No full-text available
To read the full-text of this research,
you can request a copy directly from the author.
A Question of Balance. Weighing the Options on Global Warming Policies
Abstract
As scientific and observational evidence on global warming piles up every day, questions of economic policy in this central environmental topic have taken center stage. But as author and prominent Yale economist William Nordhaus observes, the issues involved in understanding global warming and slowing its harmful effects are complex and cross disciplinary boundaries. For example, ecologists see global warming as a threat to ecosystems, utilities as a debit to their balance sheets, and farmers as a hazard to their livelihoods. In this important work, William Nordhaus integrates the entire spectrum of economic and scientific research to weigh the costs of reducing emissions against the benefits of reducing the long-run damages from global warming. The book offers one of the most extensive analyses of the economic and environmental dynamics of greenhouse-gas emissions and climate change and provides the tools to evaluate alternative approaches to slowing global warming. The author emphasizes the need to establish effective mechanisms, such as carbon taxes, to harness markets and harmonize the efforts of different countries. This book not only will shape discussion of one the world's most pressing problems but will provide the rationales and methods for achieving widespread agreement on our next best move in alleviating global warming.
... No primeiro caso, limites de emissão são fixados pela legislação, ao passo que políticas econômicas são baseadas em incentivos contrários à emissão, como taxas, impostos, subsídios ou mesmo a instauração de mercados de carbono. A preferência por políticas do segundo tipo é comumente justificada por sua maior flexibilidade e eficiência econômica, que levaria ao objetivo desejado com menores custos, dadas as diferenças observadas nas estruturas produtivas dos diversos setores da economia em termos de intensidade de emissões, além de fomentar a busca por novas tecnologias ambientalmente satisfatórias (Nordhaus, 2008). ...
... Para mais detalhes do assunto, ver Knetsch e Sinden (1984). Nordhaus (2008) também classifica as políticas econômicas de mitigação de emissões de acordo com objetivos pré-estabelecidos. Estes incluem os alcances descritos adiante. 1) Níveis ótimos de emissões e preços de carbono, em termos de eficiência econômica. ...
... Em anos mais recentes, a literatura tem se dedicado a estudar os efeitos de políticas de redução de emissão de GEE (Manne e Richels, 1991;Jorgenson e Wilcoxen, 1993;Weyant, 1993;Viguier, Babiker e Reilly, 2003;Springer, 2003;Manne, 2005;Nordhaus, 2008;Rose, 2009;Clarke et al., 2009). Para a economia dos Estados Unidos e utilizando um modelo EGC intertemporal, Jorgenson e Wilcoxen (1993), por exemplo, comparam os efeitos de taxas baseadas no conteúdo de carbono dos combustíveis fósseis com aqueles observados para taxas relacionadas ao conteúdo de energia desses combustíveis, assim como taxas ad valorem sobre seu uso. ...
Este artigo tem como objetivo simular os prováveis impactos econômicos decorrentes da proposta brasileira na XXI Conferência das Partes (COP21) de reduzir em 37% suas emissões de gases de efeito estufa (GEEs), em relação aos níveis de 2005, até 2025. Para tal, utiliza-se um modelo de equilíbrio geral computável (EGC) dinâmico-recursivo com módulos de especificação energética e ambiental que permitem agrupamentos por agente emissor (combustíveis, indústrias e famílias) e atividade emissora. De forma geral, os resultados indicam um decréscimo acumulado de -3,3% do produto interno bruto (PIB) real, em 2025, em relação ao cenário-base. Conforme esperado, os setores com mais dependência em relação à queima de combustíveis, ou com elevada intensidade de emissões nos seus processos produtivos, seriam os mais negativamente afetados.
... Measuring the net change in environmental effects is complicated because of various pollutants and carbon dioxide. Many studies focus on the carbon effect (Annicchiarico & Di Dio, 2015;Nordhaus, 2008). However, considering only one specific effect in the macro model implies considering the lower limit of the environmental effect, which may not affect the basic conclusions (Pan et al., 2020b). ...
... The negative effect of carbon stock equals the product of potential output and the degree of weakening ( Γ M t ). Based on the DICE-2007 model (Nordhaus, 2008), Γ M t is written as 0 + 1 M t + 2 M 2 t . Overall, this model can dynamically capture how the energy transition affects economic sustainability. ...
... Table 5 presents the composition of the equilibrium set. According to Nordhaus (2008), the actual global carbon stock in 2005 was approximately 800 Gt. There is a nuance between the actual and equilibrium values, showing the model's ability to capture the influence chain from China's energy transition to global carbon stock and then to China's GS. ...
Optimizing energy transition policies while considering economic sustainability has been a crucial research topic. However, it is difficult to build a quantitative model to identify the relationship between energy transition and the regime-switching process from an “unsustainable regime” to a “sustainable regime.” Here, we construct a dynamic stochastic general equilibrium model embedded in economic sustainability and energy transition while relaxing the assumption of “zero emissions” of renewable energy. This model can evaluate when qualitative regime changes occur, changes in the maximum degree of economic unsustainability, and differences in system responses to different energy strategies. Applying this model to China, we find that the country is currently in an unsustainable regime and is expected to switch to a sustainable regime due to energy transition by 2030. Importantly, we find that the path-dependent and proactive energy strategies have asymmetric effects on the regime-switching process. These findings can provide a basis for optimizing China’s energy transition, and the model can be extended to related research in major carbon-emitters.
... Carbon taxation can be manifold and includes a Pigouvian tax that addresses negative externalities (Acemoglu et al., 2019;Nordhaus, 2008;. Taxation leads to a repricing of goods, services and substitution effects that can nudge consumers into a transition of energy sources and consumer habits that are in sync with environmental protection. ...
... In the macroeconomic growth literature regarding government actions, a zero-emissions tax is not necessarily considered welfareimproving but appears as one of the most powerful means to curb harmful emissions and set positive market incentives for a transition to renewable energy (Hansen & Sato, 2016;IPCC, 2007;Mankiw, 2007;Nordhaus, 2008Nordhaus, , 2013Uzawa, 2009). A substantial increase in green investments is still required to reach the Paris Agreement's emission targets . ...
... Problems such as free riders occur, meaning that if one party removes pollution and environmental damages, other parties can enjoy a stable climate without costs (Di Bartolomeo et al., 2021). If one country pursues climate change mitigation, other countries can benefit from the stable climate and avoidance of natural disasters without any own efforts, which therefore leads to myopic first moverhesitancy, inter-temporally suboptimal choices and international political and diplomatic tensions (Nordhaus, 2008(Nordhaus, , 2013. ...
