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Warming the World: The Economics of the Greenhouse Effect
... Given the pivotal importance of information on climate change damage, it is surprising how many gaps there are in our knowledge about the expected levels as a function of climate trends across regions and economic sectors. Efforts to assemble the data fall into PRINTED (Tol, 2009): (1) the enumerative method, which adds up the values of different impacts of climate change obtained from natural science papers, which in turn may be based on a combination of laboratory experiments and climate and impact models (DARA, 2012;Fankhauser, 1994); (2) the statistical approach, in which regressions are used to estimate the welfare impact as a function of projected temperature and precipitation, given the impacts experienced so far; and (3) an economic modeling approach in which an economy-wide computable general equilibrium (CGE) model or an integrated assessment model (IAM) is used to assess the consequences of a given set of physical impacts as reported in results from enumerative studies (Tol, 2015). CGE models have a more detailed economic structure (but with little physical modeling) linking different sectors of the economy in one country and in linking countries through trade, while IAM models combine physical climate models with aggregate economic models to project changes in the economy as a result of climate change. ...
... Accordingly, each region has a social welfare function and optimizes its consumption, GHG policies, and investment over time. The FEEM-RICE model is an extended version of the RICE 99 model by Nordhaus and Boyer (2000) with the same representation of the damage function but with a detailed focus on technological aspects (Bosetti, Carraro, & Galeotti, 2006). Climate change impacts are expressed as a fraction of world output through a polynomial function of global mean temperature change accounting for agriculture, health, rise in sea level, and non-market and catastrophic damages similar to RICE. ...
... Regional variations are also not large and have a high level of uncertainty with respect to hydropower impacts. (Nordhaus & Boyer, 2000). With a 6°C increase by that year, losses are around 7% of GDP. ...
Economic damage from climate change includes several aspects that need to be considered at the global and regional levels to achieve an equitable common solution to global warming. The economic literature reviewed here analyzes this issue under three general perspectives. First, the analytical estimation of the linkages between damages in monetary terms and climate variables, as projections of temperature, precipitation, and frequency of extreme events, is rapidly evolving. Damage functions are included in complex economic models in order to calculate the economic impact of the climate change on economic output and growth, thus informing the debate on the amount of resources that should be devoted to reducing greenhouse gas (GHG) emissions and limiting climate damages. The choice of the geographical aggregation in this respect is a crucial aspect to be considered if policy advice is to be formulated on the basis of model results. The higher the level of regional detail, the more reliable the results are in terms of geographical distribution of economic damages. Second, the precise estimation of the costs associated with different damages caused by climate change is attracting growing interest. Climate costs present a wide range of heterogeneity for several reasons, such as the different formulation of the damage function adopted, the modeling design of the economic impact, the temporal horizon considered, and the differentiation across sectors. Two broad categories of analysis are relevant. The first refers to the choice of the sectoral dimension under investigation, where some studies cover multiple sectors and their interactions, while others analyze specific sectors in depth. The second classification criterion refers to the choice of the economic aspects estimated, where a strand of literature analyzes only market-based costs, while other analyses also include non-market (or intangible) damages. The most common sectors investigated are agriculture, forestry, health, energy, coastal zones and sea level rise, extreme events, tourism, ecosystem, industry, air quality, and catastrophic damages. Most studies consider market-based costs, while non-market impacts need to be better detailed in economic models. Third, the computation of a single number through the analytical framework of the social costs of carbon (SCC) represents a key aspect of the process of adapting complex results in order to properly inform the political debate. SCC represents the marginal global damage cost of carbon emissions and can also be interpreted as the economic value of damages avoided for unitary GHG emission reduction. Several uncertainties still influence the robustness of the SCC analytical framework, such as the choice of the discount rate, which strongly influences the role of SCC in supporting or not mitigation action in the short term. Although the debate on the economic damages arising from climate change is flourishing, several aspects still need to be investigated in order to build a common consensus within the scientific community as a necessary condition to properly inform the political debate and to facilitate the achievement of a long-term equitable global climate agreement.
... Studies which have attempted to incorporated the risk of catastrophic events, such as Nordhaus and Boyer (2000) and Stern (2007), have reported substantially increased damage costs leading to the conclusion that more stringent climate change mitigation is necessary in the short-term (Azar and Lindgren, 2003). Equally, studies which do not address the uncertainties surrounding future climate change and its impacts, such as the possibility of tipping points (e.g. ...
... Climate damage functions are calibrated based on data from a limited number of impact studies, estimates derived from the literature, or expert opinion (e.g. Nordhaus, 1991, Nordhaus and Boyer, 2000, Tol, 2002a, Tol and Fankhauser, 1998. Whilst the focus of most climate-damage functions is on monetary estimates, other physical units such as crop yields or ecosystem loss are also utilised. ...
... Some authors assume a smooth damage function, e.g. those used by Nordhaus and Boyer (2000), however certain climate change dynamics and impacts may be more complex and follow a different path. Coastal impacts are expected to grow continuously over time in proportion to sea level rise. ...
Drought events and their consequences pose a considerable problem for governments, businesses and individuals. Superimposed on this risk is the danger of future anthropogenic climate change. Climate models are increasingly being used to understand how climate change may affect future drought regimes. However, methodologies to quantify the type and scale of social and economic effects that could occur under these future scenarios are virtually non-existent. Consequently, this study developed a methodology for projecting and quantifying future drought risk in terms of economic damages and numbers of lives lost and affected.
In this study, historic drought events were identified in regional precipitation data using the Standardised Precipitation Index, and their magnitude quantified. Drought magnitude was linked to reported historic data on economic damages and the numbers of lives affected and lost, to create country specific economic and social drought damage functions for Australia, Brazil, China, Ethiopia, India, Spain/Portugal and the USA. Future projections of drought magnitude for 2003-2050 were modelled using the integrated assessment model CIAS (Community Integrated Assessment System), for a range of climate and emission scenarios, and applied to the drought damage functions to estimate future economic and social drought effects. Additionally, a preliminary investigation of indirect economic drought damages was conducted using the Adaptive Regional Input-Output model (ARIO).
The analysis identified large variability in the scale and trend of economic and social effects from future drought. Economic benefits projected to occur in some countries were outweighed by negative effects elsewhere, with annual losses to global GDP from drought increasing in the first half of the 21st century. The analysis suggested that severe and extreme SPI-6 and SPI-12 drought events could cause additional losses to global GDP of 0.01% to 0.25% annually. Whilst this effect on global GDP may appear small, this is considered a conservative estimate namely as the analysis is representative of six countries only; the estimates do not incorporate the possibility of successive drought events, or compounding effects on vulnerability from interactions with other extreme events such as floods. Additionally, the global economic estimates exclude indirect economic effects, and social and environmental losses; the possibility of increasing vulnerability due to changing socio-economic conditions; and the possibility of irreversible or systemic collapse of economies as, under future climate change, drought magnitude may exceed current experience and surpass thresholds of social and economic resilience. Yet importantly, even just considering direct economic effects of individual drought events on a handful of countries still resulted in a noticeable effect on global GDP.
Stringent mitigation had little effect on the increasing economic and social effects of drought in the first half of the 21st century, so in the short-term adaptation in drought ‘hot spots’ is crucial. However, stringent mitigation will be required to reduce increasingly severe drought events that are projected for the second half of the 21st century. A case study of Spain suggested that indirect economic losses increased non-linearly as a function of direct losses, amplifying total economic damages of drought. Importantly the non-linearity seen between direct and indirect economic costs suggests that the benefits of stringent mitigation policies, in terms of avoided indirect losses, may be more substantial than for direct losses in the second half of the 21st century.
The main impact of the research is its contribution to the assessment of economic and social damages from drought events through the creation and application of drought damage functions. The drought damage functions could be incorporated into wider economic assessments of climate change or integrated assessment models that currently exclude extreme weather events. The inclusion of drought related economic and social damages could help to guide appropriate levels of climate change mitigation, help to gauge the vulnerability of communities to future drought events, guide drought risk management, and inform drought adaptation strategies. The application of I-O analysis to estimate indirect economic losses from drought is a relatively new and developing area of research. The research highlights how I-O analysis could be used to provide estimates of economic drought damages under future climate change, which are more comprehensive, and useful for assessing benefits of future mitigation and adaptation strategies. Consequently, there are many gains to be seen from the continued development and application of this research methodology for drought.
... Leur coût pour l'année 2004 se chiffre à 145 milliards de dollars, dont 100 milliards pouvant être imputés aux variations extrêmes du climat, soit plus du double par rapport à l'année précédente (Munich-Re, 2005). 5 Parmi les plus référencées : Mendelson et al. 2000Mendelson et al. , 2007Tol 2002Tol , 2007Nordhaus et al., 2000Nordhaus et al., , 2006Smith et al., 2003 ;Stern, 2006 de gaz à effet de serre. C'est le cas notamment des pays du sud de la Méditerranée. ...
... C'est le cas notamment des pays du sud de la Méditerranée. Cependant, cette région qui se situe à la frontière entre deux continents est insuffisamment prise en considération dans des études régionales qui privilégient des analyses ciblées sur l'Afrique ou l'Europe (Mendelson et al., 2000 ;Pour Tol , 2002 ;Nordhaus et al., 2000 ;Nordhaus, 2006 ;Stern, 2006). L'intérêt principal de la région méditerranée est qu'elle est composée de pays ayant des profils économiques et environnementaux très variés. ...
... D'autre part, l'anticipation de la fréquence et de la force de ces manifestations extrêmes par les études climatiques est difficile et elles ne sont donc pas considérées. Globalement, les coûts mondiaux futurs estimés partent de 7% (en 2100) et peuvent atteindre jusqu'à 14% (en 2200) du PIB mondial par tête selon les études les plus complètes (Nordhaus et al., 2000 ;Stern, 2006) 8 . Les résultats des analyses portant sur la région Méditerranée sont assez disparates du fait d'une influence déterminante du cadre d'analyse et des hypothèses retenues. ...
Résumé La Méditerranée est l'une des zones les plus exposées au changement climatique. La mise en place de mesures de prévention et d'adaptation est une priorité pour la région en vue de limiter les coûts liés au climat. L'objectif de ce papier et de mettre en lumière les pertes économiques déjà supportées par les pays méditerranéens suite à des évènements extrêmes. Un modèle VAR Structurel permet de juger de la vulnérabilité des secteurs réels monétaires et financiers de quatre pays de la région, qui se caractérisent par des profils économiques différents, suite à des périodes de sécheresse ou d'inondations. L'analyse révèle que l'ensemble des pays de l'échantillon connaît d'ores et déjà des pertes économiques très importantes qui ne vont cesser de s'accentuer avec le renforcement de la puissance et de la fréquence de ces phénomènes climatiques si aucune action n'est entreprise.
... In general, the assumption of a fixed increase in temperature (2.5 • C) was a major limitation of the first-generation IAMs, which therefore could not provide an assessment of the impacts of progressive increases in global temperature. The second-generation IAMs (Mendelsohn et al. 1998;Nordhaus and Boyer 2000;Tol 2002;Stern 2006) attempted to overcome this shortcoming. They, however, produced large inconsistencies in the impact estimates. ...
... This IAM, as the one authored by Tol (2002), predicted inequality of impacts between regions, concluding that an increase in global temperature between 1.2 • C and 3.5 • C taking place until 2100 would have a very slightly beneficial overall aggregate impact, increasing WGDP by approximately 0.2%. Contrarily, in the IAM developed by Nordhaus and Boyer (2000), estimated costs were between 1.5% and 2% of WGDP under the assumption of a doubling of CO 2 levels with an increase in global temperatures of 2.5 • C in 2100. This IAM (Nordhaus and Boyer 2000) considered market and nonmarket impacts-in agriculture, other markets, sea level rise, health, amenities, human settlements, and agricultural ecosystems-and was the first to provide cost estimates of the risk of catastrophe. ...
... Contrarily, in the IAM developed by Nordhaus and Boyer (2000), estimated costs were between 1.5% and 2% of WGDP under the assumption of a doubling of CO 2 levels with an increase in global temperatures of 2.5 • C in 2100. This IAM (Nordhaus and Boyer 2000) considered market and nonmarket impacts-in agriculture, other markets, sea level rise, health, amenities, human settlements, and agricultural ecosystems-and was the first to provide cost estimates of the risk of catastrophe. Under the assumption of a temperature increase of 6 • C, implying catastrophic harm, the costs estimated by Nordhaus and Boyer (2000) model rose to 7% of WGDP. ...
Although economists have often disagreed on economic aspects of global warming, views, such as those expressed in the Stern Review, which purports global warming as a major economic problem carrying risks of disaster and demanding the use of major resources, are increasingly common. The idea that with development and technological progress, total greenhouse gas (GHG) emissions or emissions per capita would decrease has now been refuted, as a link between increased economic activity and greater emissions has been established. In general, global emissions of CO2 have increased at rates correlated with the annual increase of world GDP (WGDP). Furthermore, the annual increase in atmospheric concentrations of CO2 is correlated with the growth of WGDP. Impacts of climate change and strategies to mitigate them have often been subjected to integrated assessment models (IAMs). For global warming of above 2°C or 3°C, IAMs agree that there will be a reduction in long-term social well-being and a negative impact suffered mostly by low-income regions, but different IAMs strongly disagree on the level of human-induced damage, with estimates ranging from 10% of WGDP. Direct emissions of GHG related to agriculture are mainly emissions of CH4 and NO2. Indirect emissions of GHG from agriculture include large CO2 emissions from land-use change, i.e., conversion of natural ecosystems into cultivated land. The sum of direct and indirect emissions may represent annually one-fourth of global GHG emissions, with about three-fourths of agricultural GHG emissions coming from low-income countries. Mitigation measures focused on soil carbon sequestration by modifying practices of intensive agriculture and moving toward agroecology or low-carbon agriculture are needed. Permit trading and the implementation of a carbon tax are the major options in the public debate to mitigate climate change. The European Trading Scheme implemented in 2005 has failed to reduce emissions. A carbon tax would reduce emissions by discouraging consumption of “carbon-rich” commodities and, therefore, promoting recycling, reuse, and innovation toward production and consumption of “carbon-poor” commodities, but there have only been some timid steps to implement such a tax in some countries, and there is strong opposition to it.
... Much discussion of the economics of global warming emphasizes the issue of trade-offs in well-being between present and future generations (Nordhaus 2008;Nordhaus and Boyer, 2000;Stern, 2007). Specifically, is it socially beneficial for present and near future generations to sacrifice their own consumption to mitigate global warming for the benefit of generations yet to come? ...
... Following Nordhaus and Boyer (2000), the stock of GHG in the atmosphere, CD [ , are linear in usable output similar to the abatement cost function, [.] Λ , used in Nordhaus and Boyer (2000) and Nordhaus (2008). ...
... Following Nordhaus and Boyer (2000), the stock of GHG in the atmosphere, CD [ , are linear in usable output similar to the abatement cost function, [.] Λ , used in Nordhaus and Boyer (2000) and Nordhaus (2008). ...
... To convert a number of CO 2 ppm into our m t S , subtract 280 from it and multiply by 2.13. The presence of the stock of CO 2 in the QuoL function captures our view that environmental deterioration is a public bad in consumption (as well as in production), contrary to the modeling of Nordhaus (1994Nordhaus ( , 2008a and Nordhaus and Boyer (2000), where it is only a public bad in production. ...
... The social welfare function in Nordhaus (1991Nordhaus ( , 1994Nordhaus ( , 2008, and Nordhaus and Boyer (2000), see ...
... Comparison of paths for the environmental variables proposed byNordhaus (2008a,b) with the ones postulated in the present paper.The paths for Nordhaus "Optimal" are computed by running the program GAMS with data provided inNordhaus (2008b). The curve labeled "Optimal" ofFigure 5-6 in Nordhaus (2008a) displays emissions only for the period 2005-2105, where they coincide with those of Figure 4(a) here (except that there the emissions are per decade, and here per year). ...
Climate science indicates that climate stabilization requires low GHG emissions. Is this consistent with nondecreasing human welfare?
Our welfare index, called quality of life (QuoL), emphasizes education, knowledge, and the environment. We construct and calibrate a multigenerational model with intertemporal links provided by education, physical capital, knowledge and the environment. We reject discounted utilitarianism and adopt, first, the Intergenerational Maximin criterion,
and, second, Human Development Optimization, that maximizes the QuoL of the first generation subject to a given future rate of growth. We apply these criteria to our calibrated model via a novel algorithm inspired by the turnpike property.
The computed paths yield levels of QuoL higher than the year 2000 level for all generations. They require the doubling of the fraction of labor resources devoted to the creation of knowledge relative to the reference level, whereas the fractions of labor allocated to consumption and leisure are similar to the reference ones. On the other hand, higher growth rates require substantial increases in the fraction of labor devoted to education, together with moderate increases in the fractions of labor
devoted to knowledge and the investment in physical capital.
... The Mexican case was a pioneering one in the region, establishing the methodology designed by Galindo (2009) that was subsequently reproduced in the ECLAC approach from 2009. This first stage, in which the costs of inaction were assessed, was then supplemented by approaches that addressed sectoral impact, e.g. on agriculture (Mendelsohn, 2008;Nordhaus and Boyer, 2000;ECLAC, 2015a), and the impact on poverty. The aim was to analyse the social dimension of this impact, since this is expected to be strongest in agriculture, on which large vulnerable populations depend. ...
... (i) Dynamic integrated climate-economy (DICE) and regional integrated climate-economy (RICE) models, which are perhaps the most widely used in climate change economics (Nordhaus, 1992;Nordhaus and Boyer, 2000). 9 (ii) The policy analysis of the greenhouse effect (PAGE) model (Hope, 2006), which has received wide recognition since the Stern report (2007). ...
... Integrated assessment models that aim to calculate optimal climate policies build on the concept of a damage function. The damage function is fit to aggregated sectoral and location-specific damage estimates that are extrapolated to the global scale (Nordhaus and Boyer, 2000). Attempts to quantify the economic impacts of climate change, however, show large variability in damage estimated across regions and sectors. ...
... Our estimated damages are high compared to existing damage functions in integrated assessment models (e.g. Nordhaus and Boyer, 2000). However, the GDP-temperature relationship from the regression models are essentially linear and scale with the level of warming. ...
We estimate the impacts of climate on economic growth using Gross Regional Product (GRP) for more than 1,500 regions in 77 countries. In temperate and tropical climates, annual temperature shocks reduce GRP whereas they increase GRP in cold climates. With respect to long-term climate conditions, one degree of temperature increase reduces output by 2-3%. The effect of annual or long-term precipitation is found to be less important and less robust among specifications. For projected global warming of 4°C until 2100, we find that regions lose 9% of economic output on average and more than 20% of output in tropical regions.
... Finally, as it is expected that most costs will be felt in the short-term CEA reduces the need for a discount rate, which as discussed below can also bias CBA. 4 Knight (1921) defines risk as the property of outcomes with quantifiable probabilities, e.g. the roll of a dice, whereas uncertainty has unknown probabilities. Recognised as a 'thorny' issue back in the early 1990s (Nordhaus, 1991) the use of discount rates in CBA has received renewed attention since the publication of the Stern Review in 2007. Due to the natural inertia of the atmosphere and oceans it is imperative to cover longterm time frames when addressing climate change. ...
... This is a similar approach to that used in impact analysis studies which focus on the damage costs of climate change, both for direct (e.g. Ciscar et al., 2011, Nordhaus, 1991, Tol, 2002a), and indirect economic loss estimation (e.g. Hallegatte, 2007). ...
Drought events and their consequences pose a considerable problem for governments, businesses and individuals. Superimposed on this risk is the danger of future anthropogenic climate change. Climate models are increasingly being used to understand how climate change may affect future drought regimes. However, methodologies to quantify the type and scale of social and economic effects that could occur under these future scenarios are virtually non-existent. Consequently, this study developed a methodology for projecting and quantifying future drought risk in terms of economic damages and numbers of lives lost and affected.
In this study, historic drought events were identified in regional precipitation data using the Standardised Precipitation Index, and their magnitude quantified. Drought magnitude was linked to reported historic data on economic damages and the numbers of lives affected and lost, to create country specific economic and social drought damage functions for Australia, Brazil, China, Ethiopia, India, Spain/Portugal and the USA. Future projections of drought magnitude for 2003-2050 were modelled using the integrated assessment model CIAS (Community Integrated Assessment System), for a range of climate and emission scenarios, and applied to the drought damage functions to estimate future economic and social drought effects. Additionally, a preliminary investigation of indirect economic drought damages was conducted using the Adaptive Regional Input-Output model (ARIO).
The analysis identified large variability in the scale and trend of economic and social effects from future drought. Economic benefits projected to occur in some countries were outweighed by negative effects elsewhere, with annual losses to global GDP from drought increasing in the first half of the 21st century. The analysis suggested that severe and extreme SPI-6 and SPI-12 drought events could cause additional losses to global GDP of 0.01% to 0.25% annually. Whilst this effect on global GDP may appear small, this is considered a conservative estimate namely as the analysis is representative of six countries only; the estimates do not incorporate the possibility of successive drought events, or compounding effects on vulnerability from interactions with other extreme events such as floods. Additionally, the global economic estimates exclude indirect economic effects, and social and environmental losses; the possibility of increasing vulnerability due to changing socio-economic conditions; and the possibility of irreversible or systemic collapse of economies as, under future climate change, drought magnitude may exceed current experience and surpass thresholds of social and economic resilience. Yet importantly, even just considering direct economic effects of individual drought events on a handful of countries still resulted in a noticeable effect on global GDP.
Stringent mitigation had little effect on the increasing economic and social effects of drought in the first half of the 21st century, so in the short-term adaptation in drought ‘hot spots’ is crucial. However, stringent mitigation will be required to reduce increasingly severe drought events that are projected for the second half of the 21st century. A case study of Spain suggested that indirect economic losses increased non-linearly as a function of direct losses, amplifying total economic damages of drought. Importantly the non-linearity seen between direct and indirect economic costs suggests that the benefits of stringent mitigation policies, in terms of avoided indirect losses, may be more substantial than for direct losses in the second half of the 21st century.
The main impact of the research is its contribution to the assessment of economic and social damages from drought events through the creation and application of drought damage functions. The drought damage functions could be incorporated into wider economic assessments of climate change or integrated assessment models that currently exclude extreme weather events. The inclusion of drought related economic and social damages could help to guide appropriate levels of climate change mitigation, help to gauge the vulnerability of communities to future drought events, guide drought risk management, and inform drought adaptation strategies. The application of I-O analysis to estimate indirect economic losses from drought is a relatively new and developing area of research. The research highlights how I-O analysis could be used to provide estimates of economic drought damages under future climate change, which are more comprehensive, and useful for assessing benefits of future mitigation and adaptation strategies. Consequently, there are many gains to be seen from the continued development and application of this research methodology for drought.
... Multi-factor Regional Integrated Model of Climate and Economy System Equilibrium (MRICE-E) model established by [18] is one of IAMs to evaluate interaction between the climate change and the economic system. There are two mainlines of IAM researches, one kind of which is the programming models represented by DICE and RICE (see [22] and [23]). The other kind is the computable general equilibrium (CGE) models. ...
... We cite the definition of Lyapunov exponent from [7], which is defined in finite time system. (22) and (23). The separations between the two systems are denoted by ...
MRICE-E model is a new integrated assessment model (IAM) applied on evaluating climate change and the loss of economic welfare. Its economic module for China adopts a dynamic, nonlinear and multi-sectional CGE model. In this paper, we are concerned with the effects of perturbations in input-output coeffcients in the CGE model. In the analytical framework, some concepts such as the Lyapunov exponent and the condition number from dynamic system and numerical linear algebra are employed to measure the errors brought by perturbations of the I-O coeffcients. We finally derive the upper bound estimation of errors growth through time. To reduce the effects of the possible perturbations, some suggestions about categorization of the industrial sectors are given in the end.
... The vulnerabilities of SSA economies are investigated using econometric analysis, Stern (2007) estimated that negative consequences of climate change are sizeable and outweigh the certain costs of acting now to avoid those consequences. Nordhaus (2006), Tol (2002), Nordhaus and Boyer (2000) are among early scholars that to document the impact of climate change on economic development. Though most of these efforts focus on changes in temperature, and this primarily depends on the sensitivity of a country's economy to climate. ...
