Economics 134 L7: Climate Change I
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Questions and Answers

Hotter days increase employee productivity.

False (B)

Climate refers to the realization of weather outcomes.

False (B)

Higher annual temperatures lower economic growth particularly in developing countries.

True (A)

Changes in weather may have permanent economic implications.

<p>False (B)</p> Signup and view all the answers

The aggregate climate damages curve shows total damage as a function of temperature increase.

<p>True (A)</p> Signup and view all the answers

Hurricanes and tropical storms have no impact on long-term economic output.

<p>False (B)</p> Signup and view all the answers

The rise in global temperature is attributed to an unprecedented increase in methane levels.

<p>False (B)</p> Signup and view all the answers

The empirical strategy is used to estimate the costs of reducing climate change.

<p>False (B)</p> Signup and view all the answers

Economic output has a strong correlation with CO2 emissions per dollar of GDP across countries.

<p>True (A)</p> Signup and view all the answers

Economists often confuse the terms climate and weather.

<p>True (A)</p> Signup and view all the answers

Climate change poses no interesting economic challenges.

<p>False (B)</p> Signup and view all the answers

The optimal global carbon price can be calculated using integrated assessment modeling.

<p>True (A)</p> Signup and view all the answers

Assumptions such as valuing future events and coordinating with other countries are unrealistic in climate change economics.

<p>True (A)</p> Signup and view all the answers

Reducing climate change involves estimating only the damages caused by climate events.

<p>False (B)</p> Signup and view all the answers

The economic value of carbon emissions is greater than the benefits of reducing global temperatures.

<p>False (B)</p> Signup and view all the answers

International negotiation and cooperation are irrelevant when discussing climate change economics.

<p>False (B)</p> Signup and view all the answers

Economic damage from climate change can be accurately predicted.

<p>False (B)</p> Signup and view all the answers

The U.S. agricultural sector represents 0.6% of its GDP.

<p>True (A)</p> Signup and view all the answers

Agricultural yields in the U.S. have consistently increased with rising temperatures.

<p>False (B)</p> Signup and view all the answers

The empirical strategy for estimating climate damages involves comparing crop yields across counties over various years.

<p>True (A)</p> Signup and view all the answers

The U.S. is the world's largest agricultural producer, contributing to 41% of global corn production.

<p>True (A)</p> Signup and view all the answers

Mapping CO2 to climate change is a straightforward process that does not require expert input.

<p>False (B)</p> Signup and view all the answers

The research on agricultural yields and temperature only considers data from the 21st century.

<p>False (B)</p> Signup and view all the answers

The relationship between daily temperature and agricultural yields is represented by a linear function.

<p>False (B)</p> Signup and view all the answers

Lowering emissions has been a main focus for policymakers since the first UN assessment in 1990.

<p>True (A)</p> Signup and view all the answers

Substituting away from fossil fuels means completely ceasing energy consumption.

<p>False (B)</p> Signup and view all the answers

Better technology can improve the efficiency of carbon-based production.

<p>True (A)</p> Signup and view all the answers

The U.K. has completely eliminated the use of coal for electricity generation.

<p>False (B)</p> Signup and view all the answers

China's efforts to reduce emissions continue to rely heavily on coal.

<p>True (A)</p> Signup and view all the answers

Outsourcing emissions to other countries is not a strategy employed by the U.K.

<p>False (B)</p> Signup and view all the answers

Economic theory suggests that distorting decisions to reduce emissions will not incur costs for individuals or firms.

<p>False (B)</p> Signup and view all the answers

China has significantly invested in renewable energy alongside improving coal plant efficiency.

<p>True (A)</p> Signup and view all the answers

Total abatement costs can be calculated by considering the costs of switching to lower-carbon activities.

<p>True (A)</p> Signup and view all the answers

Starting emissions reductions as soon as possible has huge net benefits for climate policy.

<p>True (A)</p> Signup and view all the answers

The DICE model is used to evaluate climate damages at the University of Sussex.

<p>False (B)</p> Signup and view all the answers

More stringent climate targets always result in lower costs for firms.

