Economic impacts of tipping points in the climate system

Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far using a meta-analytic integrated assessment model (IAM) with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation modeling. Collectively, climate tipping points increase the social cost of carbon (SCC) by ∼25% in our main specification. The distribution is positively skewed, however. We estimate an ∼10% chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given that some tipping points, tipping point interactions, and impact channels have not been covered in the literature so far; however, our method of structural meta-analysis means that future modeling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs

Recommendations for improving the treatment of risk and uncertainty in economic estimates of climate impacts in the Sixth Intergovernmental Panel on Climate Change Assessment Report

Large discrepancies persist between projections of the physical impacts of climate change and economic damage estimates. These discrepancies increase with increasing global average temperature projections. Based on this observation, we recommend that in its Sixth Assessment Report (AR6), the Intergovernmental Panel on Climate Change (IPCC) improve its approach to the management of the uncertainties inherent in climate policy decisions. In particular, we suggest that the IPCC: (i) strengthen its focus on applications of decision-making under risk, uncertainty, and outright ambiguity; and (ii) estimate how the uncertainty itself affects its economic and financial cost estimates of climate damage and, ultimately, the optimal price for each ton of carbon dioxide released. Our hope is that by adopting these recommendations, AR6 will be able to resolve some of the documented inconsistencies in estimates of the physical and economic impacts of climate change and more effectively fulfill the IPCC’s mission to provide policy-makers with a robust and rigorous approach for assessing the potential future risks of climate change

Searching for carbon leaks in multinational companies

Does unilateral climate change policy cause companies to shift the location of production, thereby creating carbon leakage? In this paper, we analyse the effect of the European Union Emissions Trading System (EU ETS) on the geographical distribution of carbon emissions of multinational companies. The empirical evidence is based on unique data for the period 2007-2014 from the Carbon Disclosure Project, which tracks emissions of multinational businesses by geographical region. Because they al-ready operate from multiple locations, multinational firms should be the most prone to carbon leakage. Our data includes regional emissions of 1,122 companies, of which 261 are subject to EU ETS regulation. We find no evidence that the EU ETS has led to a displacement of carbon emissions from Europe towards the rest of the world, including in countries with no climate policy in place and within energy-intensive companies. A large number of robustness checks confirm this finding. Overall, the paper suggests that modest differences in carbon prices between countries do not induce carbon leakage

Essays in environmental economics

This thesis consists of three chapters that investigate environmental policy questions from an empirical point of view. Chapter 1 examines the trustworthiness of official air pollution data sources for Beijing when compared to similar data from the US Embassy in Beijing. Using a statistical regularity, I find that the official data likely suffered from misreporting until the end of 2012. From 2013 onwards, however, misreporting appears to have stopped. Chapter 2 evaluates China's main air pollution control policy to study the effects of environmental regulation when institutions are weak. I find that the policy was ultimately successful in reducing air pollution, but that those effects only set in once the Chinese government started appropriate air pollution monitoring. Moreover, I quantify the efficiency of different policy instruments to control air pollution in China and find that - in contrast to the United States - a market-based solution and a technology mandate for scrubbers are nearly identical. Finally, Chapter 3 studies whether nudges can help consumers align intention and action when choosing their electricity contract. Using a survey experiment, we find that only a default nudge had a statistically and economically significant effect on consumers' decision to contract renewable energy.Aquesta tesi consisteix en tres estudis que investiguen problemes relacionats amb la política de medi ambient des d’un punt de vista empíric. El capítol 1 examina fins a quin punt són fiables les dades sobre la contaminació de l’aire a Beijing quan es comparen amb dades semblants de l’ambaixada dels EUA. Mitjançant l'ús d'una regularitat estadística, proporciono evidència que les dades oficials segurament van ser manipulades fins a finals del 2012. A partir del 2013, però, les dades semblen indicar que es va posar fi a aquesta manipulació. El capítol 2 avalua la política xinesa més important duta a terme per frenar la contaminació de l’aire i pretén estudiar els efectes de la regulació del medi ambient en un context d’institucions febles. Demostro que aquesta política va aconseguir reduir la contaminