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A Question of Balance. Weighing the Options on Global Warming Policies
Abstract
As scientific and observational evidence on global warming piles up every day, questions of economic policy in this central environmental topic have taken center stage. But as author and prominent Yale economist William Nordhaus observes, the issues involved in understanding global warming and slowing its harmful effects are complex and cross disciplinary boundaries. For example, ecologists see global warming as a threat to ecosystems, utilities as a debit to their balance sheets, and farmers as a hazard to their livelihoods. In this important work, William Nordhaus integrates the entire spectrum of economic and scientific research to weigh the costs of reducing emissions against the benefits of reducing the long-run damages from global warming. The book offers one of the most extensive analyses of the economic and environmental dynamics of greenhouse-gas emissions and climate change and provides the tools to evaluate alternative approaches to slowing global warming. The author emphasizes the need to establish effective mechanisms, such as carbon taxes, to harness markets and harmonize the efforts of different countries. This book not only will shape discussion of one the world's most pressing problems but will provide the rationales and methods for achieving widespread agreement on our next best move in alleviating global warming.
... As a result, serially correlated shocks amplify the risk premium. This effect is particularly prominent in, e.g., Nordhaus's (2008) analysis. Using a Monte Carlo setting, the growth rate is either high or low in all periods, and we have a perfect correlation of uncertainty over time and a strong correlation between the realization of the growth rate and temperatures. ...
... Assuming that future policymakers respond optimally to incoming information, Jensen and Traeger's (2014) solve the forward-looking problem using the Bellman equation (10) and the methods discussed in Section 4.2. They find, in a slightly simplified version of DICE, 15 that under Nordhaus's (2008) parametrization, growth uncertainty increases rather than reduces the SCC, which aligns with the analytical results in equation (15). In addition to incorporating the optimal response of future decision makers, the model also features stochastic growth processes rather than a one-time growth shock. ...
... The Monte Carlo studies by Nordhaus (2008) and Dietz et al. (2018) both identify temperature uncertainty as the second-most important factor for the SCC's risk premium, after growth uncertainty. Furthermore, similar to Jensen and Traeger (2013), they find that uncertainty regarding the temperature response to emissions unambiguously increases the SCC. ...
... These findings show, once again, the need of performing a rigorous sensitivity analysis, especially if the goal is the identification of the key-drivers of uncertainty. Because our purpose is illustrative, and also for granting reproducibility of our results, we focus on William Nordhaus' [50] Dynamic Integrated Climate-Economy (DICE) model and specifically on the baseline (no controls) case in that model. 2 DICE is one of the best known IAMs and has been applied and used as a benchmark in several studies concerning uncertainty quantification in climate change modelling. Aside from the original uncertainty analysis in [50], a variance-based sensitivity analyses of DICE is performed by [13] and [12]. ...
... Because our purpose is illustrative, and also for granting reproducibility of our results, we focus on William Nordhaus' [50] Dynamic Integrated Climate-Economy (DICE) model and specifically on the baseline (no controls) case in that model. 2 DICE is one of the best known IAMs and has been applied and used as a benchmark in several studies concerning uncertainty quantification in climate change modelling. Aside from the original uncertainty analysis in [50], a variance-based sensitivity analyses of DICE is performed by [13] and [12]. More recently, [1] extend the analysis by estimating also the δ-importance measure. ...
... DICE has also been used as a test case in robust optimization contexts, in studies such as [48,45,34]. As Hu et al. underline [34], the starting point for an uncertainty analysis of the DICE model is the investigation performed by Nordhaus himself in Chapter 7 of [50]. We report the reference distributions in Table 2. ...
The functional ANOVA expansion of a multivariate mapping plays a fundamental role in statistics. The expansion is unique once a unique distribution is assigned to the covariates. Recent investigations in the environmental and climate sciences show that analysts may not be in a position to assign a unique distribution in realistic applications. We offer a systematic investigation of existence, uniqueness, orthogonality, monotonicity and ultramodularity of the functional ANOVA expansion of a multivariate mapping when a multiplicity of distributions is assigned to the covariates. In particular, we show that a multivariate mapping can be associated with a core of probability measures that guarantee uniqueness. We obtain new results for variance decomposition and dimension distribution under mixtures. Implications for the global sensitivity analysis of computer experiments are also discussed.
... But, the scale of the problem as well as the risk it poses to humanity is by far greater than those posed by the other three categories of problems. The entire atmosphere of the planet is an object of concern and the climate system of the entire planet is being altered (Nordhaus 1994). In fact, there are few human activities that do not lead to the emission of greenhouse gases. ...
... The problem of global climate change is framed by the researchers and politicians as an urgent call for cutting greenhouse gas emissions by a globally collective effort of all the countries on the planet, i.e., the mitigation efforts (Nordhaus 2008, UNEP 2017, IPCC 2018. But, the bigger problem of climate change may be how the nations and individuals will cope with the changing climate system, including the development of mitigation technologies (Seo 2006(Seo , 2016(Seo , 2021(Seo , 2022a). ...
... This means that the human society must accept the consequences of their karma. One way to do that is to pay for the cleanup of the environment or the restoration of ecological systems, possibly through a government taxation, a global treaty, or other policy instruments (Tietenberg 1999, Nordhaus 2008, Muller and Mendelsohn 2009. ...
... No primeiro caso, limites de emissão são fixados pela legislação, ao passo que políticas econômicas são baseadas em incentivos contrários à emissão, como taxas, impostos, subsídios ou mesmo a instauração de mercados de carbono. A preferência por políticas do segundo tipo é comumente justificada por sua maior flexibilidade e eficiência econômica, que levaria ao objetivo desejado com menores custos, dadas as diferenças observadas nas estruturas produtivas dos diversos setores da economia em termos de intensidade de emissões, além de fomentar a busca por novas tecnologias ambientalmente satisfatórias (Nordhaus, 2008). ...
... Para mais detalhes do assunto, ver Knetsch e Sinden (1984). Nordhaus (2008) também classifica as políticas econômicas de mitigação de emissões de acordo com objetivos pré-estabelecidos. Estes incluem os alcances descritos adiante. 1) Níveis ótimos de emissões e preços de carbono, em termos de eficiência econômica. ...
... Em anos mais recentes, a literatura tem se dedicado a estudar os efeitos de políticas de redução de emissão de GEE (Manne e Richels, 1991;Jorgenson e Wilcoxen, 1993;Weyant, 1993;Viguier, Babiker e Reilly, 2003;Springer, 2003;Manne, 2005;Nordhaus, 2008;Rose, 2009;Clarke et al., 2009). Para a economia dos Estados Unidos e utilizando um modelo EGC intertemporal, Jorgenson e Wilcoxen (1993), por exemplo, comparam os efeitos de taxas baseadas no conteúdo de carbono dos combustíveis fósseis com aqueles observados para taxas relacionadas ao conteúdo de energia desses combustíveis, assim como taxas ad valorem sobre seu uso. ...
Este artigo tem como objetivo simular os prováveis impactos econômicos decorrentes da proposta brasileira na XXI Conferência das Partes (COP21) de reduzir em 37% suas emissões de gases de efeito estufa (GEEs), em relação aos níveis de 2005, até 2025. Para tal, utiliza-se um modelo de equilíbrio geral computável (EGC) dinâmico-recursivo com módulos de especificação energética e ambiental que permitem agrupamentos por agente emissor (combustíveis, indústrias e famílias) e atividade emissora. De forma geral, os resultados indicam um decréscimo acumulado de -3,3% do produto interno bruto (PIB) real, em 2025, em relação ao cenário-base. Conforme esperado, os setores com mais dependência em relação à queima de combustíveis, ou com elevada intensidade de emissões nos seus processos produtivos, seriam os mais negativamente afetados.
... A carbon price gives an economic signal that allows polluters to decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it (OECD, 2021). Market oriented solutions such as pricing carbon dioxide (CO2) emissions or the removal of fossil fuel subsidies that incorporate a social cost of carbon have long been recommended as the Pigouvian cost-ecient solution to reduce emissions and mitigate the adverse impacts of climate change (Zhang and Baranzini, 2004;Stern, 2007;Nordhaus 2008). ...
