endogenous growth convexity of damage and climate risk how nordhaus framework supports deep cuts in carbon emissions to slow or not to slow nordhaus 1991 was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of worldwide importance we offer our assessment of the original article and trace its legacy in particular nordhaus s later series of dice models from this work many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls we use dice itself to provide an initial illustration that if the analysis is extended to take more strongly into account three essential elements of the climate problem the endogeneity of growth the convexity of damage and climate risk optimal policy comprises strong controls

future orientation promotes climate concern and mitigation abstract climate change entails uncertainties in the timing and scale of future impacts imposing challenges to decision making with intertemporal trade offs when making intertemporal trade offs future impacts are often considered distant and discounted in present decision making and policy design the future however is not only temporally distant but also perceived in culturally and psychologically different ways based on national statistics and individual level survey data statistical analyses show that both national and individual differences in future orientation affect climate perception and mitigation at the national level countries with languages that grammatically highlight the future are associated with higher climate concern lower carbon emissions and energy use and more progress in climate mitigation individual level evidence suggests that future orientation helps the public understand complicated climate issues make more personal mitigation but not necessarily collective action or policy support the findings indicate the important role that subjective future orientation plays in climate perception and decision making both behavioral intervention and climate communication can be designed based on future orientation to better address climate change

fiscal interactions and the case for carbon taxes over grandfathered carbon permits this paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with pre existing tax distortions in the labour market both policies reduce labour supply as they increase product prices and reduce real household wages the resulting efficiency losses in the labour market can be substantial relative to partial equilibrium abatement costs however much of this added cost can be offset and perhaps more than offset when additional distortions from the tax system are considered if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes consequently there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits copyright 2003 oxford university press

climate change policy what do the models tell us very little a plethora of integrated assessment models iams have been constructed and used to estimate the social cost of carbon scc and evaluate alternative abatement policies these models have crucial flaws that make them close to useless as tools for policy analysis certain inputs e g the discount rate are arbitrary but have huge effects on the scc estimates the models produce the models descriptions of the impact of climate change are completely ad hoc with no theoretical or empirical foundation and the models can tell us nothing about the most important driver of the scc the possibility of a catastrophic climate outcome iam based analyses of climate policy create a perception of knowledge and precision but that perception is illusory and misleading jel c51 q54 q58

issues economics and the dynamics of multiparty elections the british 1987 general election we offer a model of multiparty elections that combines voters retrospective economic evaluations with consideration of parties issue positions and the issue preferences of voters we show that both policy issues and the state of the economy matter in british elections in 1987 voters made a largely retrospective evaluation of the conservatives based on economic performance those who rejected the conservative party chose between labour and alliance based on issue positions through simulations we move the parties in the issue space and reestimate vote shares as well as hypothesize an alternative distribution of views on the economy and we show that labour had virtually no chance to win with a centrist party as a viable alternative the predictions from our 1987 simulations are supported in an analysis of the 1992 british election we argue for multinomial probit in studying three party elections because it allows for a richer formulation of politics than do competing methods

rethinking the costs related to global warming a survey of the issues one approach to the economic analysis of global warming seeks to balance the costs of damage from or adaptation to it with the costs of mitigating it the costs of adaptation and damage have been estimated using techniques of environmental evaluation but are subject to a wide margin of uncertainty the costs of mitigation principally by reducing the emissions of co2 have been estimated using different kinds of economic models some of the results of which have suggested that very little abatement of carbon emissions is justified before the costs of abatement exceed the benefits of it in terms of foregone damage and adaptation costs the paper analyses the extent to which this conclusion is a function of the modelling assumptions and techniques used rather than likely practical outcomes with regard to the models treatment of unemployed resources revenue recycling prior distortions in the economy due to the tax system and possible dynamic effects from the introduction of a carbon energy tax it concludes that with different and arguably more appropriate treatment of the above issues especially when the secondary benefits of reducing co2 emissions are also taken into account it is not clear that even substantial reductions in the use of fossil fuels will incur net costs especially if there is the prospect of even moderate costs from global warming