... The existing literature provides ample evidence that climate change affects economic output (GDP) (e.g. Mendelsohn et al., 1998;Mendelsohn, Dinar & Williams, 2006;Nordhaus & Boyer, 2000;Tol, 2002;Deschenes & Greenstone, 2007;Barrios, Bertinelli & Strobl, 2010). This also suggests that climate change should affect economic growth. ...
This paper attempts to empirically investigate the impact of climate change on economic development in Sub-Saharan African countries. It is a simple linear panel model using three estimation techniques, fixed effect, random effects and Maximum likelihood method. The Hausman test was also conducted to choose the most appropriate technique. In all, the paper finds that climate change impacts positively on the economic development in the region. The paper further recommends more adaptation as against mitigation measures, as many SSA countries already have some forms of indigenous adaptation measures which are relatively more manageable and less costly technological options in dealing with climate change.
... (Sausen, Shine & Wuebbles, 2006) 37 The model begins calculating current and future emissions with baseline emission concentrations from the year 1750, then adds the aviation emissions from 1940 onwards to calculate their contribution to climate change. For more on the mathematical details of this model, see Appendix 1. Nordhaus and Boyer (2000). The total impact (x line) merges with the CO 2 impact line after a few decades because the short-lived emissions no longer cause warming after a few decades. ...
... Yet such damage functions do not reflect the complexities and non-linear behavior of physical, biological and economic systems. The damage function in the FAA/APMT model is based on the climate economics model "DICE," developed by Nordhaus and Boyer (2000). For a critique of the DICE model and its assumptions, see Ackerman and Finlayson (2006). ...
... All analyses in this paper use the RICE model (Nordhaus and Boyer 2000). The RICE/DICE model family (DICE being the global counterpart) is one of three leading cost-benefit climate economy models capable of estimating the social cost of carbon (Policy Analysis of the Greenhouse Effect (PAGE) and Framework for Uncertainty, Negotiation and Distribution (FUND) are two others). ...
... First, monetary evaluation of climate damages varies with the impacts covered (Dellink 2014;Mendelsohn et al. 1998). While some studies only account for market impacts, which are those affecting agriculture, fisheries, tourism or energy sectors (Mendelsohn et al. 2006;OECD 2015;Roson and Sartori 2016), others include a wider range of components, considering also non-market impacts related to extreme events, loss of biodiversity or health effects (Bosello et al. 2009;DARA 2012a, b;Dellink 2014;Nordhaus and Boyer 2000;Stern 2007). Estimates for the former are certainly more accurate as non-market impacts are less easily measurable. ...
The UNFCCC Paris Agreement, entered into force on 4 November 2016, represents
a step forward in involving all countries in mitigation actions, even though it is
based on a voluntary approach and lacks the active participation of some major polluting
countries. The underinvestment in mitigation actions depends on market and
policy failures and the absence of price signals internalizing the economic losses
due to climatic damage. This contributes to underestimating potential benefits from
global action. In this paper we discuss how crucial is the assessment of the vulnerability
of a country to climate change in defining the threat and action strategies. A
dynamic climate-economy CGE model is developed that includes a monetary evaluation
of regional damages associated with climate change. By considering alternative
damage profiles, results show that internalizing climatic costs might change the
bargaining position of countries in climate negotiations. Consequently, damage costs
should be given greater importance when defining the implementation of a global
climate agreement.
... All analyses in this paper use the RICE model (Nordhaus and Boyer 2000). The RICE/DICE model family (DICE being the global counterpart) is one of three leading cost-benefit climate economy models capable of estimating the social cost of carbon (Policy Analysis of the Greenhouse Effect (PAGE) and Framework for Uncertainty, Negotiation and Distribution (FUND) are two others). ...
How much should the present generations sacrifice to reduce emissions today, in order to reduce the future harms of climate change? Within climate economics, debate on this question has been focused on so-called “ethical parameters” of social time preference and inequality aversion. We show that optimal climate policy similarly importantly depends on the future of the developing world. In particular, although global poverty is falling and the economic lives of the poor are improving worldwide, leading models of climate economics may be too optimistic about two central predictions: future population growth in poor countries, and future convergence in total factor productivity (TFP). We report results of small modifications to a standard model: under plausible scenarios for high future population growth (especially in sub-Saharan Africa) and for low future TFP convergence, we find that optimal near-term carbon taxes could be substantially larger.
... This is a highly debated issue given the several dimensions of climate change impacts and the uncertainty associated with alternative estimating methods ( Clarkson and Deyes, 2002;Tol, 2009Tol, , 2015). Importantly, when focusing on developing countries it is of primary relevance to expand the range of the climate change costs accounted for, considering not only the impacts on market sectors ( Ciscar et al., 2011;Nelson et al., 2014;Roson and van der Mensbrugghe, 2012) but also those on non-market ones (e.g., biodiversity loss, environment or natural catastrophes, etc.), for which the damages monetization could be particularly challenging ( Nordhaus and Boyer, 2000;Silverstein, 2011;Tol, 2002). Furthermore, as stressed by Markandya (2014), damage assessment is influenced by several uncertainties, both scientific (e.g. ...
The Paris Agreement reached during the COP21 in December 2015 represents a timid step towards burden sharing in emission mitigation involving all countries. However, given the heterogeneity of countries and their relative differences in vulnerability to climate change damage and in mitigation costs, compensating schemes are required to reach an effective agreement. This paper investigates the role of the Green Climate Fund (GCF) as a potential compensating measure for both adaptation and mitigation actions under a global climate regime. A dynamic climate-economy computable general equilibrium model (GDynEP) is developed by including both a monetary valuation of climate change damage costs and two alternative methods to determine the allocation of GCF resources among receiving countries and between adaptation and mitigation contributions. Results show that, despite the high costs associated with the implementation of mitigation actions, most developing countries would face even higher costs in case of inaction. Furthermore, the preference of a country for an allocation method is strongly influenced by its characteristics and needs. Consequently, a main policy conclusion is to design country-specific sharing rules for GCF in order to maximize country participation in a global agreement.
... with partial production elasticities α > 0, β > 0, λ > 0 and α + β + λ = 1. Output is scaled by the damage function Ω(T 1 ) based on Nordhaus and Boyer (2000) and Nordhaus (2008b). The specification assumes the percentage loss of GDP to be a quadratic function of the global mean surface temperature T 1 . ...
We consider a carbon emissions tax announced today, but implemented after a known time-lag. Before implementation, the announcement induces higher emissions than without intervention. In welfare terms, this adverse announcement effect could more than outweigh the gain after tax implementation. We quantify a ‘critical lag’ such that a shorter (longer) implementation lag is a welfare gain (loss) over nointervention. We identify resource scarcity as the main driver for a short critical lag. The model is a global Ramsey Model extended by an exhaustible carbon resource and linked to a climate model.
... As the electricity grid is built to endure maximum load, our findings have significant implications for the construction of costly peak generating capacity, suggesting additional peak capacity costs of up to 180 billion dollars by the end of the century under business-as-usual. electricity consumption | peak load | climate change | economic impacts | extreme events I ntegrated Assessment Models (IAMs) used to estimate the US government's social cost of carbon include large costs due to changes in electricity demand resulting from climate change (1)(2)(3). The Climate Framework for Uncertainty, Negotiation, and Distribution (FUND), for example, estimates the majority of the costs of climate change to result from the additional cost of cooling (4). ...
Significance
The existing empirical literature on the impacts of climate change on the electricity sector has focused on changing electricity consumption patterns. In this paper, we show that incorporating impacts on the frequency and intensity of peak load consumption during hot days implies sizable required investments in peak generating capacity (or major advances in storage technology or the structure of electricity prices), which results in substantially larger impacts than those from just changes in overall consumption.
... Costing adaptation for natural ecosystems, is based on the premise that autonomous adaptation will be inadequate (Fischlin et al., 2007) and thus human, planned adaptation is necessary to avoid the projected negative impacts on biodiversity (and ecosystem services). The possible costs of the impacts of climate change for natural ecosystems have been assessed globally by several studies, including Nordhaus and Boyer (2000) and , but these are often based on broad assumptions in the absence of relevant data. Given the difficulty of establishing the costs of impacts, no studies have established the effectiveness and costs of adaptation options in ecosystems, although some qualitative adaptation opportunities and costs were identified in the IPCC report for certain ecosystems and regions (IPCC, 2007). ...