This chapter provides an overview of recent resilience finance developments that embrace the relation of financial stability in harmony with the environment. Sprung out of SRI and socially conscientious market acts that are of benefit to the greater public, green finance marries the idea of leveraging financial assets for environmental causes. The United Nations Global Compact and the UN Environment Programme (UNEP) Finance Initiative launched the Principles for Responsible Investment (PRI) in April 2006 at the New York Stock Exchange (NYSE) to ingrain social responsibility in investment decision-making of asset owners and financial managers. In February 2008, the UN Conference on Trade and Development (UNCTAD) incepted the ‘Responsible Investment in Emerging Markets’ initiative at the Geneva PRI office. The United Nations Environment Programme Finance Initiative (UNEP FI), the Equator Principles, The Green Bond Principles and corporate reporting standards led initiatives such as Global Reporting Initiative (GRI) and Integrating Reporting (IR). In the wake of the 2015 inception of the UN Sustainable Development Goals (UN SDGs), the UN targeted at finding finance to embrace environmental, social and governance issues in light of fiduciary duty. The United States Stock Exchange Commission seeks to further support the PRI and consider innovative ways how to imbue a greening of the economy in financial markets. A group of central banks and supervisors launched the Networking for Greening the Financial System (NGFS) in 2017 to contribute to the analysis and management of climate and environment-related risks in the financial sector and mobilize mainstream finance to support a transition to a sustainable economy. Sustainable development impact reporting highlights sustainable development criteria such as environmental and social standards. In Europe, the Next Generation EU and the European Green Deal are notable developments at the forefront of green finance. The European Finance Taxonomy offers a system to classify which parts of the economy can be considered as sustainable investments. Today insurance sectors, general banking and credit regulation but also mutual funds development as well as foreign direct investments and trade policies have become intertwined with the idea of environmental stability as a key to prosperity. Green banking is becoming popular in the pursuit of reducing greenhouse gas emissions and increasing the resilience of society to negative climate change impacts while considering sustainable development goals in inclusive growth and equal opportunities. Central banks and financial regulators play a pivotal role in mainstreaming green finance and making sure climate-related risks are properly measured, verified and reported. In response to a growing awareness of the economic impacts of global warming and cognizant of the regulatory and supervisory gap in green finance, a growing number of central banks and regulators around the world are addressing climate change and environmental risks faced by the banking and financial sector. Notable is the Prudential Regulation Authority (PRA) within the Bank of England which addresses the widespread economic impact of climate change on society. Global governance institutions play a crucial role in implementing resilient finance as well. Comprised of all nations of the world, global governance entities have the capacity to instigate the idea of a ‘Global Green New Deal,’ which could globalize a binding taxation-and-bonds solution for redistribution to alleviate environmental inequalities. Green bonds could thereby help finance renewable energy availability. Green FinTech includes environmental innovations in the domains of artificial intelligence, big data analysis, the internet of things and blockchain technology. The role of Green FinTech and the sustainability of cryptocurrencies in money and banking is currently debated. Ethical concerns arise from the use of cryptocurrencies for the private exploration and colonization of space, which rises legal concerns, environmental risks and human species impacts as well as moral dilemmas.
... Carbon taxation can be manifold and includes a Pigouvian tax that addresses negative externalities (Acemoglu et al., 2019;Nordhaus, 2008;. Taxation leads to a repricing of goods, services and substitution effects that can nudge consumers into a transition of energy sources and consumer habits that are in sync with environmental protection. ...
... In the macroeconomic growth literature regarding government actions, a zero-emissions tax is not necessarily considered welfareimproving but appears as one of the most powerful means to curb harmful emissions and set positive market incentives for a transition to renewable energy (Hansen & Sato, 2016;IPCC, 2007;Mankiw, 2007;Nordhaus, 2008Nordhaus, , 2013Uzawa, 2009). A substantial increase in green investments is still required to reach the Paris Agreement's emission targets . ...
... Problems such as free riders occur, meaning that if one party removes pollution and environmental damages, other parties can enjoy a stable climate without costs (Di Bartolomeo et al., 2021). If one country pursues climate change mitigation, other countries can benefit from the stable climate and avoidance of natural disasters without any own efforts, which therefore leads to myopic first moverhesitancy, inter-temporally suboptimal choices and international political and diplomatic tensions (Nordhaus, 2008(Nordhaus, , 2013. ...
The COVID-19 crisis represents the most unforeseen external shock for modern economies. With the largest rescue and recovery funds being distributed around the world in response to the economic fallout of the crisis, economic growth is currently been called for being inclusive and green in light of growing awareness of inequality and climate change. Finance after the Great COVID-19 Reset cherishes resilience finance in sustainable development. Responsible investment trends continue to rise with a focus on social equity and inequality alleviation given the attention to the disparate impact of the external shock on the finance world and the real economy. Finance has also become political in funding of political crises resilience and divestiture acts as never before in the history of modern times. Active stakeholder engagement and green regulation—ranging from community investment projects in the finance world after the COVID-19 pandemic up to finance diplomacy on a global scale—are shaping the new era of resilient finance. This book provides an outlook on the future of resilient finance leadership. The monograph offers prospective future developments on how the field of finance may evolve in the short run, long run, and the very far future. The book features vivid case studies of how finance innovates into unprecedented extensions. In addressing the new role of capital during contemporary world events, finance will be portrayed as a novel political and international relation means. Resilient finance leadership raises hope to make the world a safer, fairer, more sustainable place, in which the economic benefits of our times are distributed more equitably. Overall, the book sets out to contribute to the current quest on how to align economic interest with justice and fairness notions in our turbulent world—driven by pandemics, economic turmoil, the ongoing climate change and, more recently, the re-emergence of East–West tensions. The future of finance outlook will analyze the contemporary international economic climate of high inflation levels in the Western World triggering a crisis of unaffordability, monetary pressures as well as mounting trade and economic sanctions between the Eastern World and the Western World. How finance can be pegged to ideologies and thereby become an ethical choice will be covered in historical examples that will inform the current political events. The book will also present insights into how the COVID-19 bailout and recovery packages can potentially provide a unique opportunity to develop fairer and more sustainable societies if well-designed and properly used. Finance will be shown to be intertwined with responsibility in the post-COVID-19 era—for one in negative screenings and sanction mechanisms in international law infringements—for another in the establishment and fortification of the current Sustainable Development Goals. In analyzing the growingly important role of social online media, finance will be understood as a new democratized form of voicing opinion. On the most futuristic account, the book will also serve as one of the first resources that thematizes the most future-oriented finance resilience domains in advocating for a democratization of access to revenues in social media and cryptocurrencies. Space travel investments and cryptocurrency’s role in the invasion of Mars will be thematized from an ethical perspective. The discussion acknowledges that resilience finance is a novel and worldwide phenomenon with international variations and diverse implementation strategies.
... where T AT is the temperature increase in the atmosphere and π2 is a parameter. Because of space limitations, we do not show the CO 2 accumulation sub-model and temperature change submodel of the DICE model, but readers may refer to Nordhaus (2008) for details on these sub-models. The equations for the RICE and DICE models are essentially the same, but the models diverge at the point at which RICE calculates Equations (2.2)-(2.7) ...
... First, the CO 2 accumulation and temperature change sub-models in DICE-2010 and RICE-2010 cannot recreate the CO 2 concentration and temperature increases in the Z650 scenario described by Matsuno et al. (2012), which uses a more detailed climate change model. Therefore, we used the CO 2 accumulation and temperature change sub-models in an older DICE model, DICE-2007(Nordhaus, 2008. In fact, these sub-models of DICE-2007 can rather accurately recreate the CO 2 concentration and temperature increases of the Z650 scenario in Matsuno et al. (2012). ...