<p>False (B)</p> Signup and view all the answers

A technological breakthrough in zero-carbon technology is estimated to have a net value of around $17 trillion.

<p>True (A)</p> Signup and view all the answers

The MERGE model is associated with the Electric Power Research Institute in Washington DC.

<p>True (A)</p> Signup and view all the answers

The evaluation of carbon pricing suggests that delaying action on emissions will ultimately benefit the economy.

<p>False (B)</p> Signup and view all the answers

Empirical strategy is not a component of estimating climate damages.

<p>False (B)</p> Signup and view all the answers

PISCES is a model used to analyze climate change impacts at the University of Maryland.

<p>False (B)</p> Signup and view all the answers

To give firms time to adapt, emissions reductions should ramp up over time.

<p>True (A)</p> Signup and view all the answers

The optimal global carbon price does not impact long-term climate policy effectiveness.

<p>False (B)</p> Signup and view all the answers

Abatement costs will not be affected by technological innovations over time.

<p>False (B)</p> Signup and view all the answers

Three strategies are outlined for estimating the costs of reducing climate change.

<p>True (A)</p> Signup and view all the answers

Nordhaus estimates that a low-cost zero-carbon technology could help avoid most damages from climate change.

<p>True (A)</p> Signup and view all the answers

The evaluation presented shows no advantages to setting stricter climate targets in terms of net benefits.

<p>False (B)</p> Signup and view all the answers

What is the main focus of policymakers since the first UN assessment?

<p>Lowering emissions</p> Signup and view all the answers

What are the three key economic issues that arise from climate change?

<p>Balancing energy use with decarbonization, discounting and long-run environmental policy, risk, uncertainty, and irreversibility. (A)</p> Signup and view all the answers

The economics of climate change often require the analysis of specific industries and how their outcomes are affected by temperature changes.

<p>True (A)</p> Signup and view all the answers

What is the main finding of Schlenker and Roberts' research on agricultural yields and temperature?

<p>There is a threshold in output effects starting between 29-32°C, where temperature is moderately beneficial until the threshold and then becomes very harmful above it.</p> Signup and view all the answers

What three strategies are broadly used to slow down climate change?

<p>Reduce emissions, carbon removal, geoengineering. (A)</p> Signup and view all the answers

Geoengineering is a well-understood and risk-free approach to reducing climate change.

<p>False (B)</p> Signup and view all the answers

What is the problem with carbon removal despite its attractiveness in principle?

<p>Carbon removal is highly costly per ton of carbon in terms of both money and energy.</p> Signup and view all the answers

What two complementary strategies are used to reduce emissions?

<p>Substitution away from fossil fuel intensive production towards different activities that do not use fossil fuels and better technology to improve the efficiency of carbon-based production.</p> Signup and view all the answers

The UK has largely phased out coal, significantly increased its share of renewables for electricity, and outsourced emissions to other countries with trade.

<p>True (A)</p> Signup and view all the answers

The UK and China have adopted only one of the two complementary strategies to reduce emissions.

<p>False (B)</p> Signup and view all the answers

Sweden is often considered a success story in terms of reducing CO2 emissions.

<p>True (A)</p> Signup and view all the answers

What is the purpose of constructing an aggregate damage function?

<p>To calculate the total damage for each sector and each county for a given increase in temperature, tracing the aggregate climate damages curve as a function of the temperature increase.</p> Signup and view all the answers

What are the key contributions of Nordhaus' research to understand climate change?

<p>The social cost of carbon and a systematic way to evaluate different climate policies with cost-benefit analysis.</p> Signup and view all the answers

What is the social cost of carbon calculated as?

<p>The marginal damage of an additional ton of carbon dioxide.</p> Signup and view all the answers

Nordhaus' integrated assessment model is a static approach that does not consider climate physics.

<p>False (B)</p> Signup and view all the answers

According to Nordhaus' research, there are huge net benefits to climate policy in comparison to inaction.  

<p>True (A)</p> Signup and view all the answers

Nordhaus' research suggests that ramp-up over time is not necessary for climate policies.  

<p>False (B)</p> Signup and view all the answers

Nordhaus' research suggests that stricter climate targets are always associated with higher benefits.  

