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Book Details
Abstract
Ambitious measures to reduce carbon emissions are all too rare in reality, impeded by economic and political concerns rather than technological advances. In this timely collection of essays, Frank Ackerman and Elizabeth A. Stanton show that the impact of inaction on climate change will be far worse than the cost of ambitious climate policies.
“Ackerman and Stanton have written a state-of-the-art economic analysis of the most important environmental issue of our time. They build a compelling case for moving quickly to reduce greenhouse gas emissions, and for making fairness within and among nations a central element in how we do it.” —James Boyce, University of Massachusetts Amherst
Ambitious measures to reduce carbon emissions are all too rare in reality, impeded by economic and political concerns rather than technological advances. In this collection of essays, Frank Ackerman and Elizabeth A. Stanton show that the impact of inaction on climate change will be far worse than the cost of ambitious climate policies.
After setting out the basic principles which must shape contemporary climate economics, Ackerman and Stanton consider common flaws in climate change policy – from mistaken assumptions that dismiss the welfare of future generations and anticipate little or no growth in low-income countries, to unrealistic projections of climate damages that dismiss catastrophic risks – and offer their own insightful remedies. They question the usefulness of conventional integrated assessment models (IAMs) that model the long-term interaction between economic growth and climate change, and propose an alternative in their Climate and Regional Economics and Development (CRED) model.
In this incisive work, Stanton and Ackerman offer a timely and original contribution to the fields of climate economics and global equity.
“There is no better guide to the thicket of climate change economics than this insightful new book by Ackerman and Stanton. They uncover where the bodies are buried in conventional economic modeling, and reinvigorate the dialog with a commonsense approach to the economics of this civilizational challenge.” —Eban Goodstein, Director and Faculty, Bard MBA in Sustainability, and Director, Bard Center for Environmental Policy
Frank Ackerman is a senior economist at Synapse Energy Economics and lecturer at Massachusetts Institute of Technology, and has written numerous books and articles on the economics of climate change, energy and environmental policy.
Elizabeth A. Stanton is a senior economist at Synapse Energy Economics and has written widely on the economics of equity and environment, climate change, energy efficiency and renewable energy.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Climate Change and Global Equity | i | ||
| Title | iii | ||
| Copyright | iv | ||
| Table of contents | v | ||
| Introduction | vii | ||
| Publication History | xi | ||
| Part I PERSPECTIVES ON CLIMATE \rAND EQUITY | 1 | ||
| Chapter 1 Climate Economics in \rFour Easy Pieces | 3 | ||
| Introduction | 3 | ||
| Your Grandchildren’s Lives Are Important | 4 | ||
| We Need to Buy Insurance for the Planet | 6 | ||
| Climate Damages Are Too Valuable to Have Prices | 8 | ||
| Some Costs Are Better than Others | 9 | ||
| Conclusions | 10 | ||
| Chapter 2 Carbon Markets Are Not Enough | 13 | ||
| Introduction: The State of the Debate | 13 | ||
| What Would Carbon Prices Accomplish? | 14 | ||
| Where Do New Technologies Come From? | 17 | ||
| Carbon Markets and Developing Countries | 18 | ||
| Conclusions | 20 | ||
| Chapter 3 Modeling Pessimism:\rDoes Climate Stabilization Require a Failure of Development? | 21 | ||
| Introduction | 21 | ||
| A Review of Current Practices | 22 | ||
| Modeling Income Convergence | 26 | ||
| Modeling changes in emissions intensity | 27 | ||
| Findings | 30 | ||
| Policy Measures to Reduce Emissions Intensity | 32 | ||
