhouse Gas Emissions: The Extensive and Intensive Margins." NBER Working Paper No. 16482, Oct 2010.

What Are the Costs of Meeting Distributional Objectives for Climate Policy?

by Ian W.H. Parry and Roberton C. Williams III

- This paper develops an analytical model to quantify the costs and distributional effects of various fiscal options for allocating the (large) rents created under prospective cap-and-trade programs to reduce domestic, energy-related CO2 emissions. The trade-off between cost effectiveness and distribution is striking.

Parry, I.W.H. and R.C. Williams III (2010). "What Are the Costs of Meeting Distributional Objectives for Climate Policy?" NBER Working Paper No. 16486, Oct 2010.

The Global Effects of Subglobal Climate Policies

by Cristoph Bohringer, Carolyn Fischer and Knut Einar Rosendahl

- This paper studies how climate policies implemented in certain major economies (the European Union and the United States) affect the global distribution of economic and environmental outcomes, and how these outcomes may be altered by complementary policies aimed at addressing carbon leakage.

Bohringer, C., C. Fischer and K.E. Rosendahl (2010). "The Global Effects of Subglobal Climate Policies." RFF Discussion Paper 10-48, Oct 2010.

Analysis of Selected Provisions of the Domestic Manufacturing and Energy Jobs Act of 2010

by the Energy Information Administration

- This report responds to a letter dated August 16, 2010, from Janice Mays, Staff Director of the U.S. House of Representatives’ Committee on Ways and Means, requesting that the U.S. Energy Information Administration (EIA) analyze several provisions included in the July 26, 2010, discussion draft of the Domestic Manufacturing and Energy Jobs Act of 2010.

EIA (2010). "Analysis of Selected Provisions of the Domestic Manufacturing and Energy Jobs Act of 2010." Oct 2010.

Wind Power: a Victim of Policy and Politics?

by Maïté Jaureguy-Naudin

- This paper examines the main challenges facing the development of large-scale wind power in the EU. As wind-power penetration increases, the impact on the whole electrical system is no longer trivial.

- http://www.ifri.org/downloads/notedelifrimjaureguynaudin.pdf
Maïté Jaureguy-Naudin (2010). "Wind Power: a Victim of Policy and Politics?" Note de l'IFRI, Oct 2010.