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

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

a dynamic analysis of the marketable permits approach to global warming policy a comparison of spatial and temporal flexibility abstract this paper presents a generalized dynamic model of greenhouse gas emissions trading under constraints on the volume of transactions an empirical version of the model is used to evaluate potentially cost saving flexibility mechanisms joint implementation and clean development mechanism and potentially cost adding restrictions supplementarity of the kyoto protocol the results indicate the greatest gains would stem from extending permit trading spatially among industrialized nations although sizable gains would also emanate from the inclusion of developing countries gains from intertemporal trading banking and borrowing are meager restrictions on the volume of permit purchases have by far the most costly effect when developing countries are incorporated into trading sensitivity tests with respect to differential discount rates across countries and technological change indicate the results are robust

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

optimal incentive contracts under inequity aversion we analyze the classic moral hazard problem with the additional assumption that agents are inequity averse the presence of inequity aversion alters the structure of optimal contracts when the concern for equity becomes more important there is convergence towards linear sharing rules the sufficient statistics result is violated depending on the environment contracts may be either overdetermined i e include non informative performance measures or incomplete i e neglect informative performance measures finally our model delivers a simple rationale for team based incentives implying wage compression 2010 elsevier inc

magnitude and direction of technological transfers for mitigating ghg emissions this paper discusses the issues of technological transfers aimed at reducing ghg mitigation costs under various assumptions in a new version of rice model we introduce technological transfer mechanism that donors monetary transfers go to recipients ghg mitigation through such transfer mechanism we examine the relationships between magnitude direction of transfers and choice of social welfare weights in the model our simulations show that different social welfare weights may lead to significant shifts on magnitudes even directions of technological transfers the results suggest that proposing policies of technological transfers should be mindful of distributional aspects and modeling assumptions

inequity aversion may increase inequity inequity aversion models have been used to explain equitable payoff divisions in bargaining games i show that inequity aversion can actually increase the asymmetry of payoff division if unanimity is not required this is because responders may be willing to accept a lower share rather than risk being left out inequity aversion may also affect comparative statics the advantage of being the proposer can decrease as players become more impatient game theory usually assumes that players care only about their own material payoffs this hypothesis is clearly refuted by the experimental evidence in the ultimatum and related games see camerer 2003 for a recent survey inequity aversion theories have been developed in order to account for the stylised facts observed in the laboratory see fehr and schmidt 1999 and bolton and ockenfels 2000 inequity aversion means that people are willing to give up some material payoffs in order to achieve more equitable outcomes inequity averse responders prefer to reject small offers in the ultimatum game and the proposers anticipating this make higher offers in this article i examine the implications of inequity aversion for bargaining games in which unanimity is not required e g legislative bargaining games and show that it may lead to a more inequitable outcome than would occur with selfish preferences the leading model of legislative bargaining is due to baron and ferejohn 1989 in this model n symmetric players must divide a budget by simple majority each player has an equal chance of being chosen to propose a division of the budget once a proposal is made the remaining players vote yes or no if a majority of the players supports the proposal it is implemented and the game ends otherwise the procedure is repeated this model predicts that minimal winning coalitions will form and that the proposer will receive a disproportionate share of the proceedings thus the equilibrium of the baron ferejohn model with selfish preferences exhibits a substantial amount of inequity some players are excluded almost half of them if the decision rule is simple majority and the proposer receives a substantial share more than half of the total payoff if the decision rule is simple majority the advantage of the proposer increases as players become more impatient or more risk averse the baron ferejohn model has led to many applications and extensions 1 in its simplest form it assumes that parties are selfish risk neutral and only concerned with their share of cabinet posts as opposed to policy the predictions of the model under these assumptions have been tested by ansolabehere et al 2005 using data on the

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

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

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

optimal climate change adaptation and mitigation expenditures in environmentally small economies we study the optimal role of mitigation and adaptation strategies for environmentally small economies that is economies that are witnessing an exogenous increase in emissions to which they are contributing very little our results lead to three main conclusions first small economies should concentrate their environmental efforts if any on adaptation this is a recommendation based on cost effectiveness rather than on any idea about these economies indulging in free riding second environmentally small economies that are unable to spend enough on adaptation may end up spending less on mitigation in the long term owing to their impoverishment as a result of negative climate shocks third higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures but also because of increased adaptation to the incentives for mitigation provided by richer countries for the simulations we use a calibrated optimal growth model for brazil chile and the united states

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

bargaining under incomplete information fairness and the hold up problem in the hold up problem incomplete contracts cause the proceeds of relation speciflc investments to be allocated by ex post bargaining the present paper investigates the e ciency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior and equally important preferences are private information as the sunk investment costs can thus potentially signal preferences they can in uence beliefs and consequently bargaining outcomes the necessities of signalling are shown to generate very strong investment incentives these incentives are based on the desire not to reveal information that is unfavorable in the ensuing bargaining after flnding all perfect bayesian equilibria in pure strategies the paper derives the necessary and su cient conditions under which it is optimal to invest and trade e ciently

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

cooperation and subgame perfect equilibria in global pollution problems with critical threshold the paper examines the issue of international pollution control under a dynamic framework involving heterogeneous countries and a critical threshold we propose an appealing specification for this type of problem and its novelty is illustrated by the fact that countries use linear strategies in equilibrium although their utility and damage functions are highly convex the stock of pollution under cooperation is always lower surprisingly emissions are always higher in distant periods under the cooperative scenario and we show through examples that this is a significant finding rather than some marginal effect it is also shown that the efficient allocation of pollution abatement is driven only by the respective technologies of the countries finally a dynamic transfer scheme allowing to implement the cooperative solution is proposed

