Is there room for geoengineering in the optimal climate policy mix?

We investigate geoengineering as a possible substitute for adaptation and mitigation measures to address climate change. With the help of an integrated assessment model, we distinguish between the effects of solar radiation management on atmospheric temperature levels and its side-effects on ecosystems. To address the uncertainty regarding the magnitude of side-effects, we rely on a distributional analysis. Our results indicate that mitigation is the preferred strategy, with adaptation acting as an effective complement. As geoengineering brings significant side-effectson the environment, it is used in only a few of theanalyzed scenarios. We then discuss additional concerns with geoengineering, and analyze their impacts on policy choices. In particular, we account for the possibility to make wrong assumptions about side-effects

Working Paper No. 2012/38 Risk experiments in gains and losses A case study for Benin

The aim of this paper is to expand our knowledge on risk aversion among the poor by conducting experiments that do not only test risk aversion in small and large stakes but also in risky gains and risky losses. To our knowledge, this is the first attempt to conduct experiments in poor communities strictly focused on the loss domain. The experiments were conducted with 120 poor rural households in Benin. In contrast to results in industrialized countries, we find that playing lotteries constrained to the loss domain dramatically increases risk aversion. We also find a strong negative relationship between the level of risk aversion (both in gains and losses) and the level of religious faith. Our interpretation of this result is that villagers with strong beliefs tend to rely more on God’s goodwill at the expense of a proper risk assessment, resulting in larger risk-taking

Working Paper Series The Effect of Proactive Adaptation on Green Investment "Credit Risk and Non-Standard Sources of Risk in Finance" The effect of proactive adaptation on green investment

Abstract Climate change is one of the greatest challenges facing our planet in the foreseeable future and despite the urgency of the situation global GHG emissions are still increasing. In this context, and since future climate changes appear now unavoidable to some extent, adaptation measures have recently gained a new political momentum as an important component of climate policies. Contrary to mitigation options, adaptation measures do not reduce emission levels but reduce their impacts. To assess the relationship and effects on the global economy of both mitigation and adaptation, we use in this paper an integrated assessment model (IAM) that includes both proactive adaptation strategies and access to "green" investments (clean technologies) for mitigation. We find that the relationship between adaptation and mitigation is complex and largely dependent on their respective attributes, with weakly effective adaptation acting as a late complement to mitigation efforts. As its effectiveness increases, adaptation becomes more and more a substitute for mitigation. Sensitivity analysis on the potential magnitude of damages also indicates that scientific efforts to better describe GHG impacts will have immediate and important consequences on the sequence of mitigation and adaptation strategies

Emissions Markets and Products

v.5:sect.9 (1896

Environmental finance and investments

The current economic and environmental situation poses fundamental questions that this book aims to answer: Under which conditions could a market-based approach contribute to a decrease in emissions? How are abatement and investment strategies generated or promoted under permit regimes like the European Union Emission Trading Scheme (EU ETS)? In the context of the EU ETS, what is the trade-off between production, technological changes and pollution

Baseline choice and performance implications for REDD

Reducing Emissions from Deforestation and forest Degradation (REDD) projects are being designed and implemented across tropical countries, intending to curb the contribution of deforestation to greenhouse gas emissions. An important aspect of REDD implementation is the baseline against which reductions are measured. The baseline estimates the business-as-usual emissions from deforestation and forest degradation. We solve a dynamic model of land conversion from forest to agriculture in the presence of REDD, and assess the performance of four baselines. We show that none of the analysed baselines dominates in all performance aspects, and that the final baseline choice needs to maximise the trade-off between the effectiveness to reduce deforestation, cost-efficiency, and changes in income. The frequently used historical average baseline could be improved by using a forward-looking one, which is shown to better account for the opportunity costs faced by landowners. This result hinges on the ability of the baseline to predict deforestation rates without significant underestimations. We advocate the switch from a single-threshold baseline to a corridor methodology, which would provide continued incentives to reduce deforestation, even during periods of high opportunity costs. We finally show how the selection of certain baseline attributes, such as corridor bandwidth and symmetry, can enhance performance