policy adoption rules and global warming although there is widespread agreement about the dangers of global warming and the resulting need to cut down emissions there does not seem to be general agreement about the exact form the policy should take or the timing of its adoption failure to adopt and implement policies against global warming reflects the complexity of the problem the uncertainties of climate change and the cost of policy adoption issues associated with the interactions between uncertainties and irreversibilities in determining the timing of policy adoption are analyzed by using the methodology of optimal stopping rules optimal policy functions are derived for cooperative and noncooperative solutions with differential game representation issues associated with the empirical application of the optimal policy rules are also considered

reevaluation and renegotiation of climate change coalitions a sequential closed loop game approach abstract major international environmental problems can be characterized as stock externality phenomena long term international environmental coalitions are subject to unexpected shocks certain shocks might have strong impacts on regional environmental policies and their commitments to the coalition the open loop solutions in optimal control problems and differential games cannot capture regions reactions to those shocks in this paper we develop a feasible modeling approach that uses the closed loop strategies to study the issues of reevaluation and renegotiation of climate change coalitions for the purpose we design an algorithm that decomposes a closed loop strategy into a sequence of open loop equilibria and implement the algorithm in the rice model am econ rev 86 1996 741 an integrated assessment model of climate change and economies we analyze policy and methodological implications of the closed loop strategies through simulations of the rice model

climate change taxes and energy efficiency in japan in 2003 japan proposed a climate change tax to reduce its co2 emissions to the level required by the kyoto protocol if implemented the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment analysis using the mit emissions prediction and policy analysis eppa model shows that this policy is unlikely to bring japan into compliance with its kyoto target unless the subsidy encourages improvement in energy intensity well beyond japan s recent historical experience similar demand management programs in the us where there has been extensive experience have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal the tax proposal also calls for limits on international emission trading we find that this limit substantially affects costs of compliance the welfare loss with full emissions trading is 1 6 that when japan meets its target though domestic actions only the carbon price is lower and there is a smaller loss of energy intensive exports japan can achieve substantial savings from emissions trading even under cases where for example the full amount of the russian allowance is not available in international markets

global warming economics in the long run a conceptual framework economic models of climate change typically analyze its short run effects for example up to the year 2100 or for a doubling of atmospheric co2 this is a potentially serious shortcoming since under a business as usual scenario atmospheric co2 concentrations could more than quadruple we introduce a framework that endogenously accounts for long run climate change and examine the implications of alternative mitigation strategies one in which the rates of annual emissions are reduced and one that places absolute limits on the total amount of carbon released we discuss alternative valuation frameworks drawing on the debate surrounding the stern review

price movements and price discovery in futures and cash markets r isk transfer and price discovery are two of the major contributions of futures markets to the organization of economic activity working 1962 evans 1978 p 80 and silber 1981 risk transfer refers to hedgers using futures contracts to shift price risk to others price discovery refers to the use of futures prices for pricing cash market transactions working 1948 wiese 1978 p 87 and lake 1978 p 161 the significance of both contributions depends upon a close relationship between the prices of futures contracts and cash commodities this paper examines the characteristics of price movements in cash or spot markets and futures markets for storable commodities section ii presents an analytical model of simultaneous price dynamics which suggests that over short intervals of time the correlation of price changes is a function of the elasticity of arbitrage between the physical commodity and its counterpart futures contract greater elasticity fosters more highly correlated price changes and thereby facilitates the risk transfer function the elasticity of supply of arbitrage services is constrained by among other things storage and transaction costs thus futures contracts will not in general provide perfect risk transfer facilities over short time horizons the essence of the price discovery function of futures markets hinges on whether new information is reflected first in changed futures prices or in changed cash prices hoffman 1932 pp 258259 the model in section ii provides a framework for analyzing whether one market is dominant in terms of information flows and price discovery in section iii we develop a model based on section ii which is appropriate for estimating the lead lag relationship between cash prices and futures prices section iv presents empirical estimates of the parameters of the model for seven different storable commodities wheat corn oats frozen orange juice concentrates copper gold and silver the cost of arbitrage between cash and futures differs across these commodities for this reason we are not surprised to find inter commodity differences in the correlation of short run price changes and in the substitutability of futures contracts for cash market positions with respect to the price discovery function of futures markets we find that while futures markets dominate cash markets cash prices do not merely echo futures prices there are reverse information flows from cash markets to futures markets as well