comparison of integrated assessment models carbon price impacts on u s energy abstract integrated assessment models iams are increasingly used to evaluate carbon policy impacts on energy structure but different models can yield considerably different results this paper seeks to frame model results for policymakers and other consumers of model outputs in this analysis we compare three models gcam merge and eppa we apply diagnostic carbon price scenarios such as ramps and shocks to identify key differences in model behavior that drive inter model variability in projected policy impacts on the u s energy system we report model results using several economic parameterizations and find that variation in carbon emissions across models results primarily from differences in carbon intensity of energy supply these differences arise because models include different low carbon energy technology options and vary widely in how flexible the electricity supply sector is at adapting to a change in policy the timing of emissions abatement is also strongly influenced by whether the model is a simulation or an inter temporal optimization scheme and the amount of foresight exhibited in the model our analysis demonstrates the usefulness of novel iam diagnostic indicators and clarifies model features that are highly relevant for consumers of model results

international co2 emissions control an analysis using ceta abstract this paper explores issues of international cooperation in co2 emission control we consider three cases selfish in which region 1 controls optimally given its own damage costs and region 2 does not control altruistic in which region 1 controls optimally given total worldwide damage costs while region 2 does not control and optimal in which regions 1 and 2 exercise jointly optimal control of emissions and region 1 pays region 2 to participate we find that neither region gains much in the selfish case but both regions are better off in the optimal case than in the altruistic case though region 1 s benefits are negative in both these cases

an optimal greenhouse tax in an optimal growth model in the past several years economists have developed a body of research concerning optimal economic policy in response to the possibility of global warming due to greenhouse gas ghg emissions contributors include nordhaus 9 10 11 12 poterba 14 manne and richels 8 cline 1 jorgenson slesnick and wilcoxen 6 goulder 3 4 gaskins and weyant 2 in this paper we attempt to assist policy makers who face the practical problem of estimating the magnitude of the socially optimal initial greenhouse gas tax and the corresponding magnitude of emission control to do this we adapt the optimal growth framework developed by nordhaus 12 in his dice model to investigate the initial optimal tax and emissions control as well as their evolution over a long planning horizon we perform sensitivity analysis not included in his monograph

can leviathan governments mitigate the tragedy of the commons this paper explores the conjecture whether the leviathan motive of politicians to tax for the purpose of raising revenues rather than for benevolent pigovian motives helps to overcome the inefficiency of international pollution spillovers such as in the cases of acid rain and global warming it turns out that this conjecture is true in a static context that captures flow externalities e g acid rain as long as environmental damages are not too high in contrast leviathan motives aggravate the already existing inefficiency in the case of stock externalities e g global warming despite probably high taxes at the beginning

the welfare effects of environmental taxation recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second best setting than in a first best setting this question has mainly been addressed indirectly by asking whether the second best optimal environmental tax is higher or lower than the first best pigouvian rate even this indirect question has itself been approached indirectly comparing the second best optimal environmental tax to a proxy for its first best value marginal social damage msd on closer examination however msd becomes ambiguously defined and variable in a second best setting making it an unreliable proxy for the pigouvian rate given these observations the current analysis reevaluates these welfare questions and finds that when compared directly to its first best value the second best optimal environmental tax generally rises with increased revenue requirements even in cases where the second best environmental tax is lower than its first best value the welfare gains may be greater than in a first best setting these results suggest that the marginal fiscal benefit revenue recycling effect exceeds the marginal fiscal cost tax base effect over a range of environmental tax rates that for benchmark models extends above the first best pigouvian rate these findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods

leviathan governments and carbon taxes costs and potential benefits abstract this paper addresses positive aspects of the global warming debate that so far has been concerned by and large with normative issues the paper considers a consumers government that appreciates tax revenues as such leviathan in addition to conventional measures of welfare i e carbon taxes serve the dual purpose of correcting for externalities here global warming or more generally a stock externality from energy use and of raising revenues this government faces either a competitive or a perfectly cartelized supply the major findings are 1 i consumers may benefit from a leviathan government that appropriates some of the monopoly rent by deterring preemption to some extent 2 ii the leviathan motive raises initial taxes and thereby lowers initial emissions but increases the long run stock externality in a play with linear strategies 3 iii there exists a continuum of equilibria in nonlinear markov strategies which are however pareto inefficient compared with the linear strategies 4 iv but in case of a binding resource constraint nonlinear strategies are the only feasible ones