Several recent studies have reported the costs of adapting to climate change, including for developing countries. They have similar-sized estimates and have been influential in United Nations (UN) negotiations aimed at tackling climate change. Our reassessment of one of these studies, which reports the UN Framework Convention on Climate Change (UNFCCC) approximations for 2030, suggests that they are likely to be substantial underestimates, for several reasons. First, some sectors have not been included in an assessment of cost (for example, ecosystems, energy, manufacturing, retailing, and tourism). In addition, some of the sectors that have been included have been only partially covered. Finally, the additional costs of adaptation have sometimes been calculated as “climate markups” against low levels of assumed investment. In some parts of the world low levels of investment have led to a current adaptation deficit, and this deficit will need to be made up by full funding of development, without which the funding for adaptation will be insufficient. Residual damages also need to be evaluated and reported because not all damages can be avoided due to technical and economic constraints. There is an urgent need for more detailed assessments of these costs, including case studies of costs of adaptation in specific places and sectors
... Taking all of the above, the social planner's problem can be simplified, which in turn, takes the form of dynamic optimal control problem with three state variables ܭሺݐሻ, ܪሺݐሻ and ܯሺݐሻ, and three control variables ܥሺݐሻ, ܤሺݐሻ and ܫ ு ሺݐሻ. To solve this problem the planner maximizes function (14) subject to three constraints (17), (19) and (20). Thus, the typical problem faced by a social planner is given as follows: ...
Payments for ecosystem services (PES) typically reward landowners for managing their land to provide ecosystem services that would not otherwise be provided. REDD+-Reduced Emissions from Deforestation and Forest Degradation-is a form of PES aimed at decreasing carbon emissions from forest conversion and extraction in lower-income countries. A key challenge for REDD+ occurs when it is implemented at a group, rather than an individual landowner, level. Whilst achieving a group-level reduction relies on individuals changing their interaction with the forest, incentives are not aligned explicitly at the individual level. Rather, payments are made to a defined group as a single entity in exchange for verified reduced forest loss, as per a PES scheme. In this paper, we explore how REDD+ has been implemented in one multiple-village pilot in Tanzania with the village defining the group. Our findings suggest that considerable attention has been paid towards monitoring, reporting, verification (MRV), and equity. No explicit mechanism ensures individual compliance with the village-level PES, and few villages allocate funds for explicit enforcement efforts to protect the forest from illegal activities undertaken by individual group members or by outsiders. However, the development of village-level institutions, "social fencing," and a shared future through equal REDD+ payments, factor into decisions that influence the level of compliance at the village level that the program will eventually achieve.
... With a carbon cycle simulator it is in theory possible to compute the changes over time in temperature in an additional scenario where the carbon sequestration services from European forests are affected by climate change. Taking 2050 as the reference point and applying the reduced-form carbon cycle module of the Nordhaus RICE 99 model (Nordhaus and Boyer, 2000), the reduced ability of EU forests to sequester carbon implies a world temperature which is 0.018°C higher. The change in the temperature, in turn, impacts on the economy at various levels. ...
The present study integrates Computable General Equilibrium (CGE) modelling with biodiversity services, proposing a possible methodology for assessing climate-change impacts on ecosystems. The assessment focuses on climate change impacts on carbon sequestration services provided by European forest, cropland and grassland ecosystems and on provisioning services, but provided by forest and cropland ecosystems only. To do this via a CGE model it is necessary to identify first the role that these ecosystem services play in marketable transactions; then how climate change can impact these services; and finally how the economic system reacts to those changes by adjusting demand and supply across sectors, domestically and internationally.
... Σο μοντζλο του Nordhaus (Nordhaus and Boyer 2000): Στθν μελζτθ του Nordhaus ςυμπεριλαμβάνονται οι τομείσ τθσ γεωργίασ, τθσ δαςοκομίασ, τθσ ενζργειασ, του νεροφ, των καταςκευϊν, τθσ ιχκυοτροωίασ, των παράκτιων ηωνϊν, τθσ ψυχαγωγίασ, τθσ κνθςιμότθτασ από αςκζνειεσ και τθν μόλυνςθ, και των οικοςυςτθμάτων. Ρεριλαμβάνει επίςθσ, τισ πρωτοπόρεσ για τθν εποχι που ζγινε θ μελζτθ εκτιμιςεισ του οικονομικοφ κόςτουσ των καταςτροωικϊν ςυνεπειϊν τθσ κλιματικισ αλλαγισ. ...
... Sectoral studies examine climate's role in specific sectors, primarily agriculture (Mendelsohn et al., 1994;Schlenker et al., 2006;Deschênes and Greenstone, 2007;Maddison et al., 2007) and health (Bosello et al., 2006), and then attempt to construct an overall prediction of climate change impacts by aggregating these sectors. Faced with these different sectoral channels, the IAM approach takes some of these channels, specifies their effects and then adds them up (e.g., Mendelsohn et al., 2000;Nordhaus and Boyer, 2000;Tol, 2002;Nordhaus, 2010). The IAM approach is based on many assumptions about which effects to include, how each of these effects operates and how to add them up. ...
Climate and institutions might be crucial in lowering the vagaries of climate change impacts in terms of productivity. This study measures the relationships of productivity measures adjusted for the regulation of carbon emission and institutions together with climate change throughout the world. This paper finds that there is higher potential for reduction of CO2 emissions in developing countries at lower cost. However, the cost to reduce emissions lowers their growth potential in terms of lost productivity growth. Better institutions help to lower the negative impacts of climate change by improving the process of technological adoption in developing countries. Climate change reduces the productivity growth in developing countries by lowering the process of technological adoption, and better institutions result in higher productivity.
... Such a positive effect has already been confirmed by the EU [Jaeger et al., 2011]. [1995] 2.5 -1.9 -8.6 a , -5.2 b -1.5 c Nordhaus [1994] 3.0 -1.33 -1.0 Nordhaus and Yang [1996] 2.5 -1.7 -2.4 d Plambeck and Hope [1996] 2.5 -1.3 (-0.6 to -5.1) -4 (-1 to -4.8) e -1.2 (-1.4 to -0.8) Nordhaus and Boyer [2000] 2.5 -1.50, -1.88 f -0.22 -0.45 Tol [2002] 1.0 ...
Consensus and disagreements between China and the U.S. are the key factors influencing the direction that global climate negotiation is heading for. By taking into account the uncertainties of temperature increment and its impact on GDP growth, together with the positive, negative and spillover effects of climate change investment on utility, a strategic simulation model including China and the U.S. is developed. Based on utility and game theory, a sensitivity analysis is conducted. The results show that the first-mover disadvantage exists in the game, and the scale of each country’s climate change investment under non-cooperative scenario is too small to ensure the 2°C target. To guarantee the stability and win-win basis for global cooperation, the simulation results also indicate that it makes sense to assist and compensate technology transfer and funding to China.
Citation: Jin, Z.-G., W.-J. Cai, and C. Wang, 2014: Simulation of climate negotiation strategies between China and the U.S. based on game theory.Adv. Clim. Change Res.,5(1), doi: 10.3724/SP.J.1248.2014.034.
... Costing adaptation for natural ecosystems, is based on the premise that autonomous adaptation will be inadequate (Fischlin et al., 2007) and thus human, planned adaptation is necessary to avoid the projected negative impacts on biodiversity (and ecosystem services). The possible costs of the impacts of climate change for natural ecosystems have been assessed globally by several studies, including Nordhaus and Boyer (2000) and , but these are often based on broad assumptions in the absence of relevant data. Given the difficulty of establishing the costs of impacts, no studies have established the effectiveness and costs of adaptation options in ecosystems, although some qualitative adaptation opportunities and costs were identified in the IPCC report for certain ecosystems and regions (IPCC, 2007). ...