| Discussion and Recommendations | 34 | ||
| Chapter 4 The Tragedy of Maldistribution: Climate, Sustainability and Equity | 37 | ||
| Introduction: Equity and Sustainability | 37 | ||
| Measuring Equity | 38 | ||
| Equity as a Public Good | 41 | ||
| Suboptimal Levels of Environmental Public Goods | 43 | ||
| Externalities | 44 | ||
| Cost–benefit analysis | 46 | ||
| Power-weighted decision rule | 47 | ||
| Strengthening the Equity Commons: Obstacles and Strategies | 48 | ||
| Clarifying property rights | 50 | ||
| Reducing transaction costs | 50 | ||
| Multi-criteria analysis | 50 | ||
| Cost-effectiveness analysis | 50 | ||
| Redistribution of income and wealth | 51 | ||
| Redistribution of political and social power | 51 | ||
| Equity for Sustainability: The Case of Climate Change | 52 | ||
| Part II ANALYSES OF CLIMATE DAMAGES | 55 | ||
| Chapter 5 Climate Impacts on Agriculture: A Challenge to Complacency? | 57 | ||
| Introduction: The Foundations of Inaction | 57 | ||
| What We Used to Know about Agriculture | 58 | ||
| Temperature Thresholds for Crop Yields | 60 | ||
| Conclusions | 65 | ||
| Chapter 6 Did the Stern Review Underestimate US and Global Climate Change? | 67 | ||
| Introduction | 67 | ||
| The PAGE2002 Model | 68 | ||
| Stern’s US and Global Results from PAGE2002 | 70 | ||
| Adaptation Assumptions | 71 | ||
| Thresholds and Probabilities for Climate Catastrophes | 73 | ||
| The Shape of the Damage Function | 74 | ||
| Worst-Case versus Average Damages | 75 | ||
| Conclusions | 77 | ||
| Chapter 7 Can Climate Change Save lives? A Comment on “Economy-Wide Estimates of the Implications of Climate Change: Human Health” | 79 | ||
| Introduction | 79 | ||
| The “Minimum-Mortality Temperature” | 82 | ||
| Extreme Weather | 83 | ||
| Unexplained Differences | 85 | ||
| Conclusions | 88 | ||
| Part III THEORY AND METHODS OF INTEGRATED ASSESSMENT | 91 | ||
| Chapter 8 Inside the Integrated Assessment Models: Four Issues in Climate Economics | 93 | ||
| Introduction | 93 | ||
| Choice of Model Structure | 94 | ||
| Differences in model structures | 95 | ||
| Welfare optimization models | 95 | ||
| General equilibrium models | 96 | ||
| Partial equilibrium models | 97 | ||
| Simulation models | 97 | ||
| Cost minimization models | 98 | ||
| Evaluation of model structures | 98 | ||
| Uncertain Outcomes and Projections of Future Damages | 99 | ||
| Scientific uncertainty in climate outcomes | 99 | ||
| Projecting future damages | 101 | ||
| Arbitrary exponent | 102 | ||
| Continuity | 103 | ||
| Income damages | 103 | ||
| Equity across Space and Time | 104 | ||
| Equity across time | 104 | ||
| Equity across space | 106 | ||
| Abatement Costs and the Endogeneity \rof Technological Change | 108 | ||
| Choices in modeling abatement technology | 109 | ||
| Cost minimization models | 110 | ||
| Conclusions | 111 | ||
| Chapter 9 Limitations of Integrated Assessment Models of \rClimate Change | 115 | ||
| Introduction | 116 | ||
| The Discounted Utility Framework | 117 | ||
| Predicting the Unpredictable and Pricing the Priceless | 123 | ||
| Technology Forecasts: Not So Bright | 126 | ||
| Insurance, Precaution and the Contribution of Climate Economics | 128 | ||
| Chapter 10 Negishi Welfare Weights in Integrated Assessment Models: The Mathematics of Global Inequality | 133 | ||
| Introduction | 133 | ||
| Negishi Weighting in Climate Economics Models | 134 | ||
| Global welfare-optimizing IAMs | 135 | ||
| Regionally disaggregated IAMs | 137 | ||
| Negishi weighting explained | 139 | ||
| Equity weighting in IAMs | 140 | ||
| Theoretical Welfare Economics: A Short Intellectual History | 141 | ||
| A prescription for income redistribution | 141 | ||
| The ordinalist revolution | 142 | ||
| Applied welfare economics and welfare optimizing IAMs | 144 | ||
| Policy Implications and Alternatives | 145 | ||
| Part IV APPLICATIONS OF INTEGRATED ASSESSMENT MODELS | 149 | ||