games of climate change with international trade we analyse games of greenhouse gas emission reduction in which the emissions and the emission reduction costs of one country depend on other countries emission abatement in an analytically tractable model we show that international trade effects on costs and emissions can either increase or decrease incentives to reduce emissions and to cooperate on emission abatement in some specifications optimal emission reduction is unaffected by trade we therefore specify the model further calibrating it to larger models that estimate the costs of emission reduction trade effects and impacts of climate change if trade effects are driven by total emission reduction costs of other countries cooperation is slightly more difficult than in the case without trade effects if trade effects are determined by relative emission reduction efforts in other countries cooperation becomes easier carbon leakage does not affect our qualitative insights although it does change the numbers

volatility in productivity and the impact on unemployment volatility and the uncertainty it creates has long been recognized as a factor in economic decision making since hiring occurs before shocks to productivity are realized firms investment in ne

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

a general equilibrium analysis of climate change impacts on tourism this paper studies the economic implications of climate change induced variations in tourism demand using a world cge model the model is first re calibrated at some future years obtaining hypothetical benchmark equilibria which are subsequently perturbed by shocks simulating the effects of climate change we portray the impact of climate change on tourism by means of two sets of shocks occurring simultaneously the first set of shocks translate predicted variations in tourist flows into changes of consumption preferences for domestically produced goods the second set reallocate income across world regions simulating the effect of higher or lower tourists expenditure our analysis highlights that variations in tourist flows will affect regional economies in a way that is directly related to the sign and magnitude of flow variations at a global scale climate change will ultimately lead to a welfare loss unevenly spread across regions 2005 elsevier ltd all rights reserved

another perspective on the effects of inflation uncertainty this paper examines the effects of inflation uncertainty on real economic activity by utilizing a flexible dynamic multivariate framework that accommodates possible interaction between the conditional means and variances the empirical model is based on a familiar identified vector autoregressive framework modified to accommodate multivariate generalized autoregressive conditional heteroskedasticity our empirical model is preferred to the baseline var by likelihood based information criteria and it retains the important dynamics of the underlying var we find that an average shock to inflation uncertainty has tended to reduce output growth over three months by about 22 basis points

robust tests of forward exchange market efficiency with empirical evidence from the 1920s summary this paper provides a robust statistical approach to testing the unbiasedness hypothesis in forward exchange market efficiency studies the methods we use allow us to work explicitly with levels rather than differenced data they are statistically robust to data distributions with heavy tails and they can be applied to data sets where the frequency of observation and the futures maturity do not coincide in addition our methods allow for stochastic trend non stationarity and general forms of serial dependence the methods are applied to daily data of spot exchange rates and forward exchange rates during the 1920s which marked the first episode of a broadly general floating exchange rate system the tail behaviour of the data is analysed using an adaptive data based method for estimating the tail slope of the density the results confirm the need for the use of robust regression methods we find cointegration between the forward rate and spot rate for the four currencies we consider the belgian and french francs the italian lira and the us dollar all measured against the british pound we find support for a stationary risk premium in the case of the belgian franc the italian lira and the us dollar and we find support for the simple market efficiency hypothesis where the forward rate is an unbiased predictor of the future spot rate and there is a zero mean risk premium in the case of the us dollar