Several recent studies have reported adaptation costs for climate change, including for developing countries. They have similar-sized estimates and have been influential in discussions on this issue However, the studies have a number of deficiencies which need to be transparent and addressed more systematically in the future. A re-assessment of the UNFCCC estimates for 2030 suggests that they are likely to be substantial under-estimates. The purpose of this report is to illustrate the uncertainties in these estimates rather than to develop new cost estimates, which is a much larger task than can be accomplished here. The main reasons for under-estimation are that: (i) some
sectors have not been included in an assessment of cost (e.g. ecosystems, energy, manufacturing, retailing, and tourism); (ii) some of those sectors which have been included have been only partially covered; and (iii) the additional costs of adaptation have sometimes been calculated as ‘climate mark-ups’ against low levels of assumed investment. In some parts of the world low levels of investment have led to a current adaptation deficit, and this deficit will need to be made good
... Costing adaptation for natural ecosystems, is based on the premise that autonomous adaptation will be inadequate (Fischlin et al., 2007) and thus human, planned adaptation is necessary to avoid the projected negative impacts on biodiversity (and ecosystem services). The possible costs of the impacts of climate change for natural ecosystems have been assessed globally by several studies, including Nordhaus and Boyer (2000) and , but these are often based on broad assumptions in the absence of relevant data. Given the difficulty of establishing the costs of impacts, no studies have established the effectiveness and costs of adaptation options in ecosystems, although some qualitative adaptation opportunities and costs were identified in the IPCC report for certain ecosystems and regions (IPCC, 2007). ...
This is an evaluation of estimates of the costs of adaptation made by the United Nations Framework Convention on Climate Change (UNFCCC) in 2007 and by some preceding studies (UNFCCC, 2007; Stern, 2006; World Bank, 2006; Oxfam, 2007; UNDP, 2007). The costs have been used as the basis for discussion regarding the levels of investment needed for adaptation to climate change. They have been influential in the debate concerning funding for climate change and it is important, therefore, that such estimates of cost are as robust as possible. The purpose of this report is to assess these estimates and consider ways to improve them in the future. The UNFCCC report was based on a set of commissioned studies (UNFCCC background papers, 2007). These took place over a short period dictated by the timescale of the UNFCCC process and the need to report the results to the next Conference of the Parties, so there was no time for independent review of a draft of the report. It is important, therefore, to recall the objectives of the UNFCCC report and the caveats that the authors ascribed to its conclusions. The study was a preliminary one of the funding, especially the public funding, estimated to be needed in the year 2030 to meet the challenge of climate change. It is not a study of the full cost of avoiding all damage. It does not cover some important activities, and other activities are only partially covered. The authors suggest that their estimates are probably under-estimates and that much more study is needed. The purpose of this evaluation is to consider the relative strengths and weaknesses of the UNFCCC study, so that we can determine what next steps can be taken to improve our understanding of the issue. It is not our purpose here to develop a revised set of numbers for the funding of adaptation to climate change, because we believe this requires detailed study
... With a carbon cycle simulator it is in theory possible to compute the changes over time in temperature in an additional scenario where the carbon sequestration services from European forests are affected by climate change. Taking 2050 as the reference point and applying the reduced-form carbon cycle module of the Nordhaus RICE 99 model (Nordhaus and Boyer, 2000), the reduced ability of EU forests to sequester carbon implies a world temperature which is 0.018°C higher. The change in the temperature, in turn, impacts on the economy at various levels. ...
This paper contributes to the ongoing debate by addressing the economic valuation of the induced climate change impacts on European biodiversity and ecosystem services. Firstly, we evaluate the impacts of climate change on biodiversity and ecosystem services, building upon the Millennium Ecosystem Assessment (MA) conceptual framework, and encompasses the determination of the role of biodiversity in the creation of provisioning, regulating and cultural services. Secondly, we develop an integrated, hybrid valuation approach to assess the economic magnitude of the involved impacts. Finally, we extend state-of-the-art general equilibrium model by introducing a new 'ecosystem' sector into the underlying "market-based" general equilibrium assessment. The estimation results show that induced climate change impacts on biodiversity and ecosystem services involve significant welfare losses, of about 145-170 billion US$ and therefore autonomous adaptation cannot be invoked as the solution to climate change. Furthermore, the distribution of the impacts varies widely according to the nature of the ecosystem service under consideration and to the geo-climatic region. Thus, the decision of including biodiversity and ecosystem services is expected to be a key component of the future climate policy framework, along with the evaluation of exisiting mitigation and planned adaptation strategies.
... These are highly simplistic assumptions but they are common in the literature (e.g., Fankhauser, 1994;Kverndokk, 1994;Tol, 2002;Nordhaus and Boyer, 2000;de Bruin, Dellink and Tol 2009;de Bruin, Dellink and Agrawala 2009; for a critique see Pindyck 2013). ...
This paper discusses the implications of climate change for official transfers from rich countries (the North) to poor countries (the South). The concern is no longer just about poverty alleviation (i.e. income in the South), but also about global emissions and resilience to climate risk. Another implication is that traditional development transfers to increase income are complemented by new financial flows to reduce greenhouse gas emissions (mitigation transfers) and become climate-resilient (adaptation transfers). We find that in the absence of institutional barriers to adaptation, mitigation or development, climate change will make isolated transfers less efficient: A large part of their intended effect (to increase income, reduce emissions, or boost climate-resilience) dissipates as the South reallocates its own resources to achieve the mitigation, adaptation and consumption balance it prefers. Only in the case of least-developed countries, which are unable to adapt fully due to income constraints, will adaptation support lead to more climate resilience. In all other cases, if the North wishes to change the balance between mitigation, adaptation and consumption it should structure its transfers as “matching grants”, which are tied to the South’s own level of funding. However, the North can also provide an integrated transfer package that recognizes the combined climate and development requirements of the South.
... The diversities of industry structures and choices of competitive industries may affect the stabilities and risk resistance capacities for each country under different temperature increment scenarios. Compared with developed countries, the developing countries, especially the African and Southeast Asian nations may suffer more sever loss with higher uncertainty for their inadequate precaution and high dependence on the tender agriculture industry (Hope, 2006;Maddison, 2003;Nordhaus and Boyer, 2000;Tol, 2002). Such risk exposures connected with individual properties may attract more attention for their own interests and trigger their subjective initiatives. ...
The common and individual uncertainties are the main factors influencing the motivation of climate change investment for each country. By distinguishing and involving the three effects of climate change investment on utility, strategic game model with rationality hypothesis is proposed and simulated to evaluate the relationship between the investment motivation and individual risk exposure due to individual uncertainties. The positive correlation between the risk exposure and investment motivations is confirmed. The negative influences of risk exposure on utilities of game equilibriums whatever the dynamic strategies are also tested. Upgrade of the structure of economy and enhancement of the anti‐fluctuation capacity for the economy shock of global warming deserve to be the focus and priority.
... There are many studies computing damage values for CO 2 , e.g. Tol (1999), Fankhauser (1995, Nordhaus and Boyer (2000) and Stern (2006). Tol (2008) conducts a meta-analysis of "the social cost of carbon" from 211 estimates, and finds that a median estimate is $20 per tonne C. Using an exchange rate of $1 = 6 SEK, this equals 0.12 SEK/kg C. The latest assessment is the Stern review (Stern 2006). ...
... These two effects of inequality aversion work in different directions, and the impacts of stronger preferences for equity on the level of greenhouse gas abatement are ambiguous. The problem is that global models used to determine the optimal level of greenhouse gas emissions focus on the first effect (intergenerational), implying that stronger preferences for equality actually induce low abatement (see e.g., Nordhaus and Boyer, 2000). Thomas Schelling suggested one solution to this (see, e.g., Schelling, 1992) by arguing that development of the poor region is the best way to reduce the impacts of global warming. ...
This paper focuses on two equity aspects of climate policy, intra- and intergenerational equity, and analyzes the implications of equity preferences on climate policy, and on the production and consumption patterns in rich and poor countries. We develop a dynamic two-region model, in which each region suffers from local pollution and global warming, but also has an inequality aversion over current consumption allocations. Inequality aversion over consumption lifts the consumption path of the poor region, while it lowers the consumption path of the rich region, which must take a greater share of the climate burden. Therefore, a high abatement in the rich region is met by more pollution in the poor region, thus justifying carbon leakages. Moreover, the poor region may even be allowed to increase emissions relative to business as usual under the optimal climate policy. These effects are reinforced when introducing transfers between the regions. However, loans to poor countries to reduce inequality may result in a debt crisis, and debt remittance may be part of the optimal climate policy.
... 3 Examples of Integrated Assessment Models can be found in Mendelsohn, Morrison, Schlesinger & Andronova (2000) and Nordhaus & Boyer (2000). ...
