Equity weighting and the marginal damage costs of climate change

Climate change will give rise to different impacts in different countries, and different countries have different levels of development. Equity-weighted estimates of the (marginal) impact of greenhouse gas emissions reflect these differences. This paper analyses the impact of equity weighting on the marginal damage cost of carbon dioxide emissions, and reaches four main conclusions. First, equity-weighted estimates are substantially higher than estimates without equity-weights; equity-weights may even change the sign of the social cost estimates. Second, estimates differ by two orders of magnitude depending on the region to which the equity weights are normalised. Third, equity-weighted estimates are sensitive to the resolution of the impact estimates. Depending on the assumed intra-regional income distribution, estimates may be more than twice as high if national rather than regional impacts are aggregated. Fourth, variations in the assumed inequality aversion have different impacts in different scenarios, not only because different scenarios have different emissions and hence warming, but also because different scenarios have different income differences, different growth rates, and different vulnerabilities.     

Local air pollution and global climate change: A combined cost-benefit analysis

This article presents the findings of a combined cost-benefit analysis of local air pollution and global climate change, two subjects that are usually studied separately. Yet these distinct environmental problems are closely related, since they are both driven by the nature of present energy production and consumption patterns. Our study demonstrates the mutual relevance of, and interaction between, policies designed to address these two environmental challenges individually. Given the many dimensions air pollution control and climate change management have in common, it is surprising that they have only little been analyzed in combination so far. We attempt to cover at least part of the existing gap in the literature by assessing how costs and benefits of technologies and strategies that jointly tackle these two environmental problems can best be balanced. By using specific technological options that cut down local air pollution, e.g. related to particulate emissions, one may concurrently reduce CO₂ emissions and thus contribute to diminishing global climate change. Inversely, some of the long-term climate change strategies simultaneously improve the quality of air in the short run. We have extended the well-established MERGE model by including emissions of particulate matter, and show that integrated environmental policies generate net global welfare benefits. We also demonstrate that the discounted benefits of local air pollution reduction significantly outweigh those of global climate change mitigation, at least by a factor of 2, but in most cases of our sensitivity analysis much more. Still, we do not argue to only restrict energy policy today to what should be our first priority, local air pollution control, and wait with the reduction of greenhouse gas emissions. Instead, we propose to design policies that simultaneously address these issues, as their combination creates an additional climate change bonus. As such, climate change mitigation proves an ancillary benefit of air pollution reduction, rather than the other way around.     

International climate regimes: Effects of delayed participation

This paper analyses how delayed participation by regions can affect international climate regimes in terms of the feasibility, costs, timing, magnitude and nature of the long-term mitigation response. We use the energy-systems optimization model MESSAGE to construct several climate change mitigation scenarios with various levels of regional participation in short-to-mid term. By comparing these with a global scenario that assumes full spatial and temporal flexibility throughout the century, we are able to evaluate how participatory decisions affect the mitigation response as well as the costs and technology choices. We find that short-term postponement of participation from some regions can often lead to a delay of mitigation measures on the global level. However, if the regional delay lasts until mid-century, participants of the regime are likely to increase their efforts in the short term. Mitigation costs are found to substantially increase as a result of delayed participation—the extent of the increase depends on the relative importance of the region that postpones its participation, the stringency of the climate target and the ability to reorganize mitigation measures. Our analysis also shows that a region's decision to delay its participation in an international climate regime can lead to accumulated inertia in its energy system and thus to a delayed ‘technological transition’ toward a low-carbon future.     

Respondent uncertainty in a contingent market for carbon offsets

The main objective of this paper is to provide additional empirical evidence of what explains respondent uncertainty in contingent valuation (CV) and how this in turn affects stated willingness to pay (WTP). Air travelers asked to pay a carbon travel tax to offset carbon emissions from flying were asked how likely it is that they will actually pay if the tax is voluntary. When changing the market compliance imperative from a mandatory carbon tax to a voluntary contribution, a third of all air travelers consider it unlikely they will actually pay their stated WTP amount. An ordered probit estimation approach is applied to identify the sources of respondent uncertainty. Besides the bid price, respondent sense of responsibility and belief in the effectiveness of the voluntary carbon market are among the main reasons for the experienced uncertainty.     