<p>False (B)</p> Signup and view all the answers

The concept of a technological breakthrough suggests the possibility of a low-cost zero-carbon technology that could significantly reduce the costs of climate change mitigation.  

<p>True (A)</p> Signup and view all the answers

Flashcards

Climate Change Economic Challenges

Balancing energy use with decarbonization, dealing with discounting, long-term environmental policy, risk, uncertainty, and irreversibility, and international negotiation.

Global Temperature Increase

A significant rise in global temperature, directly correlated with CO2 levels

CO2 and Economic Output Correlation

A strong relationship between CO2 emissions and economic output.

Climate Damages Estimation

Quantifying the economic harm resulting from climate change.

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Climate Change Mitigation Costs

The economic costs associated with reducing greenhouse gas emissions.

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Optimal Global Carbon Price

The price of carbon emissions that maximizes social welfare by balancing the costs of mitigation and the damages of climate change.

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Integrated Assessment Modeling

A model that combines economic and climate models to assess the impacts of climate change policy.

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Social Cost of Carbon

The estimated economic damages caused by emitting one additional metric ton of carbon dioxide.

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Estimating Climate Damages

Analyzing the economic harm caused by climate change. It involves linking climate change impacts (e.g., temperature changes) with economic outcomes (e.g., agricultural yields).

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Mapping CO2 to Climate Change

Establishing a connection between carbon dioxide emissions and resultant climate change, showing a correlation.

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Mapping Climate Change to Economic Damages

Linking shifts in climate, such as temperature changes, to damages on economic activities.

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Agricultural Yields and Temperature

Studying how changes in temperature affect crop production (yields).

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Empirical Strategy (research)

Using data (like temperature records and crop yields) to find a relationship between climate change and economic impacts.

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Nonlinear Temperature Effects

Temperature changes have non-linear effects on agricultural yields. The impact increases disproportionately as temperatures rise beyond a certain point.

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Spatial Data on Temperature

Detailed information about temperature variations across different geographic locations (e.g., counties)

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Crop Yields

Amount of crops produced per area of land (e.g. per acre).

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Climate vs. Weather

Climate is the long-term pattern of weather, while weather is a specific short-term event.

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Climate Change Damages

Economic losses resulting from climate change, such as reduced productivity, higher mortality, and increased injuries.

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Aggregate Damage Function

A function that estimates the total economic damage caused by a specific increase in temperature.

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Economic Impacts of Temperature

Higher temperatures negatively affect various economic activities, including worker productivity and health.

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Long-Run Economic Decisions

Decisions related to things like where to live, work, and invest that are influenced by climate change.

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Transient Weather Changes

Short-term weather fluctuations that don't significantly impact long-term economic decisions.

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Costs of Reducing Climate Change

The expenses incurred in implementing strategies to mitigate climate change.

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Reducing emissions

Lowering the release of greenhouse gases into the atmosphere to mitigate climate change.

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Substitution (emission reduction)

Shifting away from fossil fuels toward alternative energy sources like renewables or nuclear.

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Technological efficiency (emission reduction)

Improving the efficiency of current carbon-based production techniques.

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Cost of emission reduction

The economic impact of policies that discourage fossil fuel use and promote sustainability.

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UK emission reduction

UK reduced fossil-fuel use by phasing out coal, increasing renewables, and outsourcing some emissions.

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China emission reduction

China improved efficiency by replacing old coal plants with new, efficient ones, while still using coal relatively heavily.

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Emissions intensity

The emissions per unit of economic output; a measure of efficiency in reducing emissions.

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Combined strategies

Using both substitution and efficiency improvements to reduce emissions.

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Aggregate Cost Function

A function that sums up the costs associated with reducing global emissions to different levels. It considers changes in carbon-based activities.

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Abatement Costs

The expenses involved in reducing greenhouse gas emissions, compared to a 'business-as-usual' scenario.

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Climate Policy

Government actions aimed at mitigating climate change, often by incentivizing lower emissions.

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Global Emissions

The total amount of greenhouse gases emitted worldwide by human activities.

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Empirical Strategy

Methodology that relies on observed data and evidence to estimate climate damages.