... In the Nordhaus (2008) macroeconomic DICE model the carbon tax appears as abatement cost in the context of intertemporal optimal behavior of economic $ The latter studies can also derive asset price dynamics, as in Semmler et al. (2022), where expected returns and asset prices of innovating green rms are driven by their share of green scientists. They help to map, as in Lichtenberger et al. (2022), the positive and negative externalities from energy use and production activities into asset price and asset return dynamics agents where, however, technology change is exogenous. ...
In European countries, carbon pricing is often viewed as a primary strategy to combat climate change and climate risks by reducing carbon emissions and driving investment into cleaner energy sources. Decarbonization has also been suggested by directed technical change, which implements innovative renewable energy technology. We study the effectiveness of both policies for selected Northern EU countries. In a model-based investigation we first compare optimizing and behavioral drivers of decarbonization with a focus on the two decarbonization policies. Econometrically we employ Local Projection and the VAR method to explore the effects of both policies, carbon tax and directed technical change
on GDP and emission reduction. Our results show that though both policies are needed signifcant technology-oriented policy actions on the supply side of renewable energy appear to be required to accelerate the decarbonization of the economies.
... Analyse coût-bénéfice https://encyclo-philo.fr/item/1751 C'est la conclusion à laquelle parviennent les principaux travaux de modélisation économique permettant de réaliser une analyse coût-bénéfice du phénomène (Stern 2007;Nordhaus 2008). Le changement climatique dangereux est alors interprété comme une déviation par rapport à un optimum : est « dangereuse » toute trajectoire de réchauffement qui échoue à maximiser la somme mondiale et intergénérationnelle de bien-être. ...
... Les coûts et bénéfices qui échoient aux personnes futures ont donc moins de poids, toutes choses égales par ailleurs, que ceux qui échoient aux personnes présentes, et ce d'autant moins qu'ils sont éloignés dans le temps et que le taux d'actualisation sociale est élevé. Les taux d'actualisation différents utilisés par Nordhaus et Stern, par exemple, expliquent en grande partie leurs recommandations divergentes : quand Nordhaus applique dans son propre modèle le taux utilisé par Stern, il obtient des résultats très similaires à ce dernier (Nordhaus 2007). ...
Les théories de la justice climatique sont apparues au début des années 1990 avec les premières tentatives de coordination internationale dans la lutte contre le réchauffement planétaire. Elles s’intéressent notamment aux raisons de limiter l'ampleur du changement climatique et de limiter ou remédier à ses effets nuisibles, ainsi qu'aux principes qui doivent guider le partage équitable des droits et efforts qui y sont liés. Si ces théories se sont d’abord et surtout concentrées sur la question du juste partage des droits d’émission et des coûts de l’atténuation du changement climatique entre les États, elles prennent de plus en plus la mesure des limites d’une approche uniquement focalisée sur l’échelle internationale et interrogent désormais aussi les responsabilités d’autres agents comme les individus et les entreprises. Dans cette entrée, nous commençons par montrer la spécificité et la nécessité d’une problématisation du changement climatique à travers le prisme de la justice distributive, par contraste avec certaines approches économiques qui n’y voient qu’un échec à maximiser le bien-être agrégé ou à allouer les ressources de manière optimale. Nous analysons ensuite les principes élaborés par les philosophes pour répartir équitablement les responsabilités climatiques entre les États, par exemple en fonction de leurs contributions aux émissions de gaz à effet de serre ou de leurs capacités respectives. Enfin, nous mettons en évidence les difficultés structurelles et motivationnelles, notamment en raison de la dimension intergénérationnelle du problème climatique, qui font obstacle à la mise en œuvre d’une action collective efficace. Prenant acte de l’obéissance (au mieux) partielle des États à leurs devoirs de justice climatique dans notre monde « non idéal », nous interrogeons les obligations climatiques d’autres types d’acteurs comme les individus et les entreprises. https://encyclo-philo.fr/item/1751
... A carbon price gives an economic signal that allows polluters to decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it (OECD, 2021). Market oriented solutions such as pricing carbon dioxide (CO2) emissions or the removal of fossil fuel subsidies that incorporate a social cost of carbon have long been recommended as the Pigouvian cost-ecient solution to reduce emissions and mitigate the adverse impacts of climate change (Zhang and Baranzini, 2004;Stern, 2007;Nordhaus 2008). ...
... In the Nordhaus (2008) macroeconomic DICE model the carbon tax appears as abatement cost in the context of intertemporal optimal behavior of economic $ The latter studies can also derive asset price dynamics, as in Semmler et al. (2022), where expected returns and asset prices of innovating green rms are driven by their share of green scientists. They help to map, as in Lichtenberger et al. (2022), the positive and negative externalities from energy use and production activities into asset price and asset return dynamics agents where, however, technology change is exogenous. ...
In European countries carbon pricing is often viewed as a primary strategy to combat climate change and climate risks by reducing carbon emissions and driving investment into cleaner energy sources. Decarbonization has also been suggested by directed technical change, which implements innovative renewable energy technology. We study the eectiveness of both policies for selected Northern EU countries. In a model-based investigation we rst compare optimizing and behavioral drivers of decarbonization with a focus on the two decarboniza-tion policies. Econometrically we employ Local Projection and the VAR method to explore the eects of both policies, carbon tax and directed technical change on GDP and emission reduction. Our results show that though both policies are needed signicant technology-oriented policy actions on the supply side of renewable energy appear to be required to accelerate the decarbonization of the economies. We want to thank Tato Khundadze for extensive research assistance. We also want to thank two reviewers of the article and the editors of the journal for extensive comments.
... The objective value obtained by the optimal solution for the infinite horizon problem is −32.62.interaction between climate and economy. The DSICE model generalizes the commonly used dynamic integrated model of climate and the economy (DICE) model(Nordhaus;2008) by allowing for economic risks and climate risks. ...
... The objective value obtained by the optimal solution for the infinite horizon problem is −32.62.interaction between climate and economy. The DSICE model generalizes the commonly used dynamic integrated model of climate and the economy (DICE) model(Nordhaus;2008) by allowing for economic risks and climate risks. ...
We propose a machine learning algorithm for solving finite-horizon stochastic control problems based on a deep neural network representation of the optimal policy functions. The algorithm has three features: (1) It can solve high-dimensional (e.g., over 100 dimensions) and finite-horizon time-inhomogeneous stochastic control problems. (2) It has a monotonicity of performance improvement in each iteration, leading to good convergence properties. (3) It does not rely on the Bellman equation. To demonstrate the efficiency of the algorithm, it is applied to solve various finite-horizon time-inhomogeneous problems including recursive utility optimization under a stochastic volatility model, a multi-sector stochastic growth, and optimal control under a dynamic stochastic integration of climate and economy model with eight-dimensional state vectors and 600 time periods.
... Meeting sustainability goals without compromising on economic growth has been a tricky mission to achieve (Nordhaus, 2008). United Nations Conference in 2012 at Rio on Sustainable Development provided the notion of green growth as the central theme of development. ...
... This transition requires ESG investment, more specifically suggested to move from coal and fossil fuels to renewables. Notably, the energy sector is perceived as being socially responsible and focused on human health, social behaviour and the nation's cultural identity (Nordhaus, 2008). For analysis, we divided the firm into energy and non-energy to capture their significance. ...
This study delves into the effect of environmental, social and governance (ESG) indicators on economic growth trajectory of an emerging economy. A sample of firms listed on the ESG index of the National Stock Exchange (NSE) was examined. The findings reveal a positive and statistically significant relationship between ESG performance indicators and economic growth represented as gross domestic product (GDP) per capita. The sample is further segregated into energy and non‐energy sectors, where the aggregate ESG scores exhibited a statistically significant influence on economic growth in both sectors. However, upon a closer examination of the individual ESG pillars, the governance pillar is observed to exert a negative influence on economic performance in non‐energy firms. In contrast, the environment and social pillars show no significant influence. The analysis then employs a unique approach by applying a Difference‐in‐differences estimator to assess the impact of Business Responsibility and Sustainability Reporting (BRSR) regulations, which confirms a positive impact on economic growth after regulations but exclusively within the non‐energy sector. This study underscores the substantial impact of ESG aggregate and individual scores on GDP per capita, which translates to economic growth.