Identifying and evaluating robust adaptive policy responses to climate change for water management agencies in the American west

Climate change presents a significant planning challenge for water management agencies in the western United States. Changing precipitation and temperature patterns will disrupt their supply and extensive distribution systems over the coming decades, but the precise timing and extent of these impacts remain deeply uncertain, complicating decisions on needed investments in infrastructure and other system improvements. Adaptive strategies represent an obvious solution in principle, but are often difficult to develop and implement in practice. This paper describes work helping the Inland Empire Utilities Agency (IEUA) explicitly develop adaptive policies to respond to climate change and integrating these policies into the organizations' long-range planning processes. The analysis employs Robust Decision Making (RDM), a quantitative decision- analytic approach for supporting decisions under conditions of deep uncertainty. RDM studies use simulation models to assess the performance of agency plans over thousands of plausible futures, use statistical “scenario discovery” algorithms to concisely summarize those futures where the plans fail to perform adequately, and use these resulting scenarios to help decisionmakers understand the vulnerabilities of their plans and assess the options for ameliorating these vulnerabilities. This paper demonstrates the particular value of RDM in helping decisionmakers to design and evaluate adaptive strategies. For IEUA, the RDM analysis suggests the agency's current plan could perform poorly and lead to high shortage and water provisioning costs under conditions of: (1) large declines in precipitation, (2) larger-than-expected impacts of climate change on the availability of imported supplies, and (3) reductions in percolation of precipitation into the region's groundwater basin. Including adaptivity in the current plan eliminates 72% of the high-cost outcomes. Accelerating efforts in expanding the size of one of the agency's groundwater banking programs and implementing its recycling program, while monitoring the region's supply and demand balance and making additional investments in efficiency and storm-water capture if shortages are projected provides one promising robust adaptive strategy — it eliminates more than 80% of the initially-identified high-cost outcomes.     

Possible economic impacts of a shutdown of the thermohaline circulation: an application of <Emphasis Type="Italic">FUND</Emphasis>

Climate change can lead to a substantial reduction of the strength of the thermohaline circulation in the world oceans. This is often thought to have severe consequences particularly on the North Atlantic region and Northern and Western Europe. The integrated assessment model FUND is used to estimate the extent of these impacts. The results indicate that, owing to a slower warming (rather than cooling) of the regions most affected by a thermohaline circulation collapse, climate change induced damages in these regions would be smaller in case of a shutdown of the thermohaline circulation. However, even with a thermohaline circulation collapse, the total and marginal impacts of climate change are negative.JEL Classification: Q510, Q540We are grateful to Till Kuhlbrodt for providing the CLIMBER data and to Andre Krebber for processing them. The German Federal Ministry for Education and Research through the INTEGRATION project, the US National Science Foundation through the Center for Integrated Study of the Human Dimensions of Global Change (SBR-9521914) and the Michael Otto Foundation provided welcome financial support.     

Transferable quotas,enforcement costs and typical firms: An empirical application to the Norwegian trawler fleet

An alternative to traditional regulations of fisheries to avoid rent dissipation is the use of individual transferable quotas (ITQ _s ) where prices in the quota market provide the necessary information to owners of harvest rights to contract with each other. However, even under such a decentralized regime, information on the underlying technology of the fishing vessels is also necessary. First, since most fisheries consist of many interrelated production processes, in order to avoid rent dissipation by discarding wrong output mix etc., the structure of production in the multispecies fishery must be known to design a proper quota system. Second, an ITQ system may create incentives for misreporting by understating the actual catch. This may especially be the case where the expected degree of self-enforcement is low. The paper proposes a way to reduce the information requirements under regulation with asymmetric information by constructing a typical firm and comparing performance for the other vessels to this firm. Based on the typical firm, and if the industry is relatively homogenous, the performance and hence catch of any other firm in the industry can be predicted within a certain range. Further, the paper applies this idea to the Norwegian trawler fleet to assess the production structure in terms of jointness, input-output separability, and the supply and demand elasticities for the fishing firms. This information characterizes the fishery and thus how the quota system may be designed and how to construct a yardstick in order to reduce the enforcement cost under a decentralized regulation of ITQs.The authors would like to thank Trond Bjørndal, Røgnvaldur Hannesson, Ola Flaaten and two referees for useful comments and suggestions.     

Cost of stroke in Canada: a 1-year prospective study

Summary

The objective of this study was to estimate the 1-year cost of stroke for patients in Canada in 2004 and to determine the factors that contribute to this cost.

This work was based on a prospective follow-up study of all patients presenting with a stroke or transient ischaemic attack (TIA) to the emergency room in a large teaching hospital over a 6-month prospective period. All healthcare, social services, patient and caregiver resource utilisation attributable to strokes or TIAs were included in the analysis. There were 365 patients who met the

inclusion criteria. The average 1-year cost of managing patients with TIA was the lowest at $17,769, followed by ischaemic strokes at $53,576 and haemorrhagic strokes at $56,573. Predictors for 1-year cost were: type of stroke; discharge severity of stroke; death; marital status; discharge destination; and the presence of diabetes and congestive heart failure.

Initial hospitalisation costs represented the majority of 1-year costs of stroke. However, caregiver expenses are significant at between 11% and 27% of the total are 1-year cost.     