... This might be a reason for each country to take immediate action, mitigate climate change, and avoid future larger damages. However, a careful evaluation of the future economic impact of global warming is required and future costs against present costs must be balanced under some economic assumptions and climate scenarios [2][3][4]. The most basic assumption considers an exponential with a constant discount rate. ...
... The most basic assumption considers an exponential with a constant discount rate. The choice of discount rate is part of current economic debates on the urgency of the response to global warming (see [2][3][4][5][6][7][8][9][10]). Most normative approaches attempt to derive the discount from axiomatic principles of justice, or from utility theory and assumptions about growth [11][12][13]. ...
We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. From the viewpoint of complex systems science and its multidisciplinary approach, we use the theory of bond pricing to study the long-term discount rate to estimate the rate when taking historical US and UK data, and to further contribute to the discussion about the urgency of climate action in the context of environmental economics and stochastic methods. Century-long historical records of 3-month bonds, 10-year bonds, and inflation allow us to estimate real interest rates for the UK and the US. Real interest rates are negative about a third of the time and the real yield curves are inverted more than a third of the time, sometimes by substantial amounts. This rules out most of the standard bond-pricing models, which are designed for nominal rates that are assumed to be positive. We, therefore, use the Ornstein–Uhlenbeck model, which allows negative rates and gives a good match to inversions of the yield curve. We derive the discount function using the method of Fourier transforms and fit it to the historical data. The estimated long-term discount rate is 1.7% for the UK and 2.2% for the US. The value of 1.4% used by Stern is less than a standard deviation from our estimated long-run return rate for the UK, and less than two standard deviations of the estimated value for the US. All of this once more reinforces the need for immediate and substantial spending to combat climate change.
... En cuanto al financiamiento de dichos compromisos, terminada la conferencia, las propuestas fueron quedando en promesas (Stigliz y Stern, 2017;Nordhaus, 2020, ECLAC, 2018OCDE, 2021). Así sucedió con las contribuciones incondicionales y con las asociadas a financiamiento externo -fondos prometidos por los países desarrollados. ...
... Así, la magnitud temporal entra en el debate. Pero también lo hace al considerar la tasa de interés que debe aplicar aquellos modelos que vienen a evaluar el problema del cambio climático, alrededor de lo cual se encuentra el debate entre Nicholas Stern y William Nordhaus respecto a cuál es la tasa de descuento social que debe aplicarse (Stern, 2007;Nordhaus, 2008). Stern sostiene una tasa de descuento igual a cero, mientras que Nordhaus defiende una tasa positiva. ...
El planeta ha sido planteado como un espacio no sujeto a límites, tal la idea de pro-greso que consideró a la naturaleza un espacio de conquista. La crisis climática viene a demostrar lo errado de dicha visión. Fruto de la concentración de carbono y otros gases de efecto invernadero en la atmósfera, la temperatura promedio global del pla-neta sigue en aumento. Avanzar con la transición energética deviene un imperativo, y el financiamiento es un aspecto clave en dicho proceso. Postergarlo conlleva riesgos sistémicos, cuyas consecuencias sobre la macroeconomía y el sistema financiero resul-tan mayúsculas. Ello debe instar a quienes gobiernan a actuar, introducir respuestas de política económica. También debería repensarse desde lo institucional, modificar el andamiaje legal-normativo que termina perpetuando el modelo energético del pasado. Resulta necesario discutir la problemática ambiental, así como lo irreversible del pro-ceso de transición energética. El autor señala los diversos factores que muestran lo irreversible del proceso, los cam-bios tecnológicos, pero también aquellos de orden institucional o de hábitos de consu-mo que explican tal tendencia. Pero, la transición no ocurre en un vacío. Motivado por intereses espurios un grupo de actores ejerce presión sobre los gobiernos, para así man-tener sus privilegios. Al desinterés de muchos se debe añadir la desinformación que generan unos pocos, todo ello vuelve imprescindible analizar la transición desde una perspectiva multidisciplinaria; una visión de política económica global que presente actores, describa políticas y muestre cómo el poder influye en la toma de decisiones. El libro analiza estos diversos factores y destaca la complejidad del problema y, por ende, la necesidad de abordarlo desde una perspectiva multidisciplinaria.
... Thus our measure represents an upper bound. Nordhaus (2008) and Van der Ploeg (2014). 27 These authors also assume a CRRA utility function. ...
... Deterministic IAMs, such as the widely used DICE(Nordhaus 2008), produce lower estimates of SCC than IAMs which include uncertainty, such as e.g.Lontzek et al. (2015),Cai and Lontzek (2019). Estimates of SCC are also sensitive to the modeling of the climate system (Dietz and Venmans 2019).Content courtesy of Springer Nature, terms of use apply. ...
We consider a growing economy which is subject to recurring, random, uninsurable, and potentially large and long-lasting climate shocks leading to destruction of infrastructure, land degradation, collapse of ecosystems or similar loss of productive capacity. The associated damages and the hazard rate are endogenously driven by the stock of greenhouse gases. We highlight the important role of the relative risk aversion and provide analytical solutions for the optimal climate policy, the growth rate and the saving propensity of the economy. We stress the importance of jointly determining these variables, especially if the objective is to formulate meaningful policy prescriptions. If, for example, the growth rate or the saving rate are assumed to be exogenous, and thus independent of the characteristics of climate shocks and economic fundamentals, then future economic developments in the face of climate change and, consequently, the future mitigation efforts will deviate from the optimal paths. In a quantitative assessment we show that with log-utility and under favorable technological and climatic conditions the abatement expenditure represents only 0.5% of output, equivalent to $37 per ton carbon. Under less favorable conditions, coupled with a relative risk aversion which exceeds unity, the abatement propensity increases to 2.9%, equivalent to $212 per ton carbon, and it jumps to a striking 16% in the pessimistic scenario involving severe shocks and low efficiency of abatement technology.
... Moving to the AbT, Cline (2011) analyzes the abatement functions developed in three different models and computes their costs in percentage terms of GDP (Table 4). RICE 2008 and EMF 22 follows the well-known functional form developed by Nordhaus (2008). While the calibration of the former relies on the original work of Nordhaus (2008), the latter derives from its subsequent estimation on the results of the EMF 22 Climate Change Control Scenarios project (Clarke et al., 2009). ...
... RICE 2008 and EMF 22 follows the well-known functional form developed by Nordhaus (2008). While the calibration of the former relies on the original work of Nordhaus (2008), the latter derives from its subsequent estimation on the results of the EMF 22 Climate Change Control Scenarios project (Clarke et al., 2009). Further, Ackerman and Bueno (2011) estimate a functional form reproducing the shape of the bottom-up MAC curve developed by McKinsey & Company (2009). ...
... The purpose of ESG embodies the learnings of Nordhaus (2008), which emphasizes the need to balance the economic costs of today's actions with the future repercussions on the ecological system. By catering to the much-needed attention towards environmental sustainability, ESG would reshape responsible business practices to inevitably drive opportunities for a sustainable business future. ...