efficient climate policy in the presence of free riders abstract if all countries participate in a climate agreement policies affecting the supply of fossil fuels have identical economic consequences as policies affecting the demand of fossil fuels this is no longer true when there is limited participation in an international agreement in the paper it is assumed that a group of countries commit themselves to cooperating while the remaining countries act independently and in pure self interest the paper compares supply and demand policies in this context and demonstrates that policies which affect only demand or only supply of carbon generally are inferior to policies affecting both demand and supply of carbon the optimal mix of supply and demand policies is derived in the paper with particular emphasis on carbon taxes an important result is that if the marginal environmental costs of total emissions are sufficiently high in the cooperating countries then both production and consumption of carbon should be taxed at a positive rate if on the other hand the marginal environmental costs of total emissions are sufficiently low it may be optimal to subsidize production or consumption in this case production should be subsidized if the cooperating countries are net importers of carbon while consumption should be subsidized if the cooperating countries are net exporters of carbon another important conclusion of the paper is that the cooperating countries should try to induce the non cooperating countries through appropriate transfers to tax consumption and production of carbon at the same rate as in the cooperating countries

optimal climate policy is a utopia from quantitative to qualitative cost benefit analysis abstract the dominance of quantitative cost benefit analysis cba and optimality concepts in the economic analysis of climate policy is criticised among others it is argued to be based in a misplaced interpretation of policy for a complex climate economy system as being analogous to individual inter temporal welfare optimisation the transfer of quantitative cba and optimality concepts reflects an overly ambitious approach that does more harm than good an alternative approach is to focus the attention on extreme events structural change and complexity it is argued that a qualitative rather than a quantitative cba that takes account of these aspects can support the adoption of a minimax regret approach or precautionary principle in climate policy this means implement stringent ghg reduction policies as soon as possible

a strategic analysis of global warming theory and some numbers we model the global warming process as a dynamic commons game in which the players are countries their actions at each date produce emissions of greenhouse gases and the state variable is the current stock of greenhouse gases the theoretical analysis is complemented by a calibration exercise the first set of results establishes theoretically and then with illustrative numbers the over emissions due to a tragedy of the commons the power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry finally a complete theoretical charactrization is provided for the best equilibrium and it is shown that it has a very simple structure it involves a constant emission rate through time

departures from interest rate parity further evidence abstract daily data are used to test the theory of interest parity between the irish pound and three major currencies the tests are carried out within the context of a model suggested by pippenger 1978 and the statistical methodology used is spectral analysis the pippenger model emphasises the relaxation of two important implicit assumptions the exogeneity of the interest differential and the assumed infinitely elastic supply of arbitrage funds which have tended to characterise previous studies we attempt to reconcile our results which are generally supportive of interest parity with the exchange control arrangements currently in force in ireland

computing business as usual with a representative agent and a pollution externality abstract computing the no policy equilibrium business as usual in a representative agent ra model is complicated by the presence of a pollution externality since simple optimization internalizes the pollution cost many researchers use ad hoc methods but there is no way to know how reliable these are a solution is presented in which the ra model is divided into n identical components each identified with its own sub agent sub agents play a dynamic game leading to a nash equilibrium for sufficiently large n this approach keeps most of the pollution cost external and in the limit it is equivalent to a myopic firms model in which the entire cost is external this approach has the advantage of theoretical consistency and empirical applications indicate that it is easily implemented

a reinterpretation of the modern theory of forward exchange rates the modern theory of forward exchange rate determination mt has been widely although not unanimously accepted as an improvement over the traditional interest rate panty theory irpi the latter theory contends that in equilibruim the forward rate f will equal except for transactions costs the interest panty forward rate f 1 covered interest arbitrage cia is a pnmary but as shall be seen not the only force insunng this equilibnum condition for the forward market for example if f exceeds f then covenng arbitrageurs borrow or forego lending in the domestic country purchase the foreign currency on the spot market lend abroad at the foreign interest rate and simultaneously sell the foreign currency including interest on the forward market these transactions cause f to decline and or f to increase until equilibnum is restored motivated in part by early empincal studies of the irpi which found evidence of apparent deviations of f from f and by the intuitively appealing argument that expectations or speculation can also influence f the mt suggests that the equilibrium forward rate is better explained as a weighted average of f and the expected