... Moving to the AbT, Cline (2011) analyzes the abatement functions developed in three different models and computes their costs in percentage terms of GDP (Table 4). RICE 2008 and EMF 22 follows the well-known functional form developed by Nordhaus (2008). While the calibration of the former relies on the original work of Nordhaus (2008), the latter derives from its subsequent estimation on the results of the EMF 22 Climate Change Control Scenarios project (Clarke et al., 2009). ...
... RICE 2008 and EMF 22 follows the well-known functional form developed by Nordhaus (2008). While the calibration of the former relies on the original work of Nordhaus (2008), the latter derives from its subsequent estimation on the results of the EMF 22 Climate Change Control Scenarios project (Clarke et al., 2009). Further, Ackerman and Bueno (2011) estimate a functional form reproducing the shape of the bottom-up MAC curve developed by McKinsey & Company (2009). ...
... where T AT is the temperature increase in the atmosphere and π2 is a parameter. Because of space limitations, we do not show the CO 2 accumulation sub-model and temperature change submodel of the DICE model, but readers may refer to Nordhaus (2008) for details on these sub-models. The equations for the RICE and DICE models are essentially the same, but the models diverge at the point at which RICE calculates Equations (2.2)-(2.7) ...
... First, the CO 2 accumulation and temperature change sub-models in DICE-2010 and RICE-2010 cannot recreate the CO 2 concentration and temperature increases in the Z650 scenario described by Matsuno et al. (2012), which uses a more detailed climate change model. Therefore, we used the CO 2 accumulation and temperature change sub-models in an older DICE model, DICE-2007(Nordhaus, 2008. In fact, these sub-models of DICE-2007 can rather accurately recreate the CO 2 concentration and temperature increases of the Z650 scenario in Matsuno et al. (2012). ...
... This might be a reason for each country to take immediate action, mitigate climate change, and avoid future larger damages. However, a careful evaluation of the future economic impact of global warming is required and future costs against present costs must be balanced under some economic assumptions and climate scenarios [2][3][4]. The most basic assumption considers an exponential with a constant discount rate. ...
... The most basic assumption considers an exponential with a constant discount rate. The choice of discount rate is part of current economic debates on the urgency of the response to global warming (see [2][3][4][5][6][7][8][9][10]). Most normative approaches attempt to derive the discount from axiomatic principles of justice, or from utility theory and assumptions about growth [11][12][13]. ...
We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. From the viewpoint of complex systems science and its multidisciplinary approach, we use the theory of bond pricing to study the long-term discount rate to estimate the rate when taking historical US and UK data, and to further contribute to the discussion about the urgency of climate action in the context of environmental economics and stochastic methods. Century-long historical records of 3-month bonds, 10-year bonds, and inflation allow us to estimate real interest rates for the UK and the US. Real interest rates are negative about a third of the time and the real yield curves are inverted more than a third of the time, sometimes by substantial amounts. This rules out most of the standard bond-pricing models, which are designed for nominal rates that are assumed to be positive. We, therefore, use the Ornstein–Uhlenbeck model, which allows negative rates and gives a good match to inversions of the yield curve. We derive the discount function using the method of Fourier transforms and fit it to the historical data. The estimated long-term discount rate is 1.7% for the UK and 2.2% for the US. The value of 1.4% used by Stern is less than a standard deviation from our estimated long-run return rate for the UK, and less than two standard deviations of the estimated value for the US. All of this once more reinforces the need for immediate and substantial spending to combat climate change.
... En cuanto al financiamiento de dichos compromisos, terminada la conferencia, las propuestas fueron quedando en promesas (Stigliz y Stern, 2017;Nordhaus, 2020, ECLAC, 2018OCDE, 2021). Así sucedió con las contribuciones incondicionales y con las asociadas a financiamiento externo -fondos prometidos por los países desarrollados. ...
... Así, la magnitud temporal entra en el debate. Pero también lo hace al considerar la tasa de interés que debe aplicar aquellos modelos que vienen a evaluar el problema del cambio climático, alrededor de lo cual se encuentra el debate entre Nicholas Stern y William Nordhaus respecto a cuál es la tasa de descuento social que debe aplicarse (Stern, 2007;Nordhaus, 2008). Stern sostiene una tasa de descuento igual a cero, mientras que Nordhaus defiende una tasa positiva. ...
El planeta ha sido planteado como un espacio no sujeto a límites, tal la idea de pro-greso que consideró a la naturaleza un espacio de conquista. La crisis climática viene a demostrar lo errado de dicha visión. Fruto de la concentración de carbono y otros gases de efecto invernadero en la atmósfera, la temperatura promedio global del pla-neta sigue en aumento. Avanzar con la transición energética deviene un imperativo, y el financiamiento es un aspecto clave en dicho proceso. Postergarlo conlleva riesgos sistémicos, cuyas consecuencias sobre la macroeconomía y el sistema financiero resul-tan mayúsculas. Ello debe instar a quienes gobiernan a actuar, introducir respuestas de política económica. También debería repensarse desde lo institucional, modificar el andamiaje legal-normativo que termina perpetuando el modelo energético del pasado. Resulta necesario discutir la problemática ambiental, así como lo irreversible del pro-ceso de transición energética. El autor señala los diversos factores que muestran lo irreversible del proceso, los cam-bios tecnológicos, pero también aquellos de orden institucional o de hábitos de consu-mo que explican tal tendencia. Pero, la transición no ocurre en un vacío. Motivado por intereses espurios un grupo de actores ejerce presión sobre los gobiernos, para así man-tener sus privilegios. Al desinterés de muchos se debe añadir la desinformación que generan unos pocos, todo ello vuelve imprescindible analizar la transición desde una perspectiva multidisciplinaria; una visión de política económica global que presente actores, describa políticas y muestre cómo el poder influye en la toma de decisiones. El libro analiza estos diversos factores y destaca la complejidad del problema y, por ende, la necesidad de abordarlo desde una perspectiva multidisciplinaria.
... Thus our measure represents an upper bound. Nordhaus (2008) and Van der Ploeg (2014). 27 These authors also assume a CRRA utility function. ...
... Deterministic IAMs, such as the widely used DICE(Nordhaus 2008), produce lower estimates of SCC than IAMs which include uncertainty, such as e.g.Lontzek et al. (2015),Cai and Lontzek (2019). Estimates of SCC are also sensitive to the modeling of the climate system (Dietz and Venmans 2019).Content courtesy of Springer Nature, terms of use apply. ...
We consider a growing economy which is subject to recurring, random, uninsurable, and potentially large and long-lasting climate shocks leading to destruction of infrastructure, land degradation, collapse of ecosystems or similar loss of productive capacity. The associated damages and the hazard rate are endogenously driven by the stock of greenhouse gases. We highlight the important role of the relative risk aversion and provide analytical solutions for the optimal climate policy, the growth rate and the saving propensity of the economy. We stress the importance of jointly determining these variables, especially if the objective is to formulate meaningful policy prescriptions. If, for example, the growth rate or the saving rate are assumed to be exogenous, and thus independent of the characteristics of climate shocks and economic fundamentals, then future economic developments in the face of climate change and, consequently, the future mitigation efforts will deviate from the optimal paths. In a quantitative assessment we show that with log-utility and under favorable technological and climatic conditions the abatement expenditure represents only 0.5% of output, equivalent to 212 per ton carbon, and it jumps to a striking 16% in the pessimistic scenario involving severe shocks and low efficiency of abatement technology.
... The water bodies have suffered significant damage due to excessive chemicals, oils, and solid waste originating from agricultural and industrial activities, as well as wastewater discharged directly into the water bodies from point sources 3,26 . While some pollutants can be naturally attenuated by the basin's ecosystem 27,28 , the limited capacity of natural purification and inadequate wastewater treatment technologies result in the persistent accumulation of certain pollutants within river basin ecosystems for decades to centuries 29,30 . From an intergenerational perspective, the future stock of water pollution is contingent on the current pollution levels and will fluctuate based on water usage patterns and pollution reduction efforts 31 . ...