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Climate policy benefits

The positive outcomes from implementing stricter climate targets, outweighing the costs of reducing emissions.

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Early emissions reduction

Starting to reduce emissions soon, creating room for companies/industries to adapt.

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Gradual emission reduction increases

Increasing emissions reductions over time, ensuring a smoother transition for firms/industries.

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Stringent climate targets

Goals for emissions reductions that are exceptionally ambitious and precise.

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Technological breakthrough

A quick and affordable technology creating zero-carbon emissions, avoiding losses from climate change.

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Net benefits

The difference between the benefits that climate policy will bring and the costs it will take.

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Nordhaus (2018)

A Nobel Prize lecture discussing climate change.

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Environmental Offsets

Actions taken to compensate for environmental damage caused by another activity.

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Voluntary Offsets

Offsets undertaken by individuals or businesses on a voluntary basis, like buying carbon offsets to compensate for air travel.

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Mandated Offsets

Offsets required by law or regulations, often mandated through environmental impact assessments during land-use permitting processes.

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Cost of Offsets

The financial expense associated with implementing an offset project.

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Direct Environmental Protection

Actions taken directly at the source of the environmental impact to minimize or eliminate it.

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Offset Quality

The effectiveness and reliability of an offset project in achieving its desired environmental outcome.

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Offset Monitoring

The process of tracking and verifying the effectiveness of an offset project over time.

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Counterfactual

What would have happened in the absence of an offset project. Key for understanding the actual impact of an offset.

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Baseline Scenario

A hypothetical prediction of what would have occurred in the absence of an offset project.

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Pigouvian Tax/Subsidy

A tax or subsidy designed to internalize external costs or benefits, like a subsidy to encourage forest planting to offset carbon emissions.

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Expected Externality

The average environmental impact of an offset project, taking into account the probability of success or failure.

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Adverse Selection

A situation where lower-quality offset projects are more likely to be undertaken due to a flawed incentive system.

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California Carbon Market

California's system of capping and trading greenhouse gas emissions, allowing firms to use offsets to meet their legal obligations.

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Improved Forest Management Offsets

Offset projects that aim to increase carbon storage through enhanced forest management practices.

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California Air Resources Board (CARB)

The agency responsible for overseeing California's cap-and-trade program, including the approval of offset projects.

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Offset Credit Approval

The process by which CARB evaluates offset project proposals and determines the amount of credits to be awarded, if any.

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Baseline Scenario (California Offsets)

A prediction of how much carbon would be stored in a forest without offset incentives, used to determine the amount of credit awarded.

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Regional Carbon Stock Average

The average amount of carbon expected to be stored in forests within a specific region.

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Overcrediting

Awarding more offset credits than the actual environmental benefit generated by a project.

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Undercrediting

Awarding fewer offset credits than the actual environmental benefit generated by a project.

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Ecologically Robust Baseline

A more accurate prediction of carbon storage in a forest, considering factors like tree species and ecological conditions.

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Adverse Selection (California Offsets)

Lower-quality offset projects with relatively low carbon storage potential are more likely to be submitted and approved in California due to the crediting system.

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Estimated Crediting Error

The difference between the actual environmental benefit and the credits awarded for a forest offset project in California.

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Over-Crediting Error (California)

The amount of excess credits awarded in California's forest offset program due to overly optimistic baseline scenarios.

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Sandel's Moral Objection to Offsets

Philosopher Michael Sandel argues that using offsets for pollution removes the moral stigma associated with it and undermines a sense of shared responsibility.

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Midterm Exam

A comprehensive evaluation of material covered in the course, emphasizing lectures 6-11 and problem set 2.

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Study Notes

Economics 134 L7: Climate Change I

  • The presentation is on climate change, focusing on economic issues.
  • Climate change is one of the greatest challenges of our time.
  • Studying climate change is important to balance energy use with decarbonization, understand environmental policy, acknowledge risk, uncertainty, and irreversibility, and recognize the importance of international negotiation and cooperation.
  • Global surface temperatures have risen in an unprecedented way in over 2,000 years.
  • The warmest multi-century period has occurred in over 100,000 years.
  • Global emissions correlate strongly with economic output, measured in CO2 emissions per GDP.
  • The course will investigate the economic damages of climate change and the economic value of carbon emissions.
  • Climate change policies will be considered with the aim of reducing harmful outcomes.
  • Approaches to estimating climate damages include an empirical strategy, aggregating damage functions, and examining specific sectors like agriculture.

