Economics of climate policy and collective decision making

… . Disponível em: http:// …, 2006

Monetary valuation of climate-change impacts, and the cost-benefit analysis of climate-change policy into which it feeds, has long been controversial. Writers in ecological economics have done much to illuminate its difficulties. For the purposes of this paper, the key difficulties of the cost-benefit approach are, first, discounting future costs and benefits at comparatively high rates, second, the often implicit assumption of perfect substitutability between natural capital and other forms of capital and, third, the treatment of uncertainty, much of which is very difficult to quantify in this case. On the other hand, alternative approaches to climate-change policy based on safe minimum standards are not without their weaknesses either. They are largely arbitrary and, as a result, arguably more politically unstable. Thus the in-principle need for cost-benefit analysis will not diminish.

Journal of Benefit-Cost Analysis, 2021

Although a carbon value has often been integrated in the frameworks established to guide public decision-making, benefit-cost analysis (BCA) has played no more than a minor role in the design of climate policies. It is urgently necessary to promote BCA in this area, and there is currently a unique opportunity for doing so. Major countries are designing new packages in order to meet their commitments, as illustrated by the European Green Deal, recent decisions on the part of the Biden Administration, and the creation of a Chinese national carbon market. These constructive processes must be based on BCA. BCA is absolutely necessary in order to achieve net-zero emissions by 2050 at a reasonable cost. Indeed, abatement costs across and within sectors, and across and within countries, are extremely heterogeneous, and many of the policy instruments in use (subsidies, feed-in tariffs, technical standards, etc.) overlap inefficiently. The instrumental debate between carbon pricing and other...

Consilience: journal of sustainable development, 2009

The pressing reality of global climate change has resulted in a great deal of focus on proposals for market-based government intervention. Currently proposed intervention can take one of two forms: either it can achieve reductions in carbon emissions by controlling the quantity of allowable carbon emissions or it can do the same by setting the price of carbon emissions. If we approach the issue of climate change as a classic externality problem and assume perfect information, economic theory suggests that an optimal level of carbon abatement can be achieved by either method. But, with the issue of climate change we are dealing with a host of unknown costs and benefits of abatement, and we cannot be sure that either method will be efficient. Thus, the role of uncertainty must factor into any policy decision. In this paper, we apply theoretical concepts of informational uncertainty to the issue of climate change. We find that depending on the curvatures of the costs and benefit functi...

2009

LIMATE change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen. The economic analysis must therefore be global, deal with long time horizons, have the economics of risk and uncertainty at centre stage, and examine the possibility of major, non-marginal change. Economics has much to say about assessing and managing the risks of climate change, and about how to design national and international policy responses for both the reduction of emissions and adaptation. The present paper draws on ideas and techniques from most of the important areas of economics, including many recent advances.

RePEc: Research Papers in Economics, 2011

Regardless of the policies used to mitigate climate change, a positive and relatively high price of carbon will have to be established, with slow convergence across regions, leading to huge rents up to capture, way beyond those that have been fought over in the GATT-based international trading system. The paper explores the political-economy, feasibility and desirability implications of the two main alternatives, a carbon tax and a cap-and-trade (CAT) system. Having the same concerns, CAT systems in the EU and the US have accounted for different outcomes in each case. Likely leakages under foreseeable carbon prices are estimated to be small and not of an order of magnitude justifying the special allowances sought across a wide spectrum of industries. … /…

2011

2005

This edited volume contains eleven contributions to the economics of climate change with special emphasis on the European and Belgian perspective. In Part One, the book starts off at the global level looking for answers to questions such as the following. What emission pathway would be optimal from a global perspective? How should efforts be divided over generations and countries? How can international agreements be made more acceptable and sustainable to their signatories?

OECD Economics …, 2009

This paper examines the cost of a range of national, regional and global mitigation policies and the corresponding incentives for countries to participate in ambitious international mitigation actions. The paper illustrates the scope for available instruments to strengthen ...

2000

Energy Policy, 1995

The concept of 'joint implementation' is the subject of ongoing negotiations under the Framework Convention on Climate Change. Proponents argue that allowing joint implementation of the objectives of the Convention will increase the cost-effectiveness with which those objectives are achieved. Opponents argue that allowing trade in carbon emission credits will reduce the incentive for domestic greenhouse gas emissions reductions, and may undermine the commitments of the developed nations to take the lead in achieving climate stabilization. This paper examines the argument for joint implementation from the standpoint of cost-effectiveness. It addresses the determination of incremental costs for abatement options, and the assessment of cost-effectiveness under complex systemic conditions. Using national greenhouse gas abatement costing studies from four different nations -two developed nations, on economy in transition and one developing nation -the paper examines both the general claim for costeffectiveness of joint implementation and the implicit assumption that emissions reductions will be easier and cheaper in developing nations and economies in transition than they are in developed countries. The results indicate firstly that benefits from joint implementation may be highly dependent on the level of associated transaction costs and secondly that greenhouse gas emission reductions may be considerably cheaper for some developed countries than they are for developing countries. The paper stresses the need for well developed methodological guidelines under which both cost and cost-effectiveness can be assessed, and points to the dangers inherent in allowing ad hoc trading in emissions credits by a heterogeneous community of private investors.

The integrated assessment models (IAMs) that economists use to analyze the expected costs and benefits of climate policies frequently suggest that the "optimal" policy is to do relatively little in the near term to reduce greenhouse gas emissions. This conclusion seemingly conflicts with the emerging scientific consensus about the irreversibility of climate change and the risks of catastrophic impacts. We trace this disconnect to contestable assumptions and limitations of IAMs when applied to climate change. For example, they typically discount future impacts from climate change at relatively high rates that are empirically and philosophically controversial when applied to intergenerational environmental issues. IAMs also monetize the benefits of climate mitigation on the basis of incomplete and sometimes speculative information about the worth of human lives and ecosystems and fail to account for the full range of scientific uncertainty about the extent of expected damages. IAMs may also exaggerate mitigation costs by inadequately capturing the socially determined, path-dependent nature of technological change and ignoring the potential savings from reduced energy utilization and other opportunities for innovation.

Oxford Review of Economic Policy, 2008

This paper attempts to bring some central insights from behavioural economics into the economics of climate change. In particular, it discusses (i) implications of prospect theory, the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments, and (ii) the implications of various kinds of social preferences for the outcome of climate negotiations. Several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments. It also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements, compared to the standard model. However, there are also effects going in the opposite direction, and the importance of sanctions is emphasised.

Social Science Research Network, 2008

This paper provides a quantitative comparison of the main architectures for an agreement on climate policy. Possible successors to the Kyoto protocol are assessed according to four criteria: economic efficiency; environmental effectiveness; distributional implications; and their political acceptability which is measured in terms of feasibility and enforceability. The ultimate aim is to derive useful information for designing a future agreement on climate change control.

American Economic Review, 2008

Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. Climate change economics attends to this issue by offering theoretical insights and empirical findings relevant to the design of policies to reduce, avoid, or adapt to climate change. This economic analysis has yielded new estimates of mitigation benefits, improved understanding of costs in the presence of various market distortions or imperfections, better tools for making policy choices under uncertainty, and alternate mechanisms for allowing flexibility in policy responses. These contributions have influenced the formulation and implementation of a range of climate change policies at the domestic and international levels.