carbon taxes and carbon emissions trading this paper surveys the literature on and examples of current implementation of carbon taxes and carbon emission permits it sets out the theoretical basis for these instruments with special reference to the revenue recycling and tax interaction effects this theoretical work concludes that instruments which raise revenue which can be recycled so as to reduce pre existing distortionary taxes are significantly less costly than those which do not the paper then reviews the sizable literature on the distributional effects of these instruments especially with regard to industrial competitiveness and regressive effects on low income groups evaluating attempts to mitigate these where they are perceived as unacceptable the paper concludes that such efforts at mitigation while possible can substantially reduce the efficiency benefits of the instruments the projected costs of carbon taxes depend on a wide range of assumptions this is still a contested area but the paper concludes that on a range of plausible assumptions these costs need not be high finally the paper notes that early evaluations of the environmental effectiveness of carbon taxes have been generally positive this suggests that if concern about anthropogenic climate change continues to increase more countries will introduce carbon taxes and emission permits with the latter increasingly auctioned

model uncertainty in climate change economics a review and proposed framework for future research we review recent models of choices under uncertainty that have been proposed in the economic literature in particular we show how different concepts and methods of economic decision theory can be directly useful for problems in environmental economics the framework we propose is general and can be applied in many different fields of environmental economics to illustrate we provide a simple application in the context of an optimal mitigation policy under climate change

economic and environmental impacts of the kyoto protocol in 2003 the kyoto protocol which imposes legally binding greenhouse gas emission constraints on industrialized countries is likely to enter into force the protocol has been celebrated as a milestone in climate protection but standard economic theory casts doubt that it will go beyond symbolic policy in this paper we show that the final concretion of the kyoto protocol is consistent with the theoretical prediction kyoto more or less boils down to business as usual without significant compliance costs to ratifying parties jel classification d58 q43 q58 consequences economiques et environnementales du protocole de kyoto en 2003 le protocole de kyoto qui impose aux pays industrialises l obligation de reduire leurs emissions de gaz a effet de serre entrera probablement en vigueur si le protocole a ete accueilli comme un grand pas en avant dans le combat pour proteger l environnement la theorie economique jette un regard sceptique sur la portee reelle d un tel accord et le considere comme un geste symbolique dans ce memoire on montre que la concretisation finale de l accord de kyoto s arrime aux predictions theoriques kyoto n est rien de plus que business as usual et n impliquera pas de couts significatifs pour les parties qui ont signe le protocole

efficiency sustainability and global warming abstract economic analyses of global warming have typically been grounded in the theory of economic efficiency such analyses may be inappropriate because many of the underlying concerns about climate change are rooted not in efficiency but in the intergenerational allocation of economic endowments a simple economic model is developed which demonstrates that an efficient economy is not necessarily a sustainable economy this result leads directly to questions about the policy relevance of several economic studies of the issue we then consider policy alternatives to address global warming in the context of economies with the dual objectives of efficiency and sustainability with particular attention to carbon based taxes

effects of carbon tariffs trading policy on duopoly market entry decisions and price competition insights from textile firms of developing countries abstract some developed countries are considering to implement a controversial climate policy called the carbon tariffs policy on the developing country firms which produce in their own countries and transport goods such as textiles to the developed country markets this policy has significant impacts on international trade and business to examine this policy we consider the scenario in which a developing country firm and a developed country firm both manufacture the same type of textile products which are differentiated but partially substituted thus the cost differences between these two firms establish a price competition model this model is solved through a two stage game where each firm chooses its emissions reduction technology in the first stage and decides its price in the second stage we explore the effects of carbon tariffs on developing country firms and offer coping strategies for them furthermore the effects of carbon tariffs on total carbon emissions and global social welfare are also analyzed we conclude that i carbon tariffs greatly threaten the survival of developing country firms in the developed country market ii both total carbon emissions and global social welfare are reduced in the presence of carbon tariffs iii the textile firms of developing countries should make efforts to 1 choose the appropriate technology for emissions reduction 2 reduce their cost of emissions reduction and 3 reduce the product differences with those developed country firms

when can carbon abatement policies increase welfare the fundamental role of distorted factor markets abstract this paper employs analytical and numerical models to assess the welfare effects of a revenue neutral carbon tax and nonauctioned carbon emissions permits taking into account preexisting tax distortions in factor markets the presence of preexisting taxes significantly raises the general equilibrium costs of both policies this cost increase is much greater under emissions permits since this policy does not generate revenues to reduce distortionary taxes under our central estimates emissions permits cannot increase welfare unless environmental damages exceed about 18 per ton of carbon in contrast an appropriately scaled carbon tax is welfare improving so long as environmental damages are positive