Incomplete information in the acid rain game

This paper provides a model that attempts to deal with the transboundary nature of the acid rain problem, using a game theoretic approach consistent with mainstream economic theory. The general forms of cooperative and non cooperative equilibria in explicit and implicit set-up of the model are presented under the assumptions of complete and incomplete information.     

Probabilistic temperature change projections and energy system implications of greenhouse gas emission scenarios

This paper explores the implications for global average temperature change of a set of reference and mitigation scenarios in a probabilistic framework. First, we use published probability density functions for climate sensitivity to investigate the likelihood of achieving targets expressed as levels or rates of global average temperature change. We find, for example, that limiting warming to 3 C above pre-industrial levels with at least a medium likelihood requires cumulative emissions reductions on the order of 30-60% below one unmitigated reference scenario by 2100, while a more favorable baseline scenario requires no reductions at all to achieve this outcome with the same likelihood. We further conclude that the rate of temperature change may prove to be more difficult to control, especially if most of the mitigation effort is postponed until later in the century. Rate of change targets of 0.1–0.2 °C/decade are unlikely to be achieved by a target for the long-term level of climate change alone. Second, we quantify relationships between mitigation costs and the likelihood of achieving various targets and show how this depends strongly on the reference scenario. Third, we explore relationships between medium-term achievements and long-term climate change outcomes. Our results suggest that atmospheric concentrations and the share of zero-carbon energy in the middle of the 21st century are key indicators of the likelihood of meeting long-term climate change goals cost-effectively. They also suggest that interim targets could be an effective means of keeping long-term target options open. Our analysis shows that least-cost mitigation strategies for reaching low climate change targets include a wide portfolio of reduction measures. In particular, fundamental long-term structural changes in the energy system in these scenarios are a necessary but not sufficient condition to achieve high likelihoods for low temperature targets. The cost-effective portfolio of emissions reductions must also address demand-side measures and include mitigation options in the industry, agriculture, and the forest sector.     

The Cost of Obesity in the United Kingdom

Summary

This study provides economic information on the costs of obesity in the UK using a modified method of attributable risk to establish the full resource implications of treating obesity and associated diseases. Prevalence estimates of obesity, defined as a Body Mass Index (BMI) greater than 30 kg/m², together with estimates of the risk of obesity-related diseases relative to a BMI range close to ideal, are used as the basis of the costing. The total costs of treating obesity and its related diseases are estimated at £355 million (in 1995 prices). The total costs of treating obesity directly, estimated at £3.8 million, are dominated by the costs arising from the treatment of attributable diseases, estimated at £351 million.     

Uncertainty and Climate Change

Uncertainty is pervasive in analysis of climatechange. How should economists allow for this? And how have they allowed for it? This paperreviews both of these questions.     

Free Entry under Uncertainty

When focusing on firm’s risk-aversion in industry equilibrium, the number of firms may be either larger or smaller when comparing market equilibrium with and without price uncertainty. In this paper, we introduce risk-averse firms under cost uncertainty in a model of spatial differentiation and show that the impact of uncertainty will increase the number of firms in an industry. With increased uncertainty, the risk premium of the marginal buyer increases by more than the risk premium of the average buyer, so that the price increases by more than the risk premium. When turning to the free entry game, we find that the market generates too many firms.     

Optimal Timing of Climate Change Policy: Interaction Between Carbon Taxes and Innovation Externalities

This paper addresses the impact of endogenous technology through research and development (R&D) on the timing of climate change policy. We develop a model with a stock pollutant (carbon dioxide) and abatement technological change through R&D, and we use the model to study the interaction between carbon taxes and innovation externalities. Our analysis shows that the timing of optimal emission reduction policy strongly depends on the set of policy instruments available. When climate-specific R&D targeting instruments are available, policy has to use these to step up early innovation. When these instruments are not available, policy has to steer innovation through creating demand for emission saving technologies. That is, carbon taxes should be high compared to the Pigouvian levels when the abatement industry is developing. Finally, we calibrate the model in order to explore the magnitude of the theoretical findings within the context of climate change policy.      

欧盟和德国碳捕获与封存技术发展现状及展望

欧盟和德国认为,碳捕获与封存技术是一种潜在的、可供选择的二氧化碳减排方案,并为其制定了雄心勃勃的发展战略规划。文章对欧盟特别是德国在碳捕获与封存技术的研发进展、政策机制和管理立法等方面的做法和案例进行了调研,并对其面临的主要问题及未来发展进行了展望。     

交易费用和制度变迁的分析与启示

交易费用与制度变迁都涉及到经济生活中的具体操作方面,比如资源优化配置和效率问题。中国在深化改革的过程中,不仅必须考虑到资源优化配置、改革成本和经济运行效率,而且更应以此作为检验改革成效的标尺。这些又与特定的制度安排有着内在联系,因此,只有认真研究交易费用和制度变迁的相关问题,才能保证中国改革的进一步深化。