A substantial surge in ESG research has triggered a wide dissemination of research across various domains, underscoring the need for an extensive appraisal of the complex ESG landscape. This paper is grounded on a sample of 441 documents retrieved from the Web of Science database, spanning from 2007 to 2023. A strategic mapping was performed to decipher the cumulative scientific knowledge by delving into the interrelations among various facets and identifying the field's basic, motor, niche, and emerging themes. We also explore the thematic evolution of ESG across distinct time frames, indicating ESG's inception, evolution, and diversification over the years. Our findings contribute to the ESG literature by categorizing it into seven clusters across the four quadrants. Results of the strategic mapping accentuate the obsolete, over-researched and promising areas of ESG research. We find research on CSR, socially responsible investments and ESG-firm performance themes as over-researched areas calling for diversification. Promising research areas include the emerging association of ESG with portfolio construction, green innovations and investments, ESG controversies , information asymmetry, divergence, greenwashing, AI-enabled universal rating mechanism, upgrading and down-grading of ESG scores and ESG-linked compensations. Thematic evolution of ESG research underpins the culmination of its interplay with sustainability, emerging markets, board diversity, and green financing. Finally, the factorial analysis strengthens the reliability of the main findings, making it robust. This paper stands as the initial venture providing a comprehensive exploration of conceptual linkages, shifts, and advancements within the ESG literature through thematic mapping, offering an original contribution to the field.
... Even today, energy production has been made mainly by the combustion of fossil fuels, with a related increase in air pollutants and the emission of greenhouse gases, such as CO 2 . Consequently, today, one of the main issues in industrialized and developing countries is the management of CO 2 emissions, a current problem for production systems [69,70], although these CO 2 emission could also represent an opportunity to promote high-efficiency design in both conventional and new technological plants. ...
Recently, an improvement of the United Nations Human Development Index (HDI), named the Thermodynamic Human Development Index (THDI), has been introduced to link socio-economics to environmental and technical pillars of sustainable development. In this paper, the THDI is linked to the Kaya identity to bring out the quantities useful in energy economics and to obtain a clearer tool for the evaluation of sustainability. Moreover, the THDI has been normalized for use as an index for the analysis of sustainability. The component related to environmental emissions, which is included in the THDI, can be linked to the Kaya identity. This linkage allows us to use the THDI for the analysis of scenarios, which is useful for evaluating the possible impacts of any future actions on the development of countries.
... Analyzing now the CX experiment, while it is highly efficient in transitioning the economy toward NZE, it requires a very high value of the carbon tax (around 1,600 USD/tCO 2 ). On the one hand, the chosen functional form of the MAC curve implies higher costs than in previous versions (Nordhaus, 2008;Clarke et al., 2009;Ackerman and Bueno, 2011). On the other hand, the endogenous learning mechanism, by reflecting potential limits in corporates' adoption speed of new technology and slowing down investments in AbT, requires the government to act aggressively to stimulate firms to reduce emissions. ...
... This is modeled in the the spirit of integrated assessment models (IAMs) pioneered byNordhaus (1991),Nordhaus (1992),Nordhaus (2008). ...
This thesis is composed of three essays on informality, corruption and social networks and their respective dynamics with macroeconomic aggregates based on microfoundations. In the chapter, we study an equilibrium two-sector occupational choice model - agents can be (formal or informal) entrepreneurs or workers. An informal entrepreneur faces taxation determined by the combination of her capital choice and society’s tolerance of informality. Our model is consistent with many empirical findings regarding the informal sector in Brazil, a developing economy with a large informal sector. With a calibrated version of our model, we show that as society’s tolerance of informality decreases, the informal sector employs less capital and labor, and informality decreases. We conduct several counterfactual exercises. Informality is substantially lower in economies that are less tolerant of informal activities, formal entrepreneurs have more access to financial markets, and taxation of output and labor is lower. We extend the model to consider stochastic taxation of informal activities - a higher (average) informal output taxation and its variability reduce informality. In the second chapter, we present a model in which the embezzlement of tax revenues by public officials imposes distortionary effects on economic performance through its dentrimental effect on the private sector. The contribution of this article, in addition to the empirical evidence presented, is the study of a tractable economy in which it is possible to evaluate the responses of economic aggregates, via steady state analyzes and dynamic responses to variations and corruption shocks. Our model is consistent with many empirical findings about the Brazilian economy, such as the level of GDP lost to corruption and the number of corrupt bureaucrats. With a calibrated version of our model for the Brazilian economy, we study the quantitative implications of changes in the level of corruption on economic performance by comparing steady state and transition paths of the variables. Overall, our results show that economies with higher corruption control tend to present a better economic performance, with a higher level of output, capital stock, consumption, investment, tax collection and wages. The
last article improves the model presented in the second chapter, examining the relationship between social networks and the spread of corruption. We argue that social networks in labor market can facilitate corruption propagation by providing corrupt oficials with opportunities to meet and collude with each other. We develop a model of social networks and corruption propagation in which workers are endowed with peers exogenously and engage in network search to affect their labor market outcomes. We assume that power-law distributions govern the structure of social networks. We show that a shock on corrupt vacancies initially boosts the rate at which corrupt opportunities appear. Corruption-induced distortions have an adverse effect on the economy’s productivity, leading to reduced demand for capital. These consequences are particularly noticeable in economies where the average number of peers is higher. Concerning the technology shock, there is a positive effect on all components of aggregate demand. Nonetheless, the infuence on the arrival rate of corrupt opportunities varies depending on how we represent the effect on the economy’s output. In one approach, the effect aligns with the notion of hindrance (akin to the "sand-in-the- eels"hypothesis), while in another, it resembles a facilitation (akin to the "grease-in-the-wheels"hypothesis). Our findings suggest that social networks can play a role in facilitating corruption propagation. Policies should be aimed at weakening labor market networks and increasing the transparency of government procurement and contracting processes.
... Use K for the total capital stock, which is the only factor of production, Y for total output, and A for constant productivity. According to the DICE model used by Nordhaus (2014), production will lead to carbon dioxide emissions, which will accumulate in the atmosphere, thus changing the energy balance of the earth, leading to global warming and reducing future production to a certain extent. Therefore, we assume that on the basis of this model, the greenhouse effect will lead to a certain degree of decrease in production, with a constant proportion of L. In addition, we assume that society prefers green and pays attention to environmental protection, and the company pays a certain cost in the production process to reduce carbon dioxide emissions, which leads to a certain decrease in productivity compared to before. ...
Global warming, as the main feature of the climate problem, is gradually coming into our field of vision. Under this background, Poisson jump is applied to describe the arrival of natural disasters caused by global warming. Households and firms can dynamically update their beliefs about the arrival rate of disasters. In order to mitigate global warming, firms pay a share of the cost to reduce the carbon emissions in the process of production. In this paper, we discuss the social planner equilibrium and the competitive equilibrium, respectively, and obtain the Hamilton-Jacobi-Bellman (HJB) equations of value function in both contexts. Then, the equations are numerically simulated, leading to the following conclusions: under the same level of pessimism, investments and values of firms, as well as household consumption, all decrease as the emission abatement rate increases, and the social welfare is almost unchanged compared to the situation without the cost of emission reduction. Furthermore, in order to deal with the short-term adverse effects on the economy caused by emission reductions, the government subsidy is introduced into the model. The results show that, under the same level of pessimism, the government subsidy drives the growth of investment and consumption. The value of the firms that pay the emission abatement has been boosted, and economic growth rate has risen to a certain degree, while social welfare remains almost the same.