co2 mitigation potential of ccs in china an evaluation based on an integrated assessment model abstract carbon capture and storage ccs has been viewed as an emission abatement option with great potential in china as coal has dominated china s energy consumption china has already started to pay attention to ccs as well as to the proposed the concept of ccus which adds co 2 utilization into the chain of capture transportation and storage however ccs is still in the early stages of its technological development and the high cost with several internal and external uncertainties make the role that ccs can play in china s future emission reduction unclear from the perspective of general equilibrium analysis this paper introduces ccs into a regional energy economy environment integrated assessment model and makes a comprehensive evaluation of ccs s potential for future development and contribution to emission abatement in china at climate policy level the potential contribution of ccs in emission abatement has been evaluated against different future emission constraint scenarios in china at technological level the effects of endogenous learning and policy incentives on ccs have been investigated and the substitution capacities of ccs and non hydro renewables to fossil energy have been discussed as well as their technology penetration rates furthermore the impact of co 2 utilization on the development of ccs has also been discussed

poverty and distributional effects of carbon pricing in low and middle income countries a global comparative analysis abstract even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing the existing literature reveals ambiguous results for this reason we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low and middle income countries building on a consistent dataset and method we find that for countries with per capita incomes of below usd 15 000 per year at ppp adjusted 2011 usd carbon pricing has on average progressive distributional effects we also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy rather than of food goods or services we argue that an inverse u shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues our findings suggest that mitigating climate change raising domestic revenue and reducing economic inequality are not mutually exclusive even in low and middle income countries

effects of heterogeneous technological progress on haze pollution evidence from china abstract technological progress plays an important role in combating haze pollution in the long run however existing studies often ignore the inconsistent effects on the reduction of haze brought by different types of technological progress considering the potential heterogeneity among technological progress this paper constructs a theoretical framework to analyse the impact of heterogeneous technological progress on haze pollution using annual data from 30 provinces and cities in china for the period of 2003 to 2016 a systematic gmm method is applied to empirically test the effects of neutral technological progress and biased technological progress on haze pollution the results show that first due to cost reduction effect and income effect neutral technological progress and labour saving technological progress are conducive to haze reduction while the impact of capital saving technological progress on haze pollution is insignificant second because of the energy rebound effect energy saving technological progress cannot effectively reduce haze pollution third the haze reduction effects of different types of technological progress show significant regional heterogeneity in china last in terms of the control variables strengthening environmental regulation is the only factor that can be helpful in haze reduction others intensify haze pollution

welfare as equity equivalents equity or its counterpart inequity plays a fundamental role in the evaluation of social welfare in different dimensions in this paper we revisit the concept of inequity in the sense of unequal distributions across individuals time and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach we propose a general measure of welfare as equity equivalents and a corresponding inequity index we show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations we then prove that the order of aggregation across the different dimensions matters for welfare evaluations finally we show that many of the welfare theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework

costs of reducing global carbon emissions po rojecting the costs of reducing carbon emissions is extremely important and exceedingly difficult such projections are an integral component of cost benefit analyses of alternative policies for example for the global climate policy analysis described by william nordhaus in this symposium moreover the nature of the climate change problem dictates that costs be incurred long before benefits can be realized or accurately measured consequently the political spotlight predictably focuses on the cost estimates whenever specific policy options are contemplated projecting the costs of reducing carbon emissions is difficult because many assumptions must be made about how the world will evolve over a very long period of time with and without a control program typically some of these assumptions like population growth are taken from outside sources other factors like the response of energy demand to changes in economic output or energy prices are the result of modeling the behavior of economic actors in response to exogenous stimuli considerable uncertainty exists about both the exogenous factors and the best way to model the behavioral responses the global nature of the climate change problem adds yet another complication to the cost analysis scientists have concluded that it is the global concentration of carbon in the atmosphere that influences climate moreover since carbon in the atmosphere gets mixed more or less uniformly emissions anywhere change concentrations everywhere but with a long lead time current global carbon emissions are estimated to be only about 4 percent of the stock of co2 in the atmosphere attributable to human activity and about