spot versus forward speculation and hedging a diagrammatic exposition abstract it has recently been recognized that the controversial implication of the modern theory of forward exchange that the forward rate can differ from the rate required for interest parity no longer holds when speculators are allowed to choose between spot and forward speculation this paper shows this result within the diagrammatic apparatus usually used to describe the modern theory the paper also shows the effect of importers and exporters choosing between spot and forward hedging it is observed that when either speculators or traders can choose between money market and forward speculation hedging forward rates equal interest parity rates the diagram can be adapted to consider borrowing lending spreads etc

economic growth and greenhouse gas emissions abstract recent empirical research has examined the relationship between certain indicators of environmental degradation and income concluding that in some cases an inverted u shaped relationship which has been called an environmental kuznets curve ekc exists between these variables unfortunately this inverted u shaped relationship does not hold for greenhouse gas emissions one explanation of the absence of ekc like behavior in greenhouse gas emissions is that greenhouse gases are special pollutants that create global not local disutility but the international nature of global warming is not the only reason that prevents de linking greenhouse gas emissions from economic growth the intergenerational nature of the negative impact of greenhouse gas emissions may have also been an important factor preventing the implementation of greenhouse gas abatement measures in the past in this paper we explore the effect that the presence of intergenerational spillovers has on the emissions income relationship we use a numerically calibrated overlapping generations model of climate economy interactions we conclude that 1 the intertemporal responsibility of the regulatory agency 2 the institutional capacity to make intergenerational transfers and 3 the presence of intergenerationally lagged impact of emissions constitute important determinants of the relationship between economic growth and greenhouse gas emissions

cooperation on climate change mitigation abstract we analyze conditions under which it is possible to achieve efficient mitigation of greenhouse gas emissions with a self enforcing international agreement in which all countries find it in their self interest to abide by the agreement we model the choice of emissions by countries as a dynamic game we use a two part punishment scheme for deviations from an agreement that is renegotiation proof and show when this scheme supports the efficient outcome as a subgame perfect equilibrium using numerical examples we show that an efficient subgame perfect equilibrium exists for a range of reasonable parameter values the existence of such equilibrium may be non monotonic in the discount rate and the ratio of slope of marginal abatement cost and marginal damages

climate clubs overcoming free riding in international climate policy notwithstanding great progress in scientific and economic under standing of climate change it has proven difficult to forge inter national agreements because of free riding as seen in the defunct kyoto protocol this study examines the club as a model for international climate policy based on economic theory and empirical modeling it finds that without sanctions against non participants there are no stable coalitions other than those with minimal abatement by contrast a regime with small trade penalties on non participants a climate club can induce a large stable coalition with high levels of abatement jel q54 q58 k32 k33

descriptive prescriptive and second best approaches to the control of global greenhouse gas emissions a prescriptive second best approach is developed for determining the control of greenhouse gas emissions in an inter temporal multi region model of the world concerns about inter and intra generational equity are reflected in the rate of time preference and regional weights of a social welfare function choices are narrowed down by the ethical principle of anonymity a third dimension of equity inequality aversion is subject to greater variation the aggressiveness of recommended abatement can be made to bracket results for a common descriptive model by the choice of inequality aversion in this manner the perception of a sharp dichotomy between descriptive and prescriptive approaches is moderated

evolution of modern business cycle models accounting for the great recession modern business cycle theory focuses on the study of dynamic stochastic general equilibrium dsge models that generate aggregate fluctuations similar to those experienced by actual economies we discuss how these modern business cycle models have evolved across three generations from their roots in the early real business cycle models of the late 1970s through the turmoil of the great recession four decades later the first generation models were real that is without a monetary sector business cycle models that primarily explored whether a small number of shocks often one or two could generate fluctuations similar to those observed in aggregate variables such as output consumption investment and hours these basic models disciplined their key parameters with micro evidence and were remarkably successful in matching these aggregate variables a second generation of these models incorporated frictions such as sticky prices and wages these models were primarily developed to be used in central banks for short term forecasting purposes and for performing counterfactual policy experiments a third generation of business cycle models incorporate the rich heterogeneity of patterns from the micro data a defining characteristic of these models is not the heterogeneity among model agents they accommodate nor the micro level evidence they rely on although both are common but rather the insistence that any new parameters or feature included be explicitly disciplined by direct evidence we show how two versions of this latest generation of modern business cycle models which are real business cycle models with frictions in labor and financial markets can account respectively for the aggregate and the cross regional fluctuations observed in the united states during the great recession