This paper analyzes how variation in weather could aect inequality within developing countries. It bridges literatures on the macroe- conomic eects of climate change, which analyze world income distribution, and the microeconomic work on the impacts of weather variation on agri- cultural income. Using data from 6 villages in India from 2002 to 2004, we find that, under a short term climate change scenario, total income decreases by 5.2 to 5.4 percent. These eects are robust to the inclusion of agricul- tural prices and fixed eects by household and year. Crop, agricultural labor market, and other income sources respond negatively to potential climatic change, while non-farm income increases. A Gini decomposition shows crop, non-farm, and other income to be inequality-increasing, while increases in agricultural labor market income, livestock, and migration income decrease inequality. Even under the most optimistic climate change scenario, inequal- ity in the study region may increase by more than 4 percent in the short term, and up to 6 percent in the longer term. A more pessimistic scenario predicts increases in inequality of over 11 percent in the longer term.
... The damages to human health due to climate change is however part of the value for global warming, which includes all sorts of damages, e.g. humanmade capital (buildings etc), land loss and human health (Nordhaus and Boyer, 2000;Stern, 2006). The acidification and eutrophication categories in Ecotax and Ecovalue include recreational values as well as some biodiversity aspects and ecosystem productivity. ...
In environmental systems analysis tools such as cost-benefit analysis (CBA), life-cycle assessment (LCA) and Environmental Management Systems (EMS), weighting is often used to aggregate results and compare different alternatives. There are several weighting sets available, but so far there is no set that consistently use monetary values based on actual or hypothetical market valuation of environmental degradation and depletion.In this paper, we develop a weighting set where the values are based on willingness-to-pay estimates for environmental quality, and market values for resource depletion. The weighting set is applied to three case studies and the outcome is compared with the outcomes from three other weighting sets, Ecotax02, Ecoindicator99 and EPS2000. We find that the different sets give different results in many cases. The reason for this is partly that they are based on different values and thus should give different results. However, the differences can also be explained by data gaps and different methodological choices. If weighting sets are used, it is also important to use several to reduce the risk of overlooking important impacts due to data gaps. It is also interesting to note that though Ecovalue08 and Ecotax02 give different absolute values, the results are very similar in relative terms. Thus the political and the individual willingness-to-pay estimates yield a similar ranking of the impacts.
... Costing adaptation for natural ecosystems, is based on the premise that autonomous adaptation will be inadequate (Fischlin et al., 2007) and thus human, planned adaptation is necessary to avoid the projected negative impacts on biodiversity (and ecosystem services). The possible costs of the impacts of climate change for natural ecosystems have been assessed globally by several studies, including Nordhaus and Boyer (2000) and , but these are often based on broad assumptions in the absence of relevant data. Given the difficulty of establishing the costs of impacts, no studies have established the effectiveness and costs of adaptation options in ecosystems, although some qualitative adaptation opportunities and costs were identified in the IPCC report for certain ecosystems and regions (IPCC, 2007). ...
... First, following Foley (2009), the simulations reported in the slide exemplify the theoretical point that from a welfare economics point of view global warming is an externality, the correction of which (whether through direct controls, carbon taxes, or a cap-and-trade system) allows a Pareto-improvement across generations. This point of view is in sharp contrast to the presentation in many economics discussions (for example Nordhaus, 2008;Nordhaus and Boyer, 2000) that frame the global warming policy problem in terms of a tradeoff between the interests of current and future generations. I thought this perspective might be welcome to the workshop audience in substituting "gains in efficiency and welfare" for "sacrifices of economic growth and standard of living" in the political debate over measures to mitigate global warming. ...
Geo-scientists and economists carry on discussions of central problems of economic growth, including global warming and resource exhaustion, on the basis of sharply diverging assumptions about limits to economic growth. These divergent assumptions can be traced at least to the debate over N. Georgescu-Roegen's work on entropy and economic production. Limited evidence indicates that economic growth sufficient to raise world average productivity to current European standards is at the edge of feasibility in terms of renewable energy. Rosy expectations that information technology can produce a “new” economy not subject to the resource and social limitations of traditional capitalism confuse new methods of appropriation of surplus value as rent with new methods of producing value. While the world economy will almost certainly transform from the small population, low labor productivity, rich fossil fuel-based resource base of the industrial revolution to a large population, high productivity, resource limited pattern, the social relations accompanying this change are far from certain or determined.
English:
The study deals with the question whether important economic and political decisions can be made in a sufficiently adequate manner on the background of existing economic models or whether environmental and welfare indicators should play a larger role in economic model-ling to satisfy current problems in a better way. In a first step, indicators and indices are identi-fied that seems to be appropriate. However, in the following text there are no own modelling ac-tivities that could be reported; but in a second step, more than thirty models are categorized into four classes of models – equilibrium, macroeconomic, system dynamic and actor based models – and eight models are analyzed in detail concerning the integrability of environment and welfare indicators. The study concludes with a summary where the conditions and possibilities of a fur-ther development of economic models into the dimensions of environment and welfare are dis-cussed and situated into a political framework.
German:
Wirtschaftliche und politische Entscheidungsprozesse werden durch Ergebnisse ökonomischer Modelle gestützt. Um die heutigen Problemlagen besser abbilden zu können, sollten in diesen Modellen Umwelt- und Wohlfahrtsindikatoren viel stärker verankert werden. In der Studie wurden zunächst Indikatoren und Indices identifiziert, die für diesen Zweck geeignet erscheinen. Anschließend wurden über 30 Modelle in vier Modellklassen – Gleichgewichtsmodelle, makroökonomische Modelle, systemdynamische und agentenbasierte Modelle – in Bezug auf die Integrierbarkeit von Umwelt- und Wohlfahrtsindikatoren kategorisiert. Aus der Analyse werden Schlussfolgerungen für die Bedingungen und Möglichkeiten einer Weiterentwicklung der Modelle in Richtung Umwelt und Wohlfahrt gezogen.
Climate policies making are strongly impacted by the approach of damage evaluation. China is leading carbon dioxide (CO2) emissions in the world, and has agreed with Paris agreement to reduce CO2 emissions. China is also expected to be negatively impacted by climate change. One of main concerns is how to assess and monetize the climate damage from country-specific level. This paper builds a model comprising two approaches of damage evaluation and assesses China’s mitigation and adaptation responses by 2100 for both of no policy and Paris agreement policy. It has the following findings: First, the emissions pathway and nonfossil fuel consumption share of total energy consumption differs slightly between the two approaches of damage evaluation. Second, with the Burkes approach, the climate damage avoided by adaptation is increasingly higher than that by mitigation when investment in adaptation starts to be massively injected with faster increasing trend by 2045. Third, climate expenses should be invested more to address higher level of the climate damage evaluated by the Burkes approach than by the Mannes approach. Fourth, the main findings in this paper are robust in terms of uncertainties in the parameters of damage function.
This chapter looks at what we can learn about possible Loss and Damage
(L&D) and finance needed to address it using economic Integrated Assessment Models
(IAMs), which calculate economically optimal responses to climate change
mitigation
and adaptation
in terms of maximising welfare (GDP) a few decades into the future. Interpreting modelled residual damages as unavoided L&D, a few results emerge from the analysis. First, residual damages turn out to be significant under a variety of IAMs, and for a range of climate scenarios. This means that if adaptation
is undertaken optimally, there will remain a large amount of damages that are not eliminated. Second the ratio of adaptation
to total damages varies by region, so residual damages also vary for that reason. Third, residual damages will depend on the climate scenario as well as the discount rate and the assumed parameters of the climate model (equilibrium climate sensitivity) as well as those of the socioeconomic model (damage functions). These uncertainties are very large and so will be any projections of residual damages in the medium to long term. The chapter raises other aspects that could influence estimates of L&D. An important one is that, since actual adaptation
is very unlikely to be optimal, the amount of Loss and Damage
may be influenced by the sources from which adaptation
and Loss and Damage
programs are financed. The level and structure of current limited financial resources is likely to result in adaptation
that is significantly below the optimal level and thus result in significant L&D.KeywordsIntegrated Assessment ModelsLoss and DamageResidual damageAdaptationMitigation
We study how the scarcity of non-market goods, such as environmental amenities, affects the economic appraisal of climate policy. To this end, we perform a comprehensive analysis of the change in relative prices of non-market goods in the widespread climate-economy model DICE. We show that DICE already contains relative prices implicitly and that the impact of the scarcity of non-market goods on climate policy evaluation is therefore more pervasive than previously suggested. We calibrate DICE based on empirical evidence and propose a plausible range for relative price changes. The uncertainty is substantial, with relative price changes ranging from 1.3 to 9.6 percent in 2020. For our central calibration, the relative price change amounts to 4.4 percent in 2020. Neglecting relative prices leads to an underestimation of the social cost of carbon in 2020 of more than 40 percent. Accounting for these changes is equivalent to a decrease in pure time preference by more than a half percentage point. Our findings support initiatives to consider relative prices in governmental project appraisal and offer guidance for the evaluation of climate policy.