... 54 50 Cf. Nordhaus 2008;Stern 2007. 51 Cf. ...
Human activities associated with greenhouse gas emissions have unequivocally caused global warming. Widespread adverse impacts on people, living organisms, and the environment are already being observed, mostly affecting vulnerable communities who are least responsible for current climate change. Unless drastic mitigation and adaptation measures are taken, continued greenhouse gas emissions will further exacerbate dangerous climate change. This expert report maps and analyses the complex justice issues that arise in the context of climate change and evaluates policy responses to the impacts of climate change from a climate justice perspective.
... 54 50 Cf. Nordhaus 2008;Stern 2007. 51 Cf. ...
Human activities associated with greenhouse gas emissions have unequivocally caused global warming. Widespread adverse impacts on people, living organisms, and the environment are already being observed, mostly affecting vulnerable communities who are least responsible for current climate change. Unless drastic mitigation and adaptation measures are taken, continued greenhouse gas emissions will further exacerbate dangerous climate change. This expert report maps and analyses the complex justice issues that arise in the context of climate change and evaluates policy responses to the impacts of climate change from a climate justice perspective.
... Effective policy to combat climate change is crucial to future social and economic good. Doing nothing to decrease carbon emissions will cost almost 3% of global output by 2100 (Nordhaus, 2014). Policymakers should consider implementing standards and incentives that promote the sustainable design, production, and disposal of Metaverse hardware and its software's sustainable design and consumption (Dwivedi et al., 2022). ...
... Where s 0 ij is OD ij's shortest-path travel time before the improvement; s f ij is OD ij's shortest-path travel time after the improvement; d ij is OD ij's total travel demand; p ij is the proportion of trips made by persons in the protected population for OD ij; e 0 ij is OD ij's shortest-path distances before the improvement; and e f ij is OD ij's shortest-path distance after the improvement. In addition, the wellbeing function transformation is often used in the field of climate research (Adler et al., 2017;Arrow et al., 2013;Botzen and van den Bergh, 2014;Dasgupta, 2008;Nordhaus, 2014;Pindyck, 2013;Stern and Stern, 2007;Weitzman, 2007), as shown in Equation (12), and could additionally be used in transportation optimization problems. ...
... This needs to be supplemented by safe measures for negative emissions such as forestry and peatland management to compensate for residual emissions from industry and agriculture (On negative emissions [92,93,2]). However, while the FCC mistakenly emphasises the emerging burdens of future climate policy, it forgets that avoiding climate warming promises to be economically far more favourable than climate catastrophe and, when seen in this light, cannot be portrayed as mere burden (traditionally and unchanged to this [64]; more carefully [94]). ...
The German Constitutional Court’s climate verdict provides a re-interpretation of liberal- democratic core concepts and is highly relevant for liberal constitutional law in general – including EU and international law. The verdict accepts human rights as intertemporal and globally applicable; it applies the precautionary principle to these rights and frees them from the misleading causality debate. However, the court fails to address the most important violations of human rights, and it categorised climate policy as a greater threat to freedom than climate change. And the court does not make it clear that the Paris 1.5-degree limit implies a radically smaller carbon budget. Furthermore, little attention has so far been paid to the fact that the ruling implies an obligation for more EU climate protection, especially since most emissions are regulated supranationally. To be effective, the EU emissions trading system demands a reform, which should go well beyond the existing EU proposals to enable societal transformation to sustainability.
... The modern discussion on the economic effects of climate change, built predominantly upon the neoclassical growth model, assumes away too many critical aspects of reality that must form the object of policy intervention, including full employment, constant inequality, and universally accessible technology. Nordhaus' (2008Nordhaus' ( , 2010 DICE and RICE models are widely used versions of these neoclassical climate change models (Rezai et al., 2013). ...
... These measures need to be supplemented by safe measures for negative emissions such as in forestry and peatland management to compensate for residual emissions from industry and agriculture (on negative emissions, see [2,92,93]). However, while the FCC mistakenly emphasises the emerging threats of future climate policy, it forgets that avoiding climate warming promises to be economically far more favourable than climate catastrophe, thus it cannot be portrayed as a mere burden (traditionally and unchanged to this, see [64]; for a more careful account, see [94]). ...
The German Constitutional Court’s climate verdict provided a re-interpretation of core liberal-democratic concepts, and it is highly relevant for liberal constitutional law in general, including EU and international law—where similar issues are currently being discussed in ongoing trials before the European Court of Human Rights and the International Court of Justice. The present article applies a legal interpretation to analyse the national and transnational implications of the ruling. The results show that the verdict accepts human rights as intertemporal and globally applicable. It applies the precautionary principle to these rights and frees them from the misleading causality debate. However, the court failed to address the most important violations of human rights, it categorised climate policy as a greater threat to freedom than climate change, and the court failed to acknowledge that the Paris 1.5-degree limit implies a radically smaller carbon budget. Furthermore, little attention has so far been paid to the fact that the ruling implies an obligation for greater EU climate protection, especially since most emissions are regulated supranationally. Against this backdrop, the EU emissions trading system demands a reform, which has to go well beyond the existing EU proposals so as to enable societal transformations towards sustainability.
... Yet, in the last decade, politicians and international organizations increasingly frame climate action as an opportunity rather than a burden (Meckling & Allan, 2020). The concept of 'green growth' stipulates the positive relationship between climate action and economic growth, and has received increasing support in the macroeconomics discipline given the future costs of uncontained global warming (Helm & Hepburn, 2009;Jacobs, 2013;Nordhaus, 2008;Stern, 2007). Green growth can serve as a powerful frame to alter perceptions of climate action from economic costs to benefits, linking climate policies to domestic co-benefits such as job creation and competitiveness. ...
Policymakers and governments increasingly frame climate protection in terms of green growth, arguing that continued economic growth and climate protection are complementary and mutually beneficial. With such framing, governments hope to
overcome the global common goods problem associated with climate change and to enable higher ambition on climate action within and across states. Yet, no empirical evidence to date has been provided on how widespread the support for green growth is in international climate politics. This paper, therefore, investigates
which countries employ green growth framings at UNFCCC negotiations, and whether this relates to domestic factors, in particular economic structure, level of development and climate impacts. We conduct panel-data analysis on green growth positions derived from hand-coding a unique dataset of High-level
Segment statements at the Convention of the Parties (COPs) from 2010 to 2019 for 151 countries. The results reveal that, to date, green growth proponents are those countries with the most advanced national clean energy technology (CET) capacities – as measured by the Green Complexity Index. The findings highlight
that green growth is not promoted by all countries at international climate negotiations.
... The hegemonic discourse frames climate change as an emergency caused by externalities (Nordhaus 2014). Increasingly, though, climate change is recognized as a symptom of a deeper metabolic crisis linked to colonial capitalism (Davis and Todd 2017;Ajl 2021;Mahanty et al. 2023). ...