faraway so close coupled climate and economic dynamics in an agent based integrated assessment model abstract in this work we develop an agent based model that offers an alternative to standard computable general equilibrium integrated assessment models iams the dystopian schumpeter meeting keynes dsk model is composed of heterogeneous firms belonging to capital good consumption good and energy sectors production and energy generation lead to greenhouse gas emissions which affect temperature dynamics climate damages are modelled at the individual level as stochastic shocks hitting workers labour productivity energy efficiency capital stock and inventories of firms in that aggregate damages emerge from the aggregation of losses suffered by heterogeneous interacting and boundedly rational agents the model is run focusing on a business as usual carbon intensive scenario consistent with a representative concentration pathway 8 5 we find that the dsk model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics simulation experiments show a substantial lack of isomorphism between the effects of micro and macro level shocks as it is typical in complex system models in particular different types of shocks have heterogeneous impact on output growth unemployment rate and the likelihood of economic crises pointing to the importance of the different economic channel affected by the shock overall we report much larger climate damages than those projected by standard iams under comparable scenarios suggesting possible shifts in the growth dynamics from a self sustained pattern to stagnation and high volatility and the need of urgent policy interventions

the kyoto protocol and developing countries abstract under the kyoto protocol the world s wealthier countries assumed binding commitments to reduce greenhouse gas emissions the agreement requires these countries to consider ways to minimize adverse effects on developing countries of these actions transmitted through trade using a general equilibrium model of the world economy we find that adverse effects fall mainly on energy exporting countries for some even greater than on countries that are assuming commitments removing existing fuel taxes and subsidies and using international permit trading would greatly reduce the adverse impacts and also reduce economic impacts on the countries taking on commitments another approach preferential tariff reduction for developing countries would benefit many developing countries but would not target those most adversely affected if instead oecd countries directly compensated developing countries for losses the required annual financial transfer would be on the order of 25 billion 1995 us in 2010

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

when managers cover their posteriors making the decisions the market wants to see the stock market has opinions as to what choices firms should make we show that concern for current share prices may lead managers to make these choices rather than those suggested by their own superior information even when arbitrarily many privately informed firms have to make a similar decision the market s prejudices may still prevail we compare the distortions that arise from share price maximization with those due to herd behavior among profit maximizing firms and show that the former results in strictly less efficient use of information

international and intergenerational environmental externalities we examine a world in which policymakers actions in a given country at a given time have long lived effects on a common resource the global environment we consider the first best in which long lived planners behave cooperatively then examine the allocation of resources when there is non cooperation across countries across time or both finally we analyze the dynamic behavior of the economy along balanced growth paths it is found that while long lived international institutions are necessary to internalize all externalities cooperation at a point in time may be harmful to future generations

unilateral regulation of bilateral trade in greenhouse gas emission permits this paper considers the coordination of domestic markets for tradable emission permits where countries determine their own emission reduction targets using a two country model linking such schemes is beneficial to both countries but may cause the exporting country to decrease its emission reduction target and export more permits this in turn would not only reduce the costs for both countries as less emissions have to be reduced but it also lowers the environmental benefits of the importing country one price instrument tariff and two quantity instruments discount quota to prevent the exporting country from issuing more permits are examined each instrument restricts trade and alters the terms of trade for the two countries the importing country and regulator prefers an import tariff and an import quota to a carbon discount if the exporting country releases additional permits the importing country should not try to keep total emissions constant as that would be ineffective and maybe even counterproductive instead the importing country should aim to keep the total import constant this would impose costs on the exporting country that are independent of the policy instrument an import quota would be the cheapest option for the importing country an import quota would also stress the idea of supplementary of the flexible mechanism as it increases the share of emissions reduced domestically compliance and liability issues constrain the market further however both the importing and the exporting country would prefer that the permit seller is liable in case of non compliance as sellers liability would less constrain the market