After the successful conclusion of the Paris Climate Conference (Conference of the Parties (COP) 21), countries are now attempting to identify implementation measures. An important consensus has been reached on the necessity of putting in place both mitigation and adaptation measures. In this context, this article builds a three-sector China and rest of the world model based on the DE-carbonization Model with Endogenous Technologies for Emission Reductions (DEMETER) and World Induced Technical Change Hybrid (WITCH) models. It assesses China’s mitigation and adaptation investment strategies by 2050 with an optimization including climate externalities. By making the 450 ppm target and China’s 2030 CO2 emissions peak exogenous, it assesses two scenarios: (1) investment only in mitigation and (2) investment in both mitigation and adaptation. The article finds the following: First, the policy package with investment in both mitigation and adaptation can ensure lower CO2 emissions and avoid more climate damage. Second, investment in adaptation should be massively injected by around 2040, whereas mitigation efforts should be continuous. Third, the CO2 emissions peak in the tertiary sector should come prior to 2030 while the emissions pathway of the secondary sector could be allowed to increase slowly until 2035.
Policy relevance
• The necessity of engaging in both mitigation and adaptation has been widely accepted since the Paris Climate Conference (COP21), yet few studies exist in this regard concerning China.
• Substantial investment in adaptation needs to be introduced by 2040 while the investment on mitigation should peak by 2030.
• The CO2 emissions peak in the tertiary sector would be reached prior to 2030 while the peak in the secondary sector is achieved around 2035.
• This provides an alternative in China to the existing argument of an earlier peak in the secondary sector.
This chapter proposes a new scheme for global carbon mitigation cooperation. The scheme meets three requirements. Firstly, meet the emission reduction requirements. This chapter proposes a new scheme for global carbon mitigation cooperation. The scheme meets three requirements. Firstly, meet the emission reduction requirements. In specific, global temperature should not exceed 2 °C in 2100. Secondly, match the principle of Pareto improvement. Thirdly, keep fairness as much as possible. Based on these requirements, sensitive analysis is given for the important parameter, the discount rate. The scheme is cheese by the integrated assessment model using game theory, EMRICES. The results show that the alteration of discount rate will not change the no-cooperation Nash equilibrium but it does affect the Pareto improvement solution.
This section introduces the main methodologies used by the climate change impact science to assess economically the consequences of climate change. Furthermore it presents the main findings of this literature focusing specifically on possible future economic consequences of climate change in the Mediterranean area emphasizing the new knowledge in this field brought by the CIRCE project. The robust finding of the literature points out a low economic vulnerability of Euro-Mediterranean countries (with losses ranging from −0.25 to −1.4% of GDP for extreme temperature scenarios or even slight gains), and a higher vulnerability of North African and Eastern-Mediterranean countries (of roughly 2% of GDP by the mid of the century). Against this background the CIRCE project proposes one of the first attempts to perform a detailed integrated impact assessment exercise focusing on the Mediterranean area. With the IPCC A1B SRES scenario as reference, impacts related to energy demand, sea-level rise and tourism, have been economically assessed by a general equilibrium model. The Mediterranean as a whole loses 1.2% of GDP with the Northern-Mediterranean countries clearly less vulnerable than the Southern-Mediterranean ones. Among the former the average loss in 2050 is 0.5% of GDP, while among the latter this more than doubles. Particularly adversely affected are Cyprus, Albania and the Eastern Mediterranean region (−1.6, −2.4, −1.5% of GDP respectively in 2050). In terms of impact types, tourism and sea-level rise are clearly the most threatening, while GDP impacts induced by demand re-composition of energy use is less of an issue and often positive.
This chapter analyzes the types of uncertainties involved in climate modeling. It is shown that as regards climate change, unquantified uncertainties can neither be ignored in decision making nor be reduced to quantified ones by assigning subjective probabilities. This poses central problems as therefore the well-known elementary as well as probabilistic decision approaches are not applicable. While a maximized-utility approach has to presuppose probability estimates that are not at hand for climate predictions, the precautionary principle is not capable of adequately implementing questions of fairness between different nations or generations. Thus an adequate response to global warming must deal with an intricate interplay between epistemic and ethical considerations. The contribution argues that the epistemic problems involved in modeling the climate system are generic for modeling complex systems. Possible paths for future research to circumvene these problems are adumbrated.
It has become commonly accepted that a successful climate strategy should compound mitigation and adaptation. The accurate combination between adaptation and mitigation that can best address climate change is still an open question. This paper proposes a framework that integrates mitigation, adaptation, and climate change residual damages into an optimisation model. This set-up is used to provide some insights on the welfare maximising resource allocation between mitigation and adaptation, on their optimal timing, and on their marginal contribution to reducing vulnerability to climate change. The optimal mix between three different adaptation modes (reactive adaptation, anticipatory adaptation, and investment in innovation for adaptation purposes) within the adaptation bundle is also identified. Results suggest that the joint implementation of mitigation and adaptation is welfare improving. Mitigation should start immediately, whereas adaptation somewhat later. It is also shown that in a world where the probability of climate-related catastrophic events is small and where decision makers have a high discount rate, adaptation is unambiguously the preferred option. Adaptation needs, both in developed and developing countries, will be massive, especially during the second half of the century. Most of the adaptation burden will be on developing countries. International cooperation is thus required to equally distribute the costs of adaptation.
Climate Change is one of the biggest challenges the human race is being encountered in this century. The continuous rise in average temperature, extreme weather occurrence, occurrence of drought and floods, intensity and frequency of storms, change in precipitation, and so many other identified and unidentified effects are giving birth. In upcoming years, the climate change would be more severe and challenging, and as a result, it would fetch the attention of whole world towards itself. In this scenario, the different policy options and techniques evolved to cope the climatic changes and its effects on society, economy and nature. The lack of response of carbon emitters in mitigation has aid to raise temperature continuously. This time adaptation is getting more and more attention to reduce the socio-economic vulnerability and risks associated with the climate change. Adaptation is unavoidable. This paper enumerates the literature review of Adaptation. Although this term is not new but it has been focused in last few years as one of the key responses to climate change. How and why adaptation is necessary and its implications in coping the climate change challenges and what progress has been made in past and present.
We explore a framework that could be used to assign quantitative allocations of emissions of greenhouse gases (GHGs), across all countries, one budget period at a time, as envisioned at the December 2011 negotiations in Durban. Under the two-part plan: (i) China, India, and other developing countries accept targets at Business as Usual (BAU) in the coming budget period, the same period in which the US first agrees to cuts below BAU; and (ii) all countries are asked in the future to make further cuts in accordance with a common numerical formula to all. The formula is expressed as the sum of a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. This paper builds on our previous work in many ways. First we update targets to reflect pledges made by governments after the Copenhagen Accord of December 2009 and confirmed at the Cancun meeting of December 2010. Second, the WITCH model, which we use to project economic and environmental effects of any given set of emission targets, has been refined and updated to reflect economic and technological developments. We include the possibility of emissions reduction from bio energy (BE), carbon capture and storage (CCS), and avoided deforestation and forest degradation (REDD+) which is an important component of pledges in several developing countries. Third, we use a Nash criterion for evaluating whether a country's costs are too high to sustain cooperation.
This paper uses historical fluctuations in temperature within countries to identify its effects on aggregate economic outcomes. We find three primary results. First, higher temperatures substantially reduce economic growth in poor countries. Second, higher temperatures may reduce growth rates, not just the level of output. Third, higher temperatures have wide-ranging effects, reducing agricultural output, industrial output, and political stability. These findings inform debates over climate's role in economic development and suggest the possibility of substantial negative impacts of higher temperatures on poor countries. (JEL E23, O13, Q54, Q56)
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