I contribute to an emerging politics of loss through an empirical analysis of temporalities of climate change loss and damage in Australia. How people temporalize climate change informs their conception of causality, designation of losses and damages, and political response. By drawing attention to the diversity of onto-epistemological understandings and characterizations of climate change loss and damage, I illuminate some of the values diverse actors perceive as currently, or at risk of, being lost. I do this by unearthing and theorizing commonly identified temporalities held by a cross-section of social actors in regional Australia. These include the following temporalities: (1) anticipatory loss; (2) natural variability; (3) future perfect (e.g., climate catastrophe, human ingenuity); and (4) the longue durée (i.e., climate change as a historical crisis linked to colonial-capitalism). I consider the social, cultural, psychological, and political determinants of such temporalities and the implications for climate politics in Australia. I argue that recognizing the complexity of temporalities of loss and damage is crucial for both geographical research and climate politics. This nuanced understanding of difference can contribute toward the development of a progressive more-than-climate politics, which, I suggest, must be based on the longue durée temporality of climate change loss and damage.
... The average participation in field visits, training events, open days, and summer festivals was considered to assess this ES, and a summer arena ticket was used to assess this value. has not yet been achieved, this field's debate was oriented toward the possible introduction of the so-called carbon taxes (Ayres et al., 2007;Golosov et al., 2014;Nordhaus, 2008). In this study, an average value of 139 €/tCO2 (Bachmann, 2020) was considered a benchmark for assessing global warming performance associated with the outputs ES.6, ES.7 and ES.8, as described below. ...
The lack of objective sustainability indicators and measurements leaves the performance of agricultural systems under-valued, limiting the possibility of communicating any evidence about promoting economic, social, and environmental values to food system stakeholders. In this study, a cost-benefit analysis based on the social return on investment (SROI) was designed and applied to five community-supported agriculture (CSA) initiatives. CSA are local food supply chains that have become popular in recent years, characterized by features such as member volunteer commitment, reduction of synthetic inputs in food production, and shortening of the supply chain to reduce costs and environmental impact. Social and environmental outcomes related to the wider spread of impacts were comprehensively assessed in the study. A participatory assessment with CSA representatives resulted in the incorporation of several ecosystem service (ES) indicators identified from the literature. Findings revealed that the case studies analyzed are characterized by a limited but positive socio-environmental performance compared to conventional food supply chains, thereby demonstrating that they can create real value in terms of social gains and mitigation of environmental impacts.
... Hence, we assumed, like Nordhaus (2008), that the production Y t can be used for consumption C t , investments I t and expenses of carbon dioxide emission reductions D t . Thus, we have: ...
This paper introduces a new general equilibrium model involving climate change. More precisely, we used the theory of stochastic differential equations driven by fractional Brownian motion and the theory of jump processes to predict the climate–economy relationship. Through real data, we verified the new model’s effectiveness and accessed its prediction capacity through various simulations. The model provided good simulations of CO2 concentrations and other emissions, temperature dynamics and GDP. Besides, we found that climate change hurts global GDP around 2045 ceteris paribus. It proves to be more suitable for predicting the process in which memory reveals to be a relevant fact. Some policy implications are proposed to mitigate the anticipated impacts of the climate on the economy.
... where ϕ 1 , ϕ 2 > 0 are technology parameters; see, e.g., Nordhaus (2008). The parameter ϕ 1 is a scaling coefficient per unit of output, while the parameter ϕ 2 determines the convexity of the cost function. ...
We use scenario analysis to assess the macroeconomic effects of carbon transition policies aimed at mitigating climate change. To this end, we employ a version of the ECB's New Area-Wide Model (NAWM) augmented with a framework of disaggregated energy production and use, which distinguishes between "dirty" and "clean" energy. Our central transition scenario is that of a permanent increase in carbon taxes, which are levied as a surcharge on the price of dirty energy. Our findings suggest that increasing euro area carbon taxes to an interim target level consistent with the transition to a net-zero economy entails a transitory rise in inflation and a lasting, albeit moderate decline in GDP. We show that the short and medium-term effects depend on the monetary policy reaction, on the path of the carbon tax increase and on its credibility, while expanding clean energy supply is key for containing the decline in GDP. Undesirable distributional effects can be addressed by redistributing the fiscal revenues from the carbon tax increase to low-income households.
... The study found that the optimal carbon tax rate is highly sensitive to the discount rate and the climate sensitivity parameter, and that the optimal policy may be quite different under different parameter assumptions. Also, several journal papers (Kunreuther et al. 2013;Stern 2008), academic books (Nordhaus 2008, and2013), and environmental agencies like Intergovernmental Panel on Climate Change (IPCC), United States Environmental Protection Agency (EPA), World Nature Organization (WNO), European Environment Agency (EEA) point out the potential impacts of climate change and global warming on water resources, food production, health, economy and the environment. There is a large and growing volume of literature on global warming and climate change, most of the existing studies model alternative scenarios of global warming by using integrated assessment models. ...
Climate change is a complex issue with significant scientific and socio-economic uncertainties, making it difficult to assess the effectiveness of climate policies. Dynamic Integrated Climate-Economy Models (DICE models) have been widely used to evaluate the impact of different climate policies. However, since climate change, long-term economic development, and their interactions are highly uncertain, an accurate assessment of investments in climate change mitigation requires appropriate consideration of climatic and economic uncertainties. Moreover, the results of these models are highly dependent on input parameters and assumptions, which can have significant uncertainties. To accurately assess the impact of climate policies, it is crucial to incorporate uncertainties into these models. In this paper, we explore the impact of parameter uncertainties on the evaluation of climate policies using DICE models. Our goal is to understand whether uncertainty significantly affects decision-making, particularly in global warming policy decisions. By integrating climatic and economic uncertainties into the DICE model, we seek to identify the cumulative impact of uncertainty on climate change. Overall, this paper aims to contribute to a better understanding of the challenges associated with evaluating climate policies using DICE models, and to inform the development of more effective policy measures to address the urgent challenge of climate change.
... The efficient response to the negative externalities associated with energy production and use is to impose a Pigouvian tax on polluters that equals the Nordhaus 2008;Shapiro, Pham, and Malik 2008). Such a tax would improve social welfare by reducing carbon emissions while creating no deadweight loss -it will internalize the technical externality associated with greenhouse gas emissions (Hochman et al. 2010d). ...
... To complement findings on human decision making in the face of environmental cues, discounting rates should be revised for a national level. In standard economic models on climate change mitigation and adaptation financialization and the estimation of risks, discount rates for climate change action tend to be the same for all countries in the world and held constant over time (Nordhaus, 1994(Nordhaus, , 2008. Inspired by regional DICE models, macroeconomic modeling embarked on capturing climate change-induced Gross Domestic Product (GDP) effects in a more regional setting in order to propose climate change gain or loss perspective-dependent climate stabilization strategies (Puaschunder, 2020). ...
p>The literature on political short-termism holds that multiple factors in current democratic systems drive political short-termism, leading to delays in government responses to long-term policy challenges, such as global climate change. In this article, I argue that these factors do not necessarily work as drivers of political short-termism. To show this, I first review the literature on political short-termism and identify electoral cycles, voters’ policy preferences, and interest-group behavior as potential drivers of political short-termism. I then examine the influence of these potential drivers of political short-termism on climate policymaking, drawing on recent empirical studies. I find that elected governments and politicians can, in some cases, (1) have incentives to pursue climate policies in the run-up to elections, (2) build public support for climate policies, and (3) overcome organized opposition to climate legislation. These findings suggest that although electoral cycles, voters’ policy preferences, and interest-group behavior may induce political short-termism, such negative effects on policymaking are conditional on other variables.</p
After having explored to what extent the private real sector and the financial market can be a roadblock or a bridge to a low-carbon economy, we now move to the public sector and macroeconomic policies. We focus on dynamic macro models as guidance for climate policies that can support mitigation and adaptation efforts concerning climate protection and the role of broader public policies that will promote and incentivize the energy transition. More specifically, we explore the fiscal resources that should be spent on climate-related infrastructure, mitigation, and adaptation efforts. We will also allow for public borrowing, at least as much as it is sustainable helpful on climate risks. We will also study to what extent monetary policy can be helpful on climate change issues.