Global warming and the excessive exploitation of water resources have raised significant concerns regarding water scarcity and the degradation of aquatic ecosystems. To enhance integrated water resource management, a multi-objective optimization model integrated water allocation and water quality has been developed, in which there are trades-off between average economic benefit efficiency maximization and social welfare for long-term sustainability. In the social welfare maximization objective, an adapted Bentham–Rawls criterion is incorporated to addresses intergenerational trade-offs in high-quality water resource allocation, and the overlapping generations structure is employed to analyze the intertemporal dynamics of water pollution, thereby alleviating the conflicts between economic growth and environmental quality in the basin. Besides, total economic efficiency maximization objective is also important as it ensures the effective utilization of water resources. Using the heavily polluted Tuojiang River basin in China as a case study, the feasibility and rationality of this model have been demonstrated. Scenario analysis further validates the model’s effectiveness and explores the impacts of varying control parameters. Results indicate that improving sewage treatment capacity, reducing water pollution accumulation, and accounting for the reasonable needs of future generations for high-quality water can promote the sustainable development of the basin. Compared with the previous models, the proposed optimization model is capable to increase the social welfare by 13.83% and total economic efficiency by 15.97%.
... The preference for one scheme over the other varies in the literature. Prominent names advocating for carbon taxes include Nordhaus (2008). The arguments range from the simplicity of the tax system (Stavins 2019) to avoiding the potential price volatility associated with a quantity constraint that may further deter the investment process. ...
Although economists widely advocate carbon pricing as an effective solution to reduce carbon emissions, this mechanism has had so far limited effects. This paper proposes a new type of tax to help finance (and accelerate) the green transition. A carbon wealth tax (CWT) is proposed to be levied on carbon-intensive (brown) wealth rather than primarily on carbon-intensive goods. We consider tax implementation issues such as tax base, incidence, and efficiency. Moreover, we analyze the impacts of such a tax scheme by setting up a model of asset pricing and dynamic portfolio decisions. Green and carbon-intensive returns used in the model are calibrated with low-frequency returns on stock prices between 2010 and 2021. We find that such a tax and subsidy scheme is a feasible and effective instrument in speeding up the transition to a greener economy, particularly in protracted periods of economic contraction. Our approach also brings a new perspective to the wealth inequality discussions.
... The issue of car dependence has also created sustainability concerns arising from the emission of carbon from these vehicles. 1Nordhaus (2014) believes that the most efficient way to reduce carbon emissions is to put a price on it.2 In Canada, the Federal Government started the implementation of carbon pricing in 2019 through the fuel charge or output-based pricing system to reduce carbon emissions and their effects on climate change. ...
When compared with other major urban centers in Canada, Winnipeg is among those without an urban rail transit system. Other major cities like Calgary, Edmonton, Montreal, Ottawa, Toronto, Vancouver, and Waterloo have working urban rail transit systems to transport people from one place to another. The absence of rail infrastructure in Winnipeg has caused many residents to depend on their vehicles as their sole means of transportation. One reason for the car-dependence of "Winnipeggers," or residents of Winnipeg, could be the city's low density spread over a wide area. The current public transit service is focused on the downtown core where most routes end, making Winnipeg not supportive of other alternative modes of transportation. Public transportation use has decreased because of the growing popularity of motorcars, while traffic congestion causes a waste of time, increase in fuel usage and cost, and pollution of the air and water. Building light rail networks in uninterrupted and designated lanes and existing rail lines may be a veritable solution to eliminate land acquisition costs, traffic conflicts and congestion, and boost train speeds.
At the core of this design thesis are these questions. First, how can the design of a rail transit terminal as part of a rail network Master Plan be integrated into the existing urban context of Winnipeg? Second, how can this idea be sustainable, innovative, and efficient in a city such as Winnipeg? Third, can the existing bus transit system be harnessed to collaborate effectively with the proposed light rail transit terminal? The entire light rail transit project must be sustainable. Starting from what type(s) of light rail transit cars should be used, energy efficiency, building orientation, passive heating and cooling, rainwater harvesting, power generation, and reduction of noise and impacts of vibration on the people living or working closer to the terminal, this thesis would critically embrace the potentials of existing and successful similar building typologies around the world. Also, any effects of Winnipeg’s climate on the light rail infrastructure, to how the infrastructure would be properly maintained and operated would be considered.
... A carbon price gives an economic signal that allows polluters to decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it (OECD 2018). Market oriented solutions such as pricing carbon dioxide (CO 2 ) emissions or the removal of fossil fuel subsidies that incorporate a social cost of carbon have long been recommended as the Pigouvian cost-efficient solution to reduce emissions and mitigate the adverse impacts of climate change (Zhang and Baranzini 2004;Stern and Stern 2007;Nordhaus 2008). ...
In European countries, carbon pricing is often viewed as a primary strategy to combat climate change and climate risks by reducing carbon emissions and driving investment into cleaner energy sources. Decarbonization has also been suggested by directed technical change, which implements innovative renewable energy technology. We study the effectiveness of both policies for selected Northern EU countries. In a model‐based investigation, we first compare optimizing and behavioral drivers of decarbonization with a focus on the two decarbonization policies. Econometrically we use local projection and the VAR method to explore the effects of both policies, carbon tax and directed technical change on GDP and emission reduction. Our results show that—although both policies are needed–significant technology‐oriented policy actions on the supply side of renewable energy appear to be required to accelerate the decarbonization of the economies.
... As long as the limitations and assumptions of uncertainty quantification are made clear, the results of such analyses can provide important insights. There have been a number of valuable uncertainty analyses in the literature focused on global economic development, emissions and climate, however, they generally focus on a limited set of uncertainties or employ relatively simple models, and many are now quite dated [25][26][27][28][29][30][31][32][33][34][35][36] . The economic outlook, technology costs, and estimates of Earth system response have changed considerably in recent years with new data, analysis and evidence, making it useful to revisit these uncertainties. ...
Information about the likelihood of various outcomes is needed to inform discussions about climate mitigation and adaptation. Here we provide integrated, probabilistic socio-economic and climate projections, using estimates of probability distributions for key parameters in both human and Earth system components of a coupled model. We find that policy lowers the upper tail of temperature change more than the median. We also find that while human system uncertainties dominate uncertainty of radiative forcing, Earth system uncertainties contribute more than twice as much to temperature uncertainty in scenarios without fixed emissions paths, reflecting the uncertainty of translating radiative forcing into temperature. The combination of human and Earth system uncertainty is less than additive, illustrating the value of integrated modeling. Further, we find that policy costs are more uncertain in low- and middle-income economies, and that renewables are robust investments across a wide range of policies and socio-economic uncertainties.
... The parts of IAMs are summarized in the Integrated Assessment Modeling Consortium [3]. Notably, the Dynamic Integrated Climate-Economy (DICE) model [4], [5], proposed by 2018 Nobel Laureate in Economics, William Nordhaus, has been utilized in the reports of the Intergovernmental Panel on Climate Change (IPCC) [6] and has undergone temporal improvements [7]. One development of the DICE model is the Regional Integrated Climate and Economy (RICE) model [8], which extends the economic model to multiple regions. ...
... We gain insights into the distribution of the outputs, their mean values, quantiles, and other quantities of interest to the decision-maker. In the climate-economy literature, we recall the uncertainty analyses performed on the Dynamic Integrated model of Climate and the Economy (DICE) model (Nordhaus, 2014) and more recently in a multimodel comparison (Gillingham et al., 2018). perform a comprehensive exploration of the uncertainty in the social cost of CO 2 using the greenhouse gas impact value estimator model. ...
Risk assessments of complex systems are often supported by quantitative models. The sophistication of these models and the presence of various uncertainties call for systematic robustness and sensitivity analyses. The multivariate nature of their response challenges the use of traditional approaches. We propose a structured methodology to perform uncertainty quantification and global sensitivity analysis for risk assessment models with multivariate outputs. At the core of the approach are novel sensitivity measures based on the theory of optimal transport. We apply the approach to the uncertainty quantification and global sensitivity analysis of emissions pathways estimated via an eminent open‐source climate–economy model (RICE50+). The model has many correlated inputs and multivariate outputs. We use up‐to‐date input distributions and long‐term projections of key demographic and socioeconomic drivers. The sensitivity of the model is explored under alternative policy architectures: a cost‐benefit analysis with and without international cooperation and a cost‐effective analysis consistent with the Paris Agreement objective of keeping temperature increase below 2°C. In the cost‐benefit scenarios, the key drivers of uncertainty are the emission intensity of the economy and the emission reduction costs. In the Paris Agreement scenario, the main driver is the sensitivity of the climate system, followed by the projected carbon intensity. We present insights at the multivariate model output level and discuss how the importance of inputs changes across regions and over time.