| Chapter 11 Climate Risks and Carbon Prices:\rRevising the Social Cost \rof Carbon | 151 | ||
| Introduction | 151 | ||
| Choice of Models | 153 | ||
| Choice of Scenarios | 153 | ||
| Four Uncertainties | 155 | ||
| Climate sensitivity | 156 | ||
| Damage function estimates | 157 | ||
| Discount rates | 159 | ||
| Results | 161 | ||
| Abatement Costs | 162 | ||
| Sensitivity Analysis: SCC Estimates with Low Emissions | 164 | ||
| Conclusions | 166 | ||
| Chapter 12 Epstein–Zin utility in DICE:\rIs Risk Aversion Irrelevant to Climate Policy? | 169 | ||
| Introduction: The Need for a New Utility Function | 170 | ||
| Epstein–Zin Utility | 171 | ||
| The EZ–DICE Model | 173 | ||
| Model Calibration | 175 | ||
| Results | 176 | ||
| Interpretation of Results | 178 | ||
| Conclusions | 180 | ||
| Chapter 13 Fat Tails, Exponents, Extreme Uncertainty: Simulating Catastrophe in DICE | 183 | ||
| Introduction | 183 | ||
| Catastrophic Risk and Damages in DICE | 185 | ||
| Fat Tails and Unbounded Risks | 186 | ||
| The Shape of the Damage Function | 187 | ||
| Our Experiment | 188 | ||
| Climate sensitivity | 189 | ||
| The damage function exponent | 191 | ||
| Research methods | 192 | ||
| Results | 193 | ||
| Measures of economic catastrophe | 193 | ||
| Monte Carlo analysis summary results | 194 | ||
| Mapping the grid | 194 | ||
| Credible worst cases | 196 | ||
| Conclusions | 201 | ||
| Chapter 14 Climate Damages in the FUND Model: A Disaggregated Analysis | 203 | ||
| Introduction | 203 | ||
| Methods | 204 | ||
| Results | 205 | ||
| Comparing FUND and DICE | 205 | ||
| Disaggregating FUND damages | 206 | ||
| Best-guess values versus effects of uncertainty | 207 | ||
| Agricultural impacts | 208 | ||
| Modeling Agriculture Impacts: Two Issues | 210 | ||
| Risk of division by zero | 210 | ||
| Implausible temperature ranges | 212 | ||
| Implications: The Need for Updated Agricultural Estimates | 213 | ||
| Conclusions | 215 | ||
| Chapter 15 Climate Policy and Development: An Economic Analysis | 217 | ||
| Introduction: An Economic Analysis of Climate Policy \nand Development | 217 | ||
| The CRED Model | 218 | ||
| Climate Modeling Assumptions | 221 | ||
| Development Results | 222 | ||
| Climate Results | 223 | ||
| Discussion | 227 | ||
| Appendix Supplementary Data \rfor Chapter 3 | 231 | ||
| Forecasting GDP Growth | 231 | ||
| Forecasting Population Growth | 233 | ||
| Notes | 235 | ||
| Publication History | 235 | ||
| Chapter 1. Climate Economics in Four Easy Pieces | 235 | ||
| Chapter 2. Carbon Markets Are Not Enough | 235 | ||
| Chapter 3. Modeling Pessimism: Does Climate Stabilization Require a Failure of Development? | 236 | ||
| Chapter 4. The Tragedy of Maldistribution: Climate, \rSustainability and Equity | 237 | ||
| Chapter 5. Climate Impacts on Agriculture: A Challenge \rto Complacency? | 237 | ||
| Chapter 6. Did the Stern Review Underestimate US and \rGlobal Climate Change? | 238 | ||
| Chapter 7. Can Climate Change Save Lives? A Comment on \r“Economy-Wide Estimates of the Implications \rof Climate Change: Human Health” | 238 | ||
| Chapter 8. Inside the Integrated Assessment Models: \rFour Issues in Climate Economics | 239 | ||
| Chapter 9. Limitations of Integrated Assessment Models \rof Climate Change | 241 | ||
| Chapter 10. Negishi Welfare Weights in Integrated Assessment Models: The Mathematics \rof Global Inequality | 242 | ||
| Chapter 11. Climate Risks and Carbon Prices: Revising \rthe Social Cost of Carbon | 243 | ||
| Chapter 12. Epstein–Zin Utility in DICE: Is Risk Aversion Irrelevant to Climate Policy? | 245 | ||
| Chapter 13. Fat Tails, Exponents, Extreme Uncertainty: Simulating Catastrophe in DICE | 246 | ||
| Chapter 14. Climate Damages in the FUND Model: \rA Disaggregated Analysis | 247 | ||
| Chapter 15. Climate Policy and Development: An Economic Analysis | 248 | ||
| Appendix. Supplementary Data for Chapter 3 | 248 | ||
| References | 249 |