Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent

This paper provides a formal survey of price and quantity instruments for mitigating global warming. We explicitly consider policies’ impact on the incentives of resource owners who maximize their profits intertemporally. We focus on the informational and commitment requirements of the regulator. Furthermore, we study the interplay between (private) resource extraction rent and (public) climate rent and ask how property and management of the climate rent can be assigned between regulator and resource sector. There are only two instruments that unburden the regulator from the complex intertemporal management of the climate rent and associated commitment problems: in the cost-benefit world, we derive a stock-dependent tax rule; in the cost-effective (carbon budget) world, only an emissions trading scheme with free banking and borrowing can shift intertemporal timing decisions completely to the market.resource extraction, climate rent, intertemporal policy instruments, prices vs. quantities, Hotelling

Adapt, Mitigate, or Die? The Fallacy of a False Trade-off by Ottmar Edenhofer and Steffen Brunner

Klimaveränderung; Internationale Umweltpolitik; Welt

Learning or Lock-in: Optimal Technology Policies to Support Mitigation

We investigate conditions that aggravate market failures in energy innovations, and suggest optimal policy instruments to address them. Using an intertemporal general equilibrium model we show that “small” market imperfections may trigger a several decades lasting dominance of an incumbent energy technology over a dynamically more efficient competitor, given that the technologies are very good substitutes. Such a “lock-in” into an inferior technology causes significantly higher welfare losses than market failure alone, notably under ambitious mitigation targets. More than other innovative industries, energy markets are prone to these lock-ins because electricity from different technologies is an almost perfect substitute. To guide government intervention, we compare welfare-maximizing technology policies in addition to carbon pricing with regard to their efficiency, effectivity, and robustness. Technology quotas and feed-in-tariffs turn out to be only insignificantly less efficient than first-best subsidies and seem to be more robust against small perturbations.renewable energy subsidy, renewable portfolio standard, feed-in-tariffs, carbon pricing

Mitigation Strategies and Costs of Climate Protection: The effects of ETC in the hybrid Model MIND

MIND is a hybrid model incorporating several energy related sectors in an endogenous growth model of the world economy. This model structure allows a better understanding of the linkages between the energy sectors and the macro-economic environment. We perform a sensitivity analysis and parameter studies to improve the understanding of the economic mechanisms underlying opportunity costs and the optimal mix of mitigation options. Parameters representing technological change that permeates the entire economy have a strong impact on both the opportunity costs of climate protection and on the optimal mitigation strategies, e.g. parameters in the macro-economic environment and in the extraction sector. Sector-specific energy technology parameters change the portfolio of mitigation options but have only modest effects on opportunity costs, e.g. learning rate of the renewable energy technologies. We conclude that feedback loops between the macro-economy and the energy sectors are crucial for the determination of opportunity costs and mitigation strategies.Endogenous technological change, Climate change mitigation costs, Integrated assessment, Growth model, Energy sector, Integrated assessment

Avoiding Carbon Lock-In: Policy Options for Advancing Structural Change

A major obstacle for the transformation to a low-carbon economy is the risk of a carbon lock-in: fossil fuel-based ('dirty') technologies dominate the market although their carbon-free ('clean') alternatives are dynamically more efficient. We study the interaction of learning-by-doing spillovers and the substitution elasticity between the clean and the dirty sector in an intertemporal general equilibrium model. We find that the substitution possibilities between the two sectors have an ambivalent effect: although a high substitution elasticity requires less aggressive mitigation policies than a low one, it creates a greater lock-in in the absence of regulation. The optimal policy response consists of a permanent carbon tax as well as a learning subsidy for clean technologies. A single policy instrument can also avoid high welfare losses, but a more stringent mitigation target can only be achieved at painful costs. We demonstrate that the policy implication of [Acemoglu et al. 2012] is limited in scope. Our numerical results also highlight that infrastructure provision is crucial to facilitate the low-carbon transformation.structural change, low-carbon economy, carbon lock-in, mitigation policies, learning-by-doing

The antiquity of the Rhine River : stratigraphic coverage of the Dinotheriensande (Eppelsheim Formation) of the Mainz Basin (Germany)