... We can interpret u(t) as replenishment of natural resources, afforestation, reforestation, reclamation of land. The decision is at the hands of the representative agent similarly to [23,33], for the emission control rate, and [25], where emissions are proportional to the stock of capital and emission removals are proportional to the decarbonization stock that evolves according to a stochastic differential equation. Notice that we model an exogenous technological advancement only for the effect of production on pollution and not on adaptation expenditure. ...
We explore the interplay between sovereign debt default/renegotiation and environmental factors (e.g., pollution from land use, natural resource exploitation). Pollution contributes to the likelihood of natural disasters and influences economic growth rates. The country can default on its debt at any time while also deciding whether to invest in pollution abatement. The framework provides insights into the credit spreads of sovereign bonds and explains the observed relationship between bond spread and a country's climate vulnerability. Through calibration for developing and low-income countries, we demonstrate that there is limited incentive for these countries to address climate risk, and the sensitivity of bond spreads to climate vulnerability remains modest. Climate risk does not play a relevant role on the decision to default on sovereign debt. Financial support for climate abatement expenditures can effectively foster climate adaptation actions, instead renegotiation conditional upon pollution abatement does not produce any effect.
... For a recent review of ethics, climate change, and discounting, see Davidson (2015). The now-famous debate between Stern (2007) and Nordhaus (2007Nordhaus ( , 2008 brought into public view two different approaches to discounting the costs of climate change. ...
Global climate change is a multigenerational challenge that raises significant questions of intergenerational ethics. What do we owe to future generations? How should we think about intergenerational relations in the context of climate change? Many common moral theories—particularly those that assume a shared community of contemporaries who have the capacity to make agreements among themselves—encounter challenges in relation to intergenerational ethics. These challenges include the nonexistence and nonidentity problems, as well as issues involving power asymmetries, motivation, and accountability. This review suggests that the prominence of generational individualism—in which generations are conceptualized as distinct and potentially in conflict—can be an impediment to the robust consideration of future generations in climate ethics and policy. Conceptions of intergenerational ethics that emphasize transgenerational community and mutual flourishing over time may help to temper generational individualism, alleviating “intergenerational buck passing” on climate change and supporting climate action that takes past, present, and future generations more fully into account.
... Among these models, the Integrated Dynamics of Climate and the Economy (DICE). [36], is widely considered to be the most influential, taking into account CO2 emissions, climate impacts and associated economic losses. [37] estimated the social cost of carbon at 31$. ...
Climate change could have significant consequences such as rising sea levels, intensified storms, floods, droughts and forest fires. These effects could lead to forced migration, ecosystem degradation and extinction of many species. In addition, they could also affect the ability of central banks to maintain price stability. This research proposes an innovative method to integrate CO2 emissions into a Taylor rule, considering a risk premium related to climate change. This risk premium is determined by the CO2 emission gap. The model is evaluated over a period from 2002 to 2022 for 14 countries in the Mediterranean region, using the two step system Generalized Method of Moments (GMM). The results show that the coefficient associated with the CO2 emission gap is both positive and statistically significant at a level of 5%. This means that a 1% increase in this gap leads the Central Bank to increase its policy rate by 2.64%.
... As a country intensifies its emission reduction efforts, the cost of further reductions increases at an increasing rate. This implies that initial reductions are less costly, but the marginal cost rises as more emissions are cut, consistent with empirical observations and economic theory (Nordhaus, 2008). Furthermore, the convex nature of the function is appropriate for modeling cost functions in many real-world scenarios. ...
As the world grapples with the challenges of climate change, international cooperation and effective policy tools are crucial for reducing carbon emissions and achieving a sustainable future. This study uses a game-theoretical approach to investigate the negotiations between countries with high and low carbon dioxide emissions, with the goal of achieving zero carbon dioxide emissions by 2050. By fostering collaboration and understanding among nations, game theory provides a robust framework for addressing the complexities of global climate policy. Game theory provides a mathematical framework to model strategic behaviors in climate negotiations between high and low carbon dioxide-emitting countries. By analyzing the payoff functions, the Nash equilibrium strategies for emission reduction efforts are derived. The introduction of a carbon tax increases the marginal cost of emissions, leading to higher equilibrium efforts by both country groups. Simulation results indicate a significant increase in emission reductions with the tax, demonstrating the tax’s effectiveness in incentivizing climate action and contributing to global mitigation efforts. This result highlights the potential economic benefits of carbon taxation, including innovation incentives and reduced emissions, which can drive sustainable economic growth and job creation. However, the study also acknowledges potential costs, such as impacts on economic competitiveness and distributional fairness, which must be carefully considered and addressed in policy design. This research offers valuable insights for policymakers, highlighting the importance of crafting carbon tax policies that maximize environmental benefits while minimizing adverse economic and social effects. By balancing these considerations, policymakers can develop more effective strategies that support both environmental sustainability and economic resilience.
... Three authors are very influential in the research topic of behaviour in environmental tax with the most article contributions. Among them, the article written by Goulder [51] has the highest number of citations with 132 articles, in second place Nordhaus [52] with 118 articles, and followed by B. Lin and Z. Jia [53] the number of article citations is 112. C. Böhringer and T. F. Rutherford [54] and C. Fischer and M. Springborn [55] have 92 citations, followed by Y. Wang, L. Qi, and W. Cui [56] with 81. ...
This study examines compliance behaviour in the context of environmental tax policies, highlighting the essential role that these policies play in achieving the objectives of sustainable development. Environmental taxes are crucial instruments to reduce environmental damage and increase energy efficiency. Nevertheless, taxpayer compliance, which is impacted by several variables, including social acceptability, regulatory quality, and perceptions of fairness, is a key component of these policiesʹ efficacy. In contrast to earlier research, which frequently concentrated on certain tax kinds or discrete policy mechanisms, this study takes a broad approach, looking at a range of environmental taxation instruments. Emerging trends, significant factors influencing compliance behaviour, and noteworthy contributions from eminent authors and organizations are all identified by means of bibliometric and scientometric analyses. In order to create fair and effective environmental tax policies, interdisciplinary approaches and international collaboration must be used. Along with presenting policies to improve environmental regulation compliance, the study offers insightful advice for businesses that can help them innovate toward sustainability and adjust to shifting policy. It also provides a solid theoretical base for future researchers by highlighting important areas that require more investigation, especially when it comes to the wider effects of environmental taxes on various industries.
... According to Stroebel and Wurgler's (2021) exploratory study, it is likely that mitigation payoffs are more prone to manifest during periods of economic prosperity than during economic downturns. Nordhaus (2014), Barro (2015), and Giglio et al. (2021) construct a model encompassing both perspectives. This model emphasises the implications of discount rates. ...
This research investigates the interplay between sustainable finance, energy policies, and environmental outcomes in OECD countries from 2005 to 2018. Recognising the pivotal role of OECD countries in global sustainability efforts, this study focuses on Australia, Belgium, Denmark, Germany, Japan, Norway, Portugal, Spain, Sweden, and Switzerland. Within this framework, the key independent variables are climate finance, renewable energy, financial inclusion, energy intensity, and economic growth, and the load capacity factor and CO 2 emissions are dependent variables. The current analysis was carried out by employing econometric techniques, such as the panel mean group autoregressive distributed lag (PMG‐ARDL) model, the Arellano‐Bond test, random effects modelling, and ordinary least squares (OLS) modelling, due to the panel sample format of the data. The empirical results from the initial model focusing on the load capacity factor indicate that economic growth, energy intensity, financial inclusion, and renewable energy consumption positively contribute to the load capacity factor in OECD countries. Notably, climate finance was observed to diminish the load capacity factor within this model. In the subsequent model, examining CO 2 emissions as the dependent variable, the findings reveal that all variables, except renewable energy consumption, exhibit a positive and statistically significant influence on CO 2 emissions.
... El eslabón perdido en la modernización del Estado chileno (2012) MLN-Tupamaros (2012). Fue concejal por la Comuna de Peñalolén (2000-2008. ...