In this chapter, we present historical trends related to carbon dioxide (CO2) and greenhouse gas (GHG) emissions affecting the carbon budget. This documents the fact that the use of fossil fuels, coal in particular, creates a very large negative externality. We present a dynamic model starting from a mixed energy sector with fossil fuel and renewable energy and indicate different pathways to the decarbonization of the economies of advanced and developing countries.
Although many credit John Tyndall with having discovered the greenhouse effect in 1859, it may in fact have first been described by a woman, Eunice Foote, who identified the process in 1856, three years earlier, in a paper in The American Journal of Science and Arts.
In light of Finland's commitment to carbon neutrality, this project examined the implications of the green transition on its economy, outlining the complex relationship between environmental regulations, structural change, and productivity, while emphasizing the crucial role of green investments.
The main findings can be summarized as follows: 1) Environmental regulations have diverse effects on firms and the overall economy, leading to adaptations and triggering changes in market dynamics. 2) The effect of structural change on productivity is complex, highlighting the need to improve the productivity of continuing firms. 3) Finland’s carbon intensity aligns closely with the EU average, with improvements in most industries, but challenges persist in certain industries. 4) Financing the green transition is complex due to uncertain future investments, potential government intervention reasons, and sector-specific challenges.
Finland's successful green transition relies on stricter environmental regulations, efficient carbon pricing, and the promotion of green technologies, supported by customized regulations and sustainable consumption. Additionally, it necessitates a consistent environmental policy, a long-term investment strategy, increased green technology R&D, and support for startups to foster innovation and sustainability.
Today’s global challenges in regard to climate change demand for urgent action of the global community. Recent research has elucidated the economic impact of climate change on the world and found stark national differences in Gross Domestic Product (GDP) prospects under climate change around the world. Climate inequalities are proposed to be alleviated by redistribution mechanisms enacted by a taxation-and-bonds strategy. A model for economic prospects under climate change is introduced in order to determine a fair redistribution of relative short-term economic gains under global warming in order to offset for economic losses based on economic, ecological, historic and political factors. The model determining redistribution patterns throughout the world is based on the geo-impact of climate change, the financial crisis resilience capabilities as well as the global connectivity and science diplomacy leadership of a country. Empirically, nine indices provide a basis to determine which countries should be using a taxation strategy and what countries should be granted climate bond premiums in order to enact a fair relative economic gains redistribution between countries. A country’s starting ground on the climate gains and losses spectrum, a country’s climate flexibility in terms of temperature zones and a country’s CO2 emissions contributions in production and consumption levels as well as a country’s CO2 emissions levels changes and historically-grown bank lending rate as well as resilient finance strategies coupled with science diplomacy leadership and economic connectivity on the international stage will determine whether a country will be on the taxation regime for funding mutual climate stabilization or whether a country will be on the receiving end of climate bonds solutions. The countries economically gaining from climate change and being climate flexible as well as countries with high CO2 emissions and not changing CO2 emissions levels as well as consuming goods and services from other countries but also having favorable bank lending rates and a history of resilience finance and crisis intervention expertise but also science diplomacy and trade leadership advantages could be taxed to transfer funds via climate bonds for regions of the world that are losing from global warming and are not climate flexible as well as countries with low CO2 emissions and lowering CO2 emissions levels that are producing goods and services that are consumed in other parts of the world as well as having unfavorable bank lending rates and missing resilience finance expertise as science diplomacy and trade followers. The proposed taxation-and-bonds strategy could aid a broad-based and long-term market incentivization of a transition to a clean energy economy. The discussion features the implications of the proposed strategy, implementation details and the economic impetus of redistribution mechanisms. The monitoring, evaluation and accountability control of the outlined plan are thematized in the estimation of the feasibility and limitations. Future research and outlooks on the redistribution via taxation-and-bonds strategy are provided.
This edited volume, “Research on Corporate Sustainability”, contains reports written by experts in their areas of specialization. The volume begins by introducing a report on the interim system theory of corporate sustainability, which fills in the gap in the
predominantly empirical field of corporate sustainability, and is followed by three reports on organizational resilience that are widely regarded as sustainability outcomes. Another set of reports is concerned with sustainable tourism and community development, as sustainable community development can often be sustained by the people who live there. Finally, the edited volume concludes with two reports on sustainable supply chain
management and climate finance, which are seen as critical aspects of sustainable development.
In modern industrial economies wealth is generated by the production factors capital, labor, and energy. The capital stock is handled by labor and activated by energy. Utilization of energy is subject to the first two laws of thermodynamics, which rule all processes of life and production. In highly industrialized countries energy’s economic weight (output elasticity) is typically much larger than its share in total factor cost, whereas for labor the opposite holds. The cost-share theorem and the related equilibrium structure of neoclassical economics are contrary to that. A model calculation of output losses in German industry due to constraints on energy availability, e.g. as a consequence of the sudden stop of Russian gas imports as proposed in March 2022, shows: If one forgoes the cost-share theorem one obtains losses that are an order of magnitude larger than the losses that result from neoclassical equilibrium analyses based on welfare optimization without technological constraints. This, the economic consequences felt by producers and consumers by the actual lack of Russian gas in Western Europe, and the need to reduce fossil energy combustion to mitigate climate change, raise a number of questions to economics.cost-share theorem one obtains losses that are an order of magnitude larger than the losses that result from neoclassical equilibrium analyses based on welfare optimization without technological constraints. This, the economic consequences felt by producers and consumers by the actual lack of Russian gas in Western Europe, and the need to reduce fossil energy combustion to mitigate climate change, raise a number of questions to economics.
JEL-Codes: A12, E23, O47, Q43
В статье рассматривается влияние факторов ESG (от англ. Environmental, Social and Governance) на экономический рост. Проанализировано изменение экономического роста в связи с реализациейэкологических, социальных и управленческих аспектов деятельности в рамках концепции устойчивого развития в 21 стране за 2000–2022 гг. Исследование проведено с применением методов коинтеграции и корреляционно-регрессионного анализа. Обнаружено, что существует положительная взаимосвязь между практической реализацией принципов ESG и ВВП на душу населения. Полученные результаты могут быть использованы для последующих теоретических и эмпирических разработок внедрения ESG в бизнес-среду, а также гуманизации экономического роста. Интеграция экологических, социальных и управленческих факторов в макроэкономический анализ является не столько выбором, сколько необходимостью для корпоративного сектора экономики. Выявление тенденций и оценка потенциальных последствий в виде возможностей или препятствий экономического роста − важные факторы для принятия эффективных инвестиционных и финансовых решений.