the structure of the climate debate first best climate policy is a uniform carbon tax which gradually rises over time civil servants have complicated climate policy to expand bureaucracies politicians to create rents environmentalists have exaggerated climate change to gain influence other activists have joined the climate bandwagon opponents to climate policy have attacked the weaknesses in climate research the climate debate is convoluted and polarized as a result and climate policy complex climate policy should become easier and more rational as the paris agreement has shifted climate policy back towards national governments changing political priorities austerity and a maturing bureaucracy should lead to a more constructive climate debate

sustainable land use management under biodiversity lag effects the destruction of natural habitats for agricultural production results in local biodiversity loss biodiversity loss in turn affects agricultural production indirectly through a range of biodiversity dependent ecosystem services land conversion thus results in a negative externality mediated by changes in biodiversity when the consequences of this externality are delayed in time lack of internalization results in overshoot and collapse dynamics which are undesirable from a sustainability perspective here we emphasize the importance of forward looking policies for the long term sustainability of human nature interactions we show that the internalization of this externality through a land tax can result in several win win effects in the long run first more biodiversity is preserved at equilibrium which increases the carrying capacity and total well being of the human population second a taxation path that maximizes the discounted sum of human utilities prevents or greatly alleviates overshoot and collapse crises thus increasing the sustainability of the system in particular this result holds in the case of imperfect information regarding the precise temporal dynamics of biodiversity loss suggesting that the design of efficient land use management policies is possible despite incomplete ecological data this study highlights the need to internalize biodiversity dependent externalities through economic incentives especially under uncertainty regarding long term ecological dynamics

comparing specific and ad valorem pigouvian taxes and output quotas when the production or use of a good creates an external cost an unregulated market produces a socially inefficient quantity of output one remedy for this inefficiency is to impose a pigouvian tax equal to the marginal external damage associated with the good in many circumstances privately optimizing agents facing a pigouvian tax make decisions that are consistent with the maximization of social welfare

in praise of frank ramsey s contribution to the theory of taxation frank ramsey s brilliant 1927 paper modestly entitled a contribution to the theory of taxation is a landmark in the economics of public finance nearly a half century later through the work of diamond and mirrlees 1971 and mirrlees 1971 his paper can be thought of as launching the field of optimal taxation and revolutionising public finance ramsey f p 1927 a contribution to the theory of taxation economic journal vol 37 145 pp 47 61

co2 stabilization may be a no regrets policy restricting co2 emissions requires changing today s consumption pattern away from energy and emission intensive commodities towards cleaner goods the cost of stabilizing co2 emissions at the 1990 level by the year 2000 say as compared to a business as usual trend is estimated by several researchers to be on the order of 1 of gnp we will argue that the cost may be overestimated because of a too simple model describing the working of the economic system and the evaluation of welfare we demonstrate that by expanding a model to include the actual tax system and negative externalities the cost to present generations from restricting emissions by a co2 tax may be negative that is some reduction may actually correspond to a no regrets policy the reasons are inefficiencies in today s tax system and non optimal handling of negative externalities our analysis suggests that a co2 tax and reduced emissions will lessen such inefficiencies

the exploitation of fossil fuels under the threat of global warming and carbon taxes a dynamic game approach this paper considers efficient and monopolistic extraction of non renewable energy resources when the resource consumption leads simultaneously to a stock externality global warming the case of monopolistic supply leads to a dynamic game between cartelised producers and a consumers government for this game we compute linear markov perfect strategies that are characterized by preemption of the tax at the wellhead when compared with the open loop solution unfortunately the general asymmetric two state variable model does not allow for an explicit analytical solution therefore a simplified version with one state variable neglecting depreciation of the stock of the pollutant is studied and a numerical example is presented it turns out that the simplified and analytically solved framework provides a good approximation of the initial phase of the transient behaviour but not of the long run

changing asset endowments and smallholder participation in higher value markets evidence from certified coffee producers in nicaragua this paper examines the capacities of smallholders in nicaragua to exploit new linkages to certified coffee markets following the coffee crisis data on livelihood assets were collected from 292 households which were clustered to test how differences in outcomes asset building reflect variations in initial asset endowments the results suggest that most households built particular elements of their asset base and increased their resilience to future shocks however households struggled to make effective use of the gains for intensifying their livelihoods of the least endowed households few made investments in the scale or productivity of coffee and most continued to depend heavily on subsistence production and seasonal off farm income for survival in conclusion improved market access alone even under relatively favorable market conditions and with considerable external support will have uncertain impacts on rural poverty if the underlying constraints on household assets and investments are not addressed concurrently