El estallido social representó la culminación en Chile de un proceso de fuerte movilización social, creciente desafección política, y deslegitimación de las principales instituciones del Estado y del sistema político. Asimismo reveló el agotamiento del modelo de crecimiento y la deslegitimación del mundo empresarial. Avanzado el milenio, las visiones tradicionales de tanto las derechas como las izquierdas enfrentan el momento crítico más profundo que han experimentado. Las crisis politicas contemporáneas acontecen en el marco de una constelación inédita que reúne desafíos diversos: la crisis de la democracia; la fuerte irrupción de la ultraderecha y del populismo a escala global; el creciente protagonismo del feminismo y su cuestionamiento de las tradiciones patriarcales, el inicio de la era pandémica; shocks migratorios; gigantescas transformaciones tecnológicas; la crisis de la globalización; los efectos económicos y sociales del prolongado desplazamiento de numerosas industrias hacia el Asia; y la triple crisis medioambiental. Enfrentamos, nada menos, la crisis de la política como mecanismo central de la convivencia social.
En dicho contexto, la profunda fragmentación del sistema de partidos exige revisar los sistemas de pensamiento tradicionales, reconsiderar cómo se articula la acción colectiva moderna en el mundo de las comunicaciones instantáneas y de la inteligencia artificial, y considerar la creciente individuación y mayor capacidad de agencia de los individuos.
El presente libro, si bien tiene el foco puesto en el Frente Amplio, busca contribuir al debate en marcha de las izquierdas y así asistir en su urgente reconstrucción. Un proceso que necesariamente deberá enfrentar a su contraparte en los espacios más avanzados de las derechas, cuyos propios esfuerzos de reconstrucción elevarán desafíos y oportunidades de aprendizaje, Esta dinámica renovadora debe insertarse en los procesos políticos y sociales existentes pero también deberá buscar espacios de experimentación y reinvención. Sobre la base de los importantes avances que la sociedad ha logrado, la naturaleza de este decisivo momento llama a transformar, nuestras formas fundamentales de convivencia política y social.
... He looked at all the costs of carbon pollution, of generation of greenhouse gases and traced those into all of their economic effects. 11,12 If you burn a lot of coal and each extra tonne adds to the effects, then you do change the climate through well-known mechanisms in atmospheric physics. Carbon dioxide is a greenhouse gas. ...
... energy-based firms are slightly more likely than ecological firms to have a slightly higher, carbonemission decay technique X is calibrated to 0.9965. The energy-based and ecological investment adjustment cost parameters p , g are consistent with most E-DSGEs, and calibrated to 10 concerning Heutel [6]. Matching the value of the divertible funds ratio and the transfer parameter ζ to the banking sector's steady state leverage ratio of 4.5, calibrated concerning Gertler and Karadi = 0.3409 [2]. ...
Through the dynamic stochastic general equilibrium model (DSGE model), this article explores the balance between economic development and environmental protection, focusing on the in-depth mutual influence among economic agents such as households, banks, producers, and government in promoting economic growth and achieving environmental protection. The model comprehensively considers factors such as production technology, carbon tax policies, bank loan rates, and government fiscal policies, aiming to analyze the specific impacts of these factors on economic growth, environmental protection, and social welfare. By detailed settings and analysis of consumption, savings, and labor supply decisions of households, the financial intermediary role of the banking sector, and carbon emissions and environmental technology use in the production sector, this study provides theoretical support for an environmentally friendly economic growth path. Through policy analysis, this article reveals the short-term and long-term effects of positive technological shocks, taxation on energy firms' loan rates, carbon tax policies, and government spending on the economy and the environment, providing a theoretical basis and reference for formulating relevant economic and environmental policies. The results indicate that appropriate macroeconomic policies can effectively promote economic growth while reducing carbon emissions and enhancing social welfare.
... The purpose of ESG embodies the learnings of Nordhaus (2008), which emphasizes the need to balance the economic costs of today's actions with the future repercussions on the ecological system. By catering to the much-needed attention towards environmental sustainability, ESG would reshape responsible business practices to inevitably drive opportunities for a sustainable business future. ...
A substantial surge in ESG research has triggered a wide dissemination of research across various domains, underscoring the need for an extensive appraisal of the complex ESG landscape. This paper is grounded on a sample of 441 documents retrieved from the Web of Science database, spanning from 2007 to 2023. A strategic mapping was performed to decipher the cumulative scientific knowledge by delving into the interrelations among various facets and identifying the field's basic, motor, niche, and emerging themes. We also explore the thematic evolution of ESG across distinct time frames, indicating ESG's inception, evolution, and diversification over the years. Our findings contribute to the ESG literature by categorizing it into seven clusters across the four quadrants. Results of the strategic mapping accentuate the obsolete, over‐researched and promising areas of ESG research. We find research on CSR, socially responsible investments and ESG‐firm performance themes as over‐researched areas calling for diversification. Promising research areas include the emerging association of ESG with portfolio construction, green innovations and investments, ESG controversies, information asymmetry, divergence, greenwashing, AI‐enabled universal rating mechanism, up‐grading and down‐grading of ESG scores and ESG‐linked compensations. Thematic evolution of ESG research underpins the culmination of its interplay with sustainability, emerging markets, board diversity, and green financing. Finally, the factorial analysis strengthens the reliability of the main findings, making it robust. This paper stands as the initial venture providing a comprehensive exploration of conceptual linkages, shifts, and advancements within the ESG literature through thematic mapping, offering an original contribution to the field.
... Even today, energy production has been made mainly by the combustion of fossil fuels, with a related increase in air pollutants and the emission of greenhouse gases, such as CO 2 . Consequently, today, one of the main issues in industrialized and developing countries is the management of CO 2 emissions, a current problem for production systems [69,70], although these CO 2 emission could also represent an opportunity to promote high-efficiency design in both conventional and new technological plants. ...
Recently, an improvement of the United Nations Human Development Index (HDI), named the Thermodynamic Human Development Index (THDI), has been introduced to link socio-economics to environmental and technical pillars of sustainable development. In this paper, the THDI is linked to the Kaya identity to bring out the quantities useful in energy economics and to obtain a clearer tool for the evaluation of sustainability. Moreover, the THDI has been normalized for use as an index for the analysis of sustainability. The component related to environmental emissions, which is included in the THDI, can be linked to the Kaya identity. This linkage allows us to use the THDI for the analysis of scenarios, which is useful for evaluating the possible impacts of any future actions on the development of countries.
... Analyzing now the CX experiment, while it is highly efficient in transitioning the economy toward NZE, it requires a very high value of the carbon tax (around 1,600 USD/tCO 2 ). On the one hand, the chosen functional form of the MAC curve implies higher costs than in previous versions (Nordhaus, 2008;Clarke et al., 2009;Ackerman and Bueno, 2011). On the other hand, the endogenous learning mechanism, by reflecting potential limits in corporates' adoption speed of new technology and slowing down investments in AbT, requires the government to act aggressively to stimulate firms to reduce emissions. ...
... This is modeled in the the spirit of integrated assessment models (IAMs) pioneered byNordhaus (1991),Nordhaus (1992),Nordhaus (2008). ...
This thesis is composed of three essays on informality, corruption and social networks and their respective dynamics with macroeconomic aggregates based on microfoundations. In the chapter, we study an equilibrium two-sector occupational choice model - agents can be (formal or informal) entrepreneurs or workers. An informal entrepreneur faces taxation determined by the combination of her capital choice and society’s tolerance of informality. Our model is consistent with many empirical findings regarding the informal sector in Brazil, a developing economy with a large informal sector. With a calibrated version of our model, we show that as society’s tolerance of informality decreases, the informal sector employs less capital and labor, and informality decreases. We conduct several counterfactual exercises. Informality is substantially lower in economies that are less tolerant of informal activities, formal entrepreneurs have more access to financial markets, and taxation of output and labor is lower. We extend the model to consider stochastic taxation of informal activities - a higher (average) informal output taxation and its variability reduce informality. In the second chapter, we present a model in which the embezzlement of tax revenues by public officials imposes distortionary effects on economic performance through its dentrimental effect on the private sector. The contribution of this article, in addition to the empirical evidence presented, is the study of a tractable economy in which it is possible to evaluate the responses of economic aggregates, via steady state analyzes and dynamic responses to variations and corruption shocks. Our model is consistent with many empirical findings about the Brazilian economy, such as the level of GDP lost to corruption and the number of corrupt bureaucrats. With a calibrated version of our model for the Brazilian economy, we study the quantitative implications of changes in the level of corruption on economic performance by comparing steady state and transition paths of the variables. Overall, our results show that economies with higher corruption control tend to present a better economic performance, with a higher level of output, capital stock, consumption, investment, tax collection and wages. The
last article improves the model presented in the second chapter, examining the relationship between social networks and the spread of corruption. We argue that social networks in labor market can facilitate corruption propagation by providing corrupt oficials with opportunities to meet and collude with each other. We develop a model of social networks and corruption propagation in which workers are endowed with peers exogenously and engage in network search to affect their labor market outcomes. We assume that power-law distributions govern the structure of social networks. We show that a shock on corrupt vacancies initially boosts the rate at which corrupt opportunities appear. Corruption-induced distortions have an adverse effect on the economy’s productivity, leading to reduced demand for capital. These consequences are particularly noticeable in economies where the average number of peers is higher. Concerning the technology shock, there is a positive effect on all components of aggregate demand. Nonetheless, the infuence on the arrival rate of corrupt opportunities varies depending on how we represent the effect on the economy’s output. In one approach, the effect aligns with the notion of hindrance (akin to the "sand-in-the- eels"hypothesis), while in another, it resembles a facilitation (akin to the "grease-in-the-wheels"hypothesis). Our findings suggest that social networks can play a role in facilitating corruption propagation. Policies should be aimed at weakening labor market networks and increasing the transparency of government procurement and contracting processes.