The estimated value to society from climate change mitigation is highly sensitive to the long-term social discount rate. Governmental discounting guidance has almost exclusively been influenced by economists, although it is not clear that they possess any special expertise on intergenerational ethics. Here, by contrast, we report the views of philosophers, who are the most trained in ethical matters. We show that, as a group, these experts offer strong support for a real social discount rate of 2%, a value that is also predominantly backed by economists. We find multidisciplinary support for climate policy paths in line with the United Nations climate targets when views on discounting determinants are applied within a recent update of the DICE integrated assessment model. However, this apparent agreement hides important differences in views on how the ethics of intergenerational welfare can be better incorporated into climate policy evaluation.
Decisions by individuals, organisations, and nations shape the well-being of humans and other species, the environment, and sustainability. Decisions for Sustainability examines how we can make better decisions concerning our future. It incorporates sociological, psychological, and economic perspectives to highlight our strengths and weaknesses in decision-making, and suggest strategies to influence both individual and societal decisions. Sustainability challenges – from local land use and toxic contamination to climate change and biodiversity loss – illustrate how we can improve decision making and what factors lead to conflict. How we use science in the face of uncertainty is also examined, and a range of ethical criteria for good decisions are proposed. Emphasizing the need for diversity in decision making and clarifying the relationship between reform and societal transformation, this book provides a comprehensive view of what we know about decision-making, and how we can do better in the face of sustainability challenges.
Meyer (Environ Econ Policy Stud, 2022) questions a number of assumptions behind the social cost of carbon (SCC) calculations in Dayaratna et al. (Environ Econ Policy Stud 22:433–448, 2020), especially the CO 2 fertilization benefit and the climate sensitivity estimate. He recommends against increasing the CO 2 effect and suggests applying a recent climate sensitivity estimate in Lewis, Clim Dyn (2022), but did not calculate the resulting SCC distribution. Herein we critically assess his recommendations and compute the SCC distribution they imply. It has a median SCC value in 2050 of $3.39 and implies a 33.4 percent probability of the optimal carbon tax being negative. While a bit higher than the results in Dayaratna et al. (Environ Econ Policy Stud 22:433–448, 2020), they are not materially different for the purposes of setting optimal climate policy.
The UN Framework Convention on Climate Change calls for the avoidance of “dangerous anthropogenic interference with the climate
system”. Among the many plausible choices, dangerous interference with the climate system may be interpreted as anthropogenic
radiative forcing causing distinct and widespread climate change impacts such as a widespread demise of coral reefs or a disintegration
of the West Antarctic ice sheet. The geological record and numerical models suggest that limiting global warming below critical
temperature thresholds significantly reduces the likelihood of these eventualities. Here we analyze economically optimal policies
that may ensure this risk-reduction. Reducing the risk of a widespread coral reef demise implies drastic reductions in greenhouse
gas emissions within decades. Virtually unchecked greenhouse gas emissions to date (combined with the inertia of the coupled
natural and human systems) may have already committed future societies to a widespread demise of coral reefs. Policies to
reduce the risk of a West Antarctic ice sheet disintegration allow for a smoother decarbonization of the economy within a
century and may well increase consumption in the long run.
A critical issue for policymakers in defining mitigation strategies for climate change is the availability of appropriate evaluation tools. The development of climate impact response functions (CIRFs) is our reaction to this challenge. CIRFs depict the response of selected climate-sensitive impact sectors across a wide range of plausible futures. They consist of a limited number of climate-change-related dimensions and sensitivities of sector-specific impact models. The concept of CIRFs is defined and the procedure to develop them is presented. The use of climate change scenarios derived from various GCM experiments and the adopted impact assessment models are explained. The CIRFs presented here consider climate change impacts on natural vegetation, crop production, and water availability. They are part of the ICLIPS integrated assessment framework based on the tolerable windows approach. CIRFs can be applied both in 'forward' and in 'inverse' mode. In the latter, they help to translate thresholds for climate impacts perceived by stakeholders (so-called impact guardrails) into constraints for climate variables (so-called climate windows). This enables the results of detailed impact models to be incorporated into intertemporally optimizing integrated assessment models, such as the ICLIPS model.
This paper is concerned with the conclusion of the Stern Review that the cost of climate change could be as much as 20% of the global GDP. In this paper, I identify two major sources of the variation in the estimates of the aggregate cost of climate change. One is the different climate change predictions of the AOGCM (Atmospheric Oceanic General Circulation Model) models, and the other is varying economic damage estimates. The main conclusion of this paper is that only under the alarmist approach- which assumes both the most severe climate change and the most extreme estimate of climate change damage to the economy- we can be convinced that the cost of climate change is close to 20% of the global GDP in 2100. In most other cases, the cost will be under 1% of the global GDP.
Given the large uncertainties regarding potential damages from climate change and the significant but also uncertain costs of reducing greenhouse emissions, the debate over a policy response is often framed as a choice of acting now or waiting until the uncertainty is reduced. Implicit in the "wait to learn" argument is the notion that the ability to learn in the future necessarily implies that less restrictive policies should be chosen in the near term. I demonstrate in the general case that the ability to learn in the future can lead to either less restrictive or more restrictive policies today. I also show that the initial decision made under uncertainty will be affected by future learning only if the actions taken today change the marginal costs or marginal damages in the future. Results from an intermediate-scale integrated model of climate and economics indicate that the choice of current emissions restrictions is independent of whether or not uncertainty is resolved before future decisions, because, like most models, the cross-period interactions are minimal. With stronger interactions, the effect of learning on initial period decisions can be more important.
In this paper, we investigate the sensitivity of optimal carbon control strategies to parameters of the Carbon Emissions Trajectory Assessment (CETA) Model, and we use CETA in a simple decision tree framework to estimate the value of information about global warming uncertainties. We find that if an optimal control policy is used under uncertainty, the eventual resolution of uncertainty has high value relative to current research budgets, and resolving uncertainty about the costs of warming is nearly as important as resolving uncertainty about the extent of warming. In addition, we find that there is not a high premium on immediate resolution of uncertainty, if resolution would otherwise occur within, say, twenty years; this implies that time is available to plan and execute a carefully designed research program. On the other hand, we find that if the real world political process would result in a suboptimal control policy being chosen under uncertainty, and this choice could be prevented by early resolution of uncertainty, the benefit of early resolution may be as much as three orders of magnitude greater.
The study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models. It compares three approaches: MER accounts, world-price PPP accounts, and superlative PPP accounts. It concludes that the best approach is to use superlative PPP accounts. This approach uses cross-sectional PPP measures for relative incomes and outputs and relies on national accounts price and quantity indexes for time-series extrapolations. Under ideal circumstances, this approach will provide accurate and consistent cross-sections and time series. This approach will require relatively little change in model structure from ones using MER accounts. The main concern would be to ensure that behavioral and reduced-form relationships in the models have been correctly estimated.