review on integrated strategies for energy policy planning and evaluation of ghg mitigation alternatives abstract this review paper is devoted to elaborating the status of different energy policy planning studies and the evaluation of various ghg mitigation studies it includes some of the major developments in global energy scenario status of green house gas ghg emissions issues in the implementation of kyoto protocol and ghg mitigation clean development mechanism cdm and energy scenario especially pertaining to the residential industrial and commercial energy sector in the initial sections the later part of this paper highlights the salient contributions in various literatures pertaining to energy demand forecasting in residential commercial and industrial sector ghg estimation methodologies and ghg mitigation studies in various sectors the success and difficulties in implementing various policy planning practices were also discussed in the paper most of the prominent literature in the area of energy demand and consumption analysis towards effective implementation of ghg mitigation is described in the end a comprehensive comments and recommendations based on the study were furnished

choosing a monetary value of greenhouse gases in assessment tools a comprehensive review there is a societal need for using monetary estimates of social impacts of co2 and other greenhouse gases in different assessment tools such as cost benefit analysis and life cycle assessment a number of estimates are available in the literature since these differ by several orders of magnitude there is ambiguity and confusion about which to use this review aims to give some guidance on this issue the variation in carbon value estimates depends on several uncertain aspects which will remain uncertain including climate sensitivity assumptions about future emissions and decision makers ethical standpoints hence there is no single correct monetary value for co2 it will depend on the ethical standpoint of the user due to this estimates of social costs of co2 emissions cannot be used for calculating an optimal emission level although they can inform such assessments it is suggested that marginal abatement cost values are used for emissions capped by binding targets in short term assessments and that social cost of carbon values should be used for all other emissions benchmark principles for choosing a monetary carbon value are suggested along with associated estimates depending on the choices made with regard to ethical standpoints and assumptions about future emissions and climate sensitivity estimates can be significantly higher than the ones typically used in assessment tools today the estimates need continuous updating and there is need for better understanding and communication around the limitations and uncertainties involved

balancing contemporary fairness and historical justice a quasi equitable proposal for ghg mitigations abstract in this paper we analyze the impasse caused by polarizing positions of the united states and china in international negotiations on carbon mitigation by incorporating the bern carbon cycle module into the rice model developed by nordhaus and yang 1996 we set up a framework for tracking regional contributions to carbon concentration and to global climate change our proposal labeled the color preservation principle uses regional contribution share to global carbon concentration as the criterion for international cooperation through simulations in rice model with bern module rice b we examine the rationales of the arguments made by the united states and china we conclude that both countries standpoints are severely flawed to facilitate the global cooperation on carbon mitigations major concessions are needed from the two top carbon emitters

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

spatial and temporal efficiency in climate policy applications of fund fund is an integrated assessment model of the interactions between climate and economy nine world regions emit greenhouse gases and suffer damages from climate change a number of greenhouse gas emission reduction policies are compared including optimal and cost effective strategies strategies with early and late abatement and strategies with and without international co operation the analyses confirm that co operation matters resulting in substantially lower costs or higher welfare the real commitments of policy targets based on an absolute level e g 1990 emissions are hard to estimate because of the uncertainties in the baseline postponing action conflicts with minimising costs and maximising welfare but so does sharp emission reduction at the short term as proposed in the kyoto protocol