... Use K for the total capital stock, which is the only factor of production, Y for total output, and A for constant productivity. According to the DICE model used by Nordhaus (2014), production will lead to carbon dioxide emissions, which will accumulate in the atmosphere, thus changing the energy balance of the earth, leading to global warming and reducing future production to a certain extent. Therefore, we assume that on the basis of this model, the greenhouse effect will lead to a certain degree of decrease in production, with a constant proportion of L. In addition, we assume that society prefers green and pays attention to environmental protection, and the company pays a certain cost in the production process to reduce carbon dioxide emissions, which leads to a certain decrease in productivity compared to before. ...
Global warming, as the main feature of the climate problem, is gradually coming into our field of vision. Under this background, Poisson jump is applied to describe the arrival of natural disasters caused by global warming. Households and firms can dynamically update their beliefs about the arrival rate of disasters. In order to mitigate global warming, firms pay a share of the cost to reduce the carbon emissions in the process of production. In this paper, we discuss the social planner equilibrium and the competitive equilibrium, respectively, and obtain the Hamilton-Jacobi-Bellman (HJB) equations of value function in both contexts. Then, the equations are numerically simulated, leading to the following conclusions: under the same level of pessimism, investments and values of firms, as well as household consumption, all decrease as the emission abatement rate increases, and the social welfare is almost unchanged compared to the situation without the cost of emission reduction. Furthermore, in order to deal with the short-term adverse effects on the economy caused by emission reductions, the government subsidy is introduced into the model. The results show that, under the same level of pessimism, the government subsidy drives the growth of investment and consumption. The value of the firms that pay the emission abatement has been boosted, and economic growth rate has risen to a certain degree, while social welfare remains almost the same.
An updated and extended meta‐analysis confirms that the central estimate of the social cost of carbon is around 700–900/tCO2) with a large, right‐skewed uncertainty and trending up as ethical views have changed. The pure rate of time preference and the inverse of the elasticity of intertemporal substitution are key assumptions, the total impact of 2.5℃ warming less so. The social cost of carbon is much higher if climate change is assumed to affect economic growth rather than the levels of output and welfare. The literature is dominated by a relatively small network of authors, based in a few countries. Publication and citation bias may have pushed the social cost of carbon up.
With the intensification of global warming, climate risk has become a crucial factor influencing global sustainable development. This study conducts a multi-dimensional assessment of climate risk in China, measuring both climate physical risk and climate transition risk at the provincial level from 2000 to 2022. The spatio-temporal evolution analysis reveals that while climate physical risk exhibits a fluctuating trend, climate transition risk shows a fluctuating upward trajectory. Kernel density estimation indicates that the peaks of both risks demonstrate an overall increasing trend, highlighting their intensification over time. The Dagum Gini coefficient and its decomposition uncover significant regional disparities in climate risk, with inter-regional differences being the primary contributor. To further explore the structural characteristics of climate risk propagation, a spatial network model based on the modified gravity model is constructed. The analysis reveals complex inter-provincial linkages, stable centrality rankings, and significant contagion effects, as evidenced by block model analysis. Moreover, the economic consequence analysis employing impulse response functions in a panel vector autoregressive model demonstrates that climate risks significantly affect economic development, social consumption, research and development, government intervention, energy structure, and green finance, underlining their far-reaching socio-economic implications. This study provides a novel integrated framework combining spatio-temporal analysis, network structure modeling, and economic consequence evaluation to enhance climate risk management. The findings offer valuable insights for policymakers in optimizing resource allocation and strengthening risk mitigation strategies.
Indonesia, sebagai negara dengan sumber daya alam yang melimpah, berada dalam posisi yang strategis untuk menjadi kekuatan dominan dalam pasar karbon global, khususnya di Asia Tenggara. Penelitian ini menggali potensi besar yang dimiliki Indonesia dalam berkontribusi terhadap tujuan pengurangan karbon global, dengan fokus pada kekuatan strategis yang dapat dimanfaatkan dari hutan, lahan gambut, dan proyek energi terbarukan yang dimiliki. Studi ini mengidentifikasi sejumlah peluang, seperti komitmen Indonesia terhadap Perjanjian Paris dan pemanfaatan kredit karbon melalui skema seperti REDD+ serta pasar karbon domestik yang sedang berkembang. Namun, penelitian ini juga menguraikan hambatan-hambatan signifikan yang perlu diatasi, termasuk fragmentasi kebijakan nasional, keterbatasan teknologi, dan kesenjangan kapasitas dalam pengelolaan proyek karbon. Melalui analisis mendalam terhadap tantangan ini, makalah ini mengusulkan strategi komprehensif yang mencakup penyelarasan regulasi, pengembangan infrastruktur, kerjasama regional dalam ASEAN, serta inisiatif pembangunan kapasitas. Rekomendasi ini bertujuan untuk menciptakan ekonomi karbon yang berkelanjutan yang tidak hanya mendukung pertumbuhan ekonomi Indonesia tetapi juga berkontribusi secara signifikan dalam perjuangan melawan perubahan iklim. Dengan menerapkan strategi-strategi ini, Indonesia dapat memposisikan dirinya sebagai pemimpin pasar karbon regional sekaligus membangun ekonomi rendah karbon yang inklusif yang menguntungkan masyarakat lokal dan lingkungan.
Global warming and the excessive exploitation of water resources have sparked significant concerns about water scarcity and the degradation of aquatic ecosystems. To improve integrated water resource management, a multi-objective optimization model has been devised, combining water allocation with water quality management, with a focus on environmental intergenerational equity. This model prioritizes efficiency and sustainability to balance socio-economic development and integrated water resource management while preserving aquatic ecosystem health.To ensure sustainable water allocation for both present and future generations, an adapted Bentham-Rawls criterion has been introduced. This criterion facilitates balancing current and future equity in water resource management. It uses a binary utility function that considers both water usage and pollution levels, thereby promoting fair water quality across generations. Furthermore, to integrate social development with integrated water management for sustainable resource use, the model includes mean economic benefit efficiency. This takes into account the costs related to wastewater treatment within the multi-objective framework for water resource allocation, ensuring a comprehensive approach to sustainable water management. By incorporating the competition between present and future generations and addressing the conflict between rapid economic development and the continuous deterioration of water environmental quality, the proposed optimal strategy more accurately represents an inter-temporal utilization pattern for integrated water allocation and water quality management compared to existing strategies. Using the heavily polluted Tuojiang River basin in China as a case study, the practicality and rationality of this model have been validated. Compared to previous models, this intergenerational equity-based optimization model for joint water allocation and water quality management demonstrates lower water pollution accumulation, reduced sewage treatment costs, higher total social welfare, and ensures sustainable water resource management.
Before going into the discussions of the five singularities driven by science, this chapter introduces the basics of how economists have understood big catastrophes. The chapter begins with the concept of a singularity and a bifurcation point defined by mathematics, a catastrophe model developed by biological/ecological science, and a chaos theory developed in weather science. In applied sciences, a tipping point is commonly used. Economics integrates these science concepts into the economic model of civilizations-ending catastrophes. In designing a public policy against a truly catastrophic event, a precautionary principle based on the dismal theorem is put forth. The rationale for such a policy is the large irreducible uncertainty which is represented in the economic model as a fat-tail probability distribution. On the other hand, a behavioral critique puts forward the argument that people’s and society’s adaptation capabilities and capacities including technological possibilities are substantial, rendering the conclusion of the dismal theorem invalid.