Background: Mammalian fossils from the Eppelsheim Formation (Dinotheriensande) have been a benchmark for Neogene vertebrate palaeontology since 200 years. Worldwide famous sites like Eppelsheim serve as key localities for biochronologic, palaeobiologic, environmental, and mammal community studies. So far the formation is considered to be of early Late Miocene age (~9.5 Ma, Vallesian), representing the oldest sediments of the Rhine River. The stratigraphic unity of the formation and of its fossil content was disputed at times, but persists unresolved. Principal Findings: Here we investigate a new fossil sample from Sprendlingen, composed by over 300 mammalian specimens and silicified wood. The mammals comprise entirely Middle Miocene species, like cervids Dicrocerus elegans, Paradicrocerus elegantulus, and deinotheres Deinotherium bavaricum and D. levius. A stratigraphic evaluation of Miocene Central European deer and deinothere species proof the stratigraphic inhomogenity of the sample, and suggest late Middle Miocene (~12.5 Ma) reworking of early Middle Miocene (~15 Ma) sediments. This results agree with taxonomic and palaeoclimatic analysis of plant fossils from above and within the mammalian assemblage. Based on the new fossil sample and published data three biochronologic levels within the Dinotheriensand fauna can be differentiated, corresponding to early Middle Miocene (late Orleanian to early Astaracian), late Middle Miocene (late Astaracian), and early Late Miocene (Vallesian) ages. Conclusions/Significance: This study documents complex faunal mixing of classical Dinotheriensand fauna, covering at least six million years, during a time of low subsidence in the Mainz Basin and shifts back the origination of the Rhine River by some five million years. Our results have severe implications for biostratigraphy and palaeobiology of the Middle to Late Miocene. They suggest that turnover events may be obliterated and challenge the proposed ‘supersaturated’ biodiversity, caused by Middle Miocene superstites, of Vallesian ecosystems in Central Europe

Hominin palaeoecology in Late Pliocene Malawi : first insights from isotopes (13C, 18O) in mammal teeth

Carbon-13 and oxygen-18 abundances were measured in large mammal skeletal remains (tooth enamel, dentine and bone) from the Chiwondo Beds in Malawi, which were dated by biostratigraphic correlation to ca. 2.5 million years ago. The biologic isotopic patterns, in particular the difference in carbon-13 abundances between grazers and browsers and the difference in oxygen-18 abundances between semi-aquatic and terrestrial herbivores, were preserved in enamel, but not in dentine and bone. The isotopic results obtained from the skeletal remains from the Chiwondo Beds indicate a dominance of savannah habitats with some trees and shrubs. This environment was more arid than the contemporaneous Ndolanya Beds in Tanzania. The present study confirms that robust australopithecines were able to live in relatively arid environments and were not confined to more mesic environments elsewhere in southern Africa

Planet-proofing the global food system

Without a great food system transformation, the world will fail to deliver both on the United Nations Sustainable Development Goals and the Paris Climate Agreement. There are five grand challenges to be faced, by science and society, to effect that transformation

Renewable Energy Subsidies: Second-Best Policy or Fatal Aberration for Mitigation?

This paper evaluates the consequences of renewable energy policies on welfare, resource rents and energy costs in a world where carbon pricing is imperfect and the regulator seeks to limit emissions to a (cumulative) target. We use a global general equilibrium model with an intertemporal fossil resource sector. We calculate the optimal second-best renewable energy subsidy and compare the resulting welfare level with an efficient first-best carbon pricing policy. If carbon pricing is permanently missing, mitigation costs increase by a multiple (compared to the optimal carbon pricing policy) for a wide range of parameters describing extraction costs, renewable energy costs, substitution possibilities and normative attitudes. Furthermore, we show that small deviations from the second-best subsidy can lead to strong increases in emissions and consumption losses. This confirms the rising concerns about the occurrence of unintended side effects of climate policy { a new version of the green paradox. We extend our second-best analysis by considering two further types of policy instruments: (1) temporary subsidies that are displaced by carbon pricing in the long run and (2) revenue-neutral instruments like a carbon trust and a feed-in-tariff scheme. Although these instruments cause small welfare losses, they have the potential to ease distributional conflicts as they lead to lower energy prices and higher fossil resource rents than the optimal carbon pricing policy.Feed-in-Tariff, Carbon Trust, Carbon Pricing, Supply-Side Dynamics, Green Paradox, Climate Policy