Tuesday, February 19, 2008
ECON 365: Climate Change Review
I. What will occur? What outcomes are possible? How likely are each of these outcomes?
Here's a link to the IPCC website -- probably more than you'd ever want to know there.
Here's a shorter summary from Scientific American on the state of the science.
II. How good/bad are each of the outcomes? What will it cost to adapt? How much damage/benefit occurs in each of the possible outcomes? How will future generations value these costs/benefits? That is, what will they regard as disastrous, as no big deal, or as improvements? (Note -- this depends on answering the nearly impossible questions -- what are the tastes, preferences, and technology are likely to exist in the future when changes occur? )
III. How much should we care about the future? What's the appropriate discount rate to use when evaluating costs and benefits that are paid/enjoyed by future generations? How much are we willing to pay in order to make them better off?
IV. What can we do to mitigate climate change (i.e., change the probabilities associated with different outcomes)? How much will these actions cost both directly and in terms of opportunity costs?
Several items that relate to the questions in II-IV:
Here's a link to the Stern Review, here's economist Gary Yohe's testimony to the Senate discussing the Stern Review, here's economist William Nordhaus's tome on climate change. These are relatively in depth looks at all the issues.
Here are some shorter readings:
Nobel prize winner Ken Arrow on "The Case for Cutting Emissions."
Paul Klemperer on "Why economists don't know all the answers about climate change."
Scientific American interviews Sir Nicholas Stern, Bjorn Lomborg, and Gary Yohe on the costs of mitigating climate change.
Angus Deaton on the criticism of Stern's use of a zero discount rate.
While not directly addressing climate change, here's Nobel prize winner Robert Solow on an economist's approach to sustainability (aka -- our obligations to future generations). Here's one economist's attempt to directly apply Solow's point of view to climate change.
V. Assuming we think we should act to reduce emissions, what can/should we do? Carbon taxes? Cap and trade? Command and control? And how do we accomplish this on a global scale?
The CBO recently released a study examining the policy options for reducing carbon emissions. They favor a carbon tax.
Several links to discussion of this topic at the Environmental Economics blog.
Mark Thoma on the equity concerns about carbon taxes. Here are several responses to Thoma's argument.
Finally, here's my grad school friend Joe Aldy (and co-author's) description of the challenges of developing global climate change policies.
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