This study investigates the hypothesis that seawater desalination technology is too costly for widespread benefit for irrigated agriculture. An integrated optimization model is developed to test this hypothesis by assessing the benefits of incorporating affordable desalinated seawater into local urban water supplies, revealing a gain for both cities and farm water users. Using the Rio Grande Basin high desert region of North America as a case study, the economic performance of various water shortage sharing strategies is investigated under current and projected desalination costs, with broader implications for other arid regions internationally. The findings reveal that water trading between agricultural and urban sectors significantly reduces the cost of adapting to climate-induced water stress. Additionally, the availability of affordable desalinated water further enhances these cost reductions, demonstrating its potential to lower the cost of climate adaptation in arid regions worldwide where competition for water is most intense.
Time disjunctures inherent to the value chains of fossil-based global capitalism have been illuminated by explicatory critiques of extractivism and carbon markets. Through the conceptual lens of futurity, I now focus upon global warming-climate change as a materialization of fossil-based global capitalism and as an insightful but partial depiction of this totality. Doing so first requires some time-epistemic clarifications. Futurity in general covers different kinds of future orientation. As indicated previously, these are permeations of temporality. Examining or investigating the future (scenario projections, futurism, science fiction) occurs in the present. Contemporary imaginings and constructions of a future society invoke past social arrangements. Futures in the making arise, organically, from an evolving present which is also indebted to the past.
p>The literature on political short-termism holds that multiple factors in current democratic systems drive political short-termism, leading to delays in government responses to long-term policy challenges, such as global climate change. In this article, I argue that these factors do not necessarily work as drivers of political short-termism. To show this, I first review the literature on political short-termism and identify electoral cycles, voters’ policy preferences, and interest-group behavior as potential drivers of political short-termism. I then examine the influence of these potential drivers of political short-termism on climate policymaking, drawing on recent empirical studies. I find that elected governments and politicians can, in some cases, (1) have incentives to pursue climate policies in the run-up to elections, (2) build public support for climate policies, and (3) overcome organized opposition to climate legislation. These findings suggest that although electoral cycles, voters’ policy preferences, and interest-group behavior may induce political short-termism, such negative effects on policymaking are conditional on other variables.</p
After having explored to what extent the private real sector and the financial market can be a roadblock or a bridge to a low-carbon economy, we now move to the public sector and macroeconomic policies. We focus on dynamic macro models as guidance for climate policies that can support mitigation and adaptation efforts concerning climate protection and the role of broader public policies that will promote and incentivize the energy transition. More specifically, we explore the fiscal resources that should be spent on climate-related infrastructure, mitigation, and adaptation efforts. We will also allow for public borrowing, at least as much as it is sustainable helpful on climate risks. We will also study to what extent monetary policy can be helpful on climate change issues.
In this chapter, we present historical trends related to carbon dioxide (CO2) and greenhouse gas (GHG) emissions affecting the carbon budget. This documents the fact that the use of fossil fuels, coal in particular, creates a very large negative externality. We present a dynamic model starting from a mixed energy sector with fossil fuel and renewable energy and indicate different pathways to the decarbonization of the economies of advanced and developing countries.
Although many credit John Tyndall with having discovered the greenhouse effect in 1859, it may in fact have first been described by a woman, Eunice Foote, who identified the process in 1856, three years earlier, in a paper in The American Journal of Science and Arts.
The UN Framework Convention on Climate Change calls for the avoidance of “dangerous anthropogenic interference with the climate
system”. Among the many plausible choices, dangerous interference with the climate system may be interpreted as anthropogenic
radiative forcing causing distinct and widespread climate change impacts such as a widespread demise of coral reefs or a disintegration
of the West Antarctic ice sheet. The geological record and numerical models suggest that limiting global warming below critical
temperature thresholds significantly reduces the likelihood of these eventualities. Here we analyze economically optimal policies
that may ensure this risk-reduction. Reducing the risk of a widespread coral reef demise implies drastic reductions in greenhouse
gas emissions within decades. Virtually unchecked greenhouse gas emissions to date (combined with the inertia of the coupled
natural and human systems) may have already committed future societies to a widespread demise of coral reefs. Policies to
reduce the risk of a West Antarctic ice sheet disintegration allow for a smoother decarbonization of the economy within a
century and may well increase consumption in the long run.
A critical issue for policymakers in defining mitigation strategies for climate change is the availability of appropriate evaluation tools. The development of climate impact response functions (CIRFs) is our reaction to this challenge. CIRFs depict the response of selected climate-sensitive impact sectors across a wide range of plausible futures. They consist of a limited number of climate-change-related dimensions and sensitivities of sector-specific impact models. The concept of CIRFs is defined and the procedure to develop them is presented. The use of climate change scenarios derived from various GCM experiments and the adopted impact assessment models are explained. The CIRFs presented here consider climate change impacts on natural vegetation, crop production, and water availability. They are part of the ICLIPS integrated assessment framework based on the tolerable windows approach. CIRFs can be applied both in 'forward' and in 'inverse' mode. In the latter, they help to translate thresholds for climate impacts perceived by stakeholders (so-called impact guardrails) into constraints for climate variables (so-called climate windows). This enables the results of detailed impact models to be incorporated into intertemporally optimizing integrated assessment models, such as the ICLIPS model.
This paper is concerned with the conclusion of the Stern Review that the cost of climate change could be as much as 20% of the global GDP. In this paper, I identify two major sources of the variation in the estimates of the aggregate cost of climate change. One is the different climate change predictions of the AOGCM (Atmospheric Oceanic General Circulation Model) models, and the other is varying economic damage estimates. The main conclusion of this paper is that only under the alarmist approach- which assumes both the most severe climate change and the most extreme estimate of climate change damage to the economy- we can be convinced that the cost of climate change is close to 20% of the global GDP in 2100. In most other cases, the cost will be under 1% of the global GDP.
Given the large uncertainties regarding potential damages from climate change and the significant but also uncertain costs of reducing greenhouse emissions, the debate over a policy response is often framed as a choice of acting now or waiting until the uncertainty is reduced. Implicit in the "wait to learn" argument is the notion that the ability to learn in the future necessarily implies that less restrictive policies should be chosen in the near term. I demonstrate in the general case that the ability to learn in the future can lead to either less restrictive or more restrictive policies today. I also show that the initial decision made under uncertainty will be affected by future learning only if the actions taken today change the marginal costs or marginal damages in the future. Results from an intermediate-scale integrated model of climate and economics indicate that the choice of current emissions restrictions is independent of whether or not uncertainty is resolved before future decisions, because, like most models, the cross-period interactions are minimal. With stronger interactions, the effect of learning on initial period decisions can be more important.
In this paper, we investigate the sensitivity of optimal carbon control strategies to parameters of the Carbon Emissions Trajectory Assessment (CETA) Model, and we use CETA in a simple decision tree framework to estimate the value of information about global warming uncertainties. We find that if an optimal control policy is used under uncertainty, the eventual resolution of uncertainty has high value relative to current research budgets, and resolving uncertainty about the costs of warming is nearly as important as resolving uncertainty about the extent of warming. In addition, we find that there is not a high premium on immediate resolution of uncertainty, if resolution would otherwise occur within, say, twenty years; this implies that time is available to plan and execute a carefully designed research program. On the other hand, we find that if the real world political process would result in a suboptimal control policy being chosen under uncertainty, and this choice could be prevented by early resolution of uncertainty, the benefit of early resolution may be as much as three orders of magnitude greater.
The study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models. It compares three approaches: MER accounts, world-price PPP accounts, and superlative PPP accounts. It concludes that the best approach is to use superlative PPP accounts. This approach uses cross-sectional PPP measures for relative incomes and outputs and relies on national accounts price and quantity indexes for time-series extrapolations. Under ideal circumstances, this approach will provide accurate and consistent cross-sections and time series. This approach will require relatively little change in model structure from ones using MER accounts. The main concern would be to ensure that behavioral and reduced-form relationships in the models have been correctly estimated.