Estimating Climate Damages

  • Mapping CO2 to climate change is already fairly well established.
  • Mapping climate change to economic damage (e.g., temperature effects) is an economist's key strength.
  • Uncertainty regarding climate physics and various economic impacts poses a challenge.
  • An example of studies examines agricultural yields and temperature, showing how high temperatures correlate to negative consequences across multiple crops (corn, soybeans, cotton) in the US.
  • Research strategy combines detailed spatial data on daily temperatures during growing seasons and U.S. crop yields.
  • This strategy compares crops grown in the same county in different years to control for state-specific effects.
  • Studies found a threshold temperature above which crop yield significantly declines.

Implications of Global Warming

  • Predicted changes in crop yields correlate negatively with temperature increases.
  • Future climate change scenarios demonstrate implications for crop yields.
  • Other studies find links between higher temperatures and negative economic outcomes including mortality, reduced worker productivity and higher workplace injuries.

Geoengineering

  • Geoengineering is the conceptually straightforward but technically complex approach of directly altering climate.
  • There are well-established, inexpensive links between volcanic eruptions and temperature reductions.
  • Nonetheless, murkier details, including potential negative side-effects, exist.
  • There is widespread agreement that adaptation is necessary but not sufficient.

Carbon Removal

  • Reverse combustion is a theoretically attractive approach to carbon removal.
  • Carbon removal is costly, both financially and energetically.
  • Extensive efforts by engineers remain unsuccessful.
  • Trees offer a natural solution.

Reducing Emissions (Abatement)

  • Policymakers have made this their principal focus, considered the only realistic option.
  • Policy changes include adopting alternative energy sources and improving efficiency of carbon-based production.
  • Economic theory suggests that these changes will involve costs for individuals and firms, but that these costs are unlikely to outweigh the benefits.
  • Reduction examples presented include phasing out coal and increasing renewables in the U.K.

Aggregate Damage Function

  • The general idea is to aggregate a lot of small estimates to understand total sector-specific damages at the county level.
  • These can be used to estimate total damages as a function of the temperature increase.

Aggregate Cost Function

  • This idea is similar to the damage function, where costs of mitigating/reducing climate change are calculated.
  • Calculations add up the costs related to adopting new technologies and lower-carbon activities, and integrate innovation & technical changes over time.
  • Costs are calculated relative to a "business-as-usual" scenario.
  • Models used to generate these costs include FUND, GCAM, DICE, and others.

Integrated Assessment Modeling

  • Recall the solution to external effects where marginal profits and marginal damage equal zero.
  • Marginal profits are dependent on output, and marginal damage is dependent on output, too.
  • The approach assumes marginal abatement cost is dependent on emission reduction speed and marginal benefit is dependent on the total carbon stock.

Social Cost of Carbon

  • The Social Cost of Carbon (SCC) is calculated as the marginal damage of an additional ton of carbon.
    • The Social Cost of Carbon is often used as a metric by policy makers and businesses.

Policy Evaluation

  • Net benefits across a range of climate policy scenarios were calculated.
  • Policies are often evaluated by considering their net benefits.
  • It was observed that a lower degree of emissions mitigation would entail lower costs.
  • A technological breakthrough in low-cost zero-carbon technology would allow for higher net benefits compared to other options.
  • A significant investment would be needed for strict climate targets.

Next Steps

  • Further research by Nordhaus should be reviewed.

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Related Documents

Economics 134 L7. Climate Change I Lecture Notes PDF
Economics 134 Past Paper Notes PDF

Description

This quiz focuses on the economic implications of climate change, exploring its global impact and the urgent need for policies that address carbon emissions. By examining the relationship between economic output and climate damages, students will gain insight into effective strategies for balancing energy use with environmental sustainability.

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