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

climate policy and induced r d how great is the effect abstract carbon taxes or tradable permit systems to address climate change may induce research and development in energy related technologies we construct a single knowledge stock model of r d growth and climate to assess the importance of this effect the contribution of induced r d is shown to be very sensitive to i the duplication externality ii the feasibility of dedicated research subsidies to internalize inter firm knowledge spillovers iii the opportunity cost of r d iv the initial level of research expenditure and v the elasticity of substitution between energy and other factors of production in contrast the direction and scale of the inter temporal research spillover are of secondary importance we find strong support for rezai s 2011 argument that when the business as usual scenario no policy is modeled appropriately all externalities treated as external sacrifices for early generations associated with optimal climate policy are minor or non existent employing our preferred selections for the parameters we find that adding an induced r d component to the model increases the welfare impact of the first best policy optimally chosen carbon tax and research subsidies by an average value of more than 400 and of the second best policy carbon tax alone by approximately 22

ideals versus dollars donors charity managers and government grants this paper demonstrates how changes in untied lump sum government grants or income from unrestricted endowments will affect the behavior of charities operated by managers with strong philosophical or professional commitments an increase in such funds will reduce the charity s accountability to private donors and lower its fund raising activities the grant will not be spent entirely on raising the quantity of output instead it will permit the charity manager to reduce his or her dependence on the costly solicitation of donors who do not completely share the manager s preferences in order to understand nonprofit charities one must recognize both their diversity and the independent role of their managers in furthering this diversity we will miss much of their special character if we view them as mere conduits seeking faithfully to reify the wishes of their contributors in this paper i demonstrate how an increase or a fall in untied lump sum government grants or income from unrestricted endowments will affect the behavior of charities operated by managers with strong philosophical or professional commitments to some service mixes rather than others an increase in such funds will reduce the charity s accountability to private donors and lower its fund raising activities the grant will not be spent entirely on raising

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

exemption or taxation for profits of non profits an answer from a model incorporating managerial discretion many non profit organizations engage in bothcharitable and purely commercial activities whereprofits from the latter are used to finance theformer should business income be tax exempted becauseof its cross subsidization function the effects ofexemption on the product mix are analysed using amodel incorporating managerial discretion acrucially different assumption from that of thecurrent literature under given assumptions tax exemption of commercial income emerges as a lessefficient means of supporting the charitable productthan alternative government measures such as anoutput subsidy

discretionary profit in subsidised housing markets in the subsidised housing sector building corporations can use their market power as purchasers to raise output of subsidised housing to a level higher than it is with perfect competition on both sides of the market this holds true if the building society is perfectly x efficient the proposition is not necessarily true if the corporation maximises a utility function in which discretionary profit or organisational slack is an argument the x inefficient building society may set output higher or lower than with perfect competition if the government grants a fixed subsidy per house and tries to constrain x inefficiency by imposing a maximum price this might be an incentive for the building corporation to maintain a planned shortage of subsidised houses however housing shortages will be smaller and welfare possibly greater than it is with perfect competition the existence of a perfectly competitive non subsidised housing sector is for the building corporation an incentive to increase strategically the output of subsidised housing and reduce planned shortages but it does not necessarily eliminate such shortages

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

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

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

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

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

organizational slack in subsidized nonprofit institutions informal objectives of managers next to the formal objective of the organization can be a source of organizational slack or x inefficiency in nonprofit organizations if the organization is subsidized the donor can restrain organizational slack by choosing an appropriate subsidy system four subsidy systems are discussed output input revenue and lump sum subsidy output subsidy reduces slack most the ranking of input subsidy compared with lump sum subsidy depends on the elasticity of demand for output revenue subsidy equals input subsidy changes in the subsidy regime for residential adult educations in the netherlands turn out to have been inconsistent

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

inefficiencies in public environmental services the paper discusses efficiency issues in the public provision of environmental services in particular waste water treatment it is shown that in the face of increasing respectively decreasing returns to scale the zero profit constraint of a cost minimizing public firm induces underinvestment respectively overinvestment in public capacity compared with efficient allocation between public purification and effluent control by private polluters x inefficiency of the public firm counter acts the inefficiency in allocation arising from overinvestment and it reinforces the inefficiency in allocation in case of underinvestment in public purification capacity as subsidy can bring down the user s charge imposed on sources but it will also increase x inefficiency the subsidy counteracts underinvestment but reinforces overinvestment in public capacity

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

the opportunity cost of climate policy aquestion of reference the cost of climate policy depends on the no policy alternative without which the opportunity cost of climate action cannot be determined this reference path has to reflect the current failure in the market for carbon emissions due to a negative externality private investment decisions do not consider the climate damage they entail agents overinvest in conventional capital and underinvest in climate capital internalization of climate damage lowers the private return to capital agents reduce investment in favor of mitigation and consumption optimal climate mitigation increases welfare of the present and the future simulation of the inefficient no policy scenario in dice 07 confirms that this point numerically author s abstract

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

bargaining and inequity aversion on the efficiency of the double auction abstract in a bargaining setting with asymmetrically informed inequity averse parties a fully efficient mechanism i e the double auction exists if and only if compassion is strong less compassionate parties do not trade in the double auction in the limit of strong envy

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

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