unraveling effects of coal output cut policy on air pollution abatement in china using a cge model abstract recently frequent hazy weather in china caused by pm2 5 is mainly attributed to irrational energy consumption structure so the policies cutting coal output and promoting electric power substitution were initiated facing some resistance in the policy implementation what the proper target of cutting coal output is or whether there is a need to cut electricity prices for electric power substitution are still unknown or debatable to exploring this knowledge gap this paper set the eight action plan policy scenarios in which the coal output cut is set from 3 to 10 respectively further in order to observe whether the policy of cutting electric price will reduce the negative effects of action plan policy scenarios the eight enhanced action plan policy scenarios were also set in which the coal output cut is set from 3 to 10 respectively with the hypothetical electric price cut 3 by using the developed computable general equilibrium cge model the policy scenarios are simulated and the economic and environmental effects are tested the results showed that first in most policy scenarios the environmental and economic effects were changing synchronously in inverted u shapes but the policy to cut coal output would lead to positive environmental effects and negative economic effects second cutting electricity price could contribute to promoting electricity substitution though it couldn t be conducive to improving the electricity structure third the reduction of electricity price could also help to reduce the resistance in policy implementation consequently for optimal environmental effects and economic resistance it is recommended to set the policy target of cutting coal output as 6 while the moderate reduction of electricity price is needed and set as 3

a hotelling model with a ceiling on the stock of pollution abstract environmental agreements such as the kyoto protocol aim to stabilize the amount of carbon in the atmosphere which is mainly caused by the burning of nonrenewable resources such as coal we characterize the solution to the textbook hotelling model when there is a ceiling on the stock of emissions we consider both increasing and decreasing demand for energy we show that when the ceiling is binding both the low cost nonrenewable resource and the high cost renewable resource may be used jointly a key implication is that if energy demand were to decline in the long run we may supplement energy supply through clean renewables to meet the environmental standard but then revert back to using only dirty fossil fuels in the future when the ceiling has become non binding that is the much heralded societal transition to clean energy resources may be short lived

does distribution matter efficiency equity and flexibility in greenhouse gas abatement this paper analyses banking and borrowing ofcarbon emission rights within the framework ofa simple integrated assessment model breaking the world economy in just two regionsit will be shown 1 increasing intertemporal flexibility in greenhouse gasabatement through banking and borrowing ofcarbon emission permits has a positive effecton welfare for regions with a poor endowment incarbon emission rights but negatively affectsrich endowed regions 2 intergenerationalfairness advocates intertemporal flexibility ingreenhouse gas abatement irrespectively of theinitial allocation of carbon rights 3 optimal carbon accumulation is not independentof the initial allocation of carbon rights different initial sharing rules clearlyinfluence the development of atmospheric carbonconcentration

the effects of real and nominal uncertainty on inflation and output growth some garch m evidence in this paper we use garch m methods to test four hypotheses about the effects of real and nominal uncertainty on average inflation and output growth in the united states from 1948 to 1996 we find no evidence that higher inflation uncertainty or higher output growth uncertainty raises the average inflation rate we also find no support for the idea that more risky output growth is associated with a higher average real growth rate our key result is that in a variety of models and sample periods inflation uncertainty significantly lowers real output growth copyright 2000 john wiley sons ltd

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

game theoretic models for climate change negotiations abstract negotiations to reduce greenhouse gas accumulation in the atmosphere are modeled as extensive games of perfect information various solution concepts such as nash equilibrium reaction function equilibrium correlated equilibrium and bargaining solutions are applied analyzed and computed special reduction techniques are used when the size of the game tree becomes excessive a new solution concept the tree correlated equilibrium is also introduced main features of an excel add in designed to compute various solutions are briefly described and a sample policy analysis for a special negotiating scenario is discussed

integrating economic analysis and the science of climate instability abstract scientific understanding of climate change and climate instability has undergone a revolution in the past decade with the discovery of numerous past climate transitions so rapid and so unlike the expectation of smooth climate changes that they would have previously been unbelievable to the scientific community models commonly used by economists to assess the wisdom of adapting to human induced climate change rather than averting it lack the ability to incorporate this new scientific knowledge here we identify and explain the nature of recent scientific advances and describe the key ways in which failure to reflect new knowledge in economic analysis skews the results of that analysis this includes the understanding that economic optimization models reliant on convexity are inherently unable to determine an optimal policy solution it is incumbent on economists to understand and to incorporate the new science in their models and on climatologists and other scientists to understand the basis of economic models so that they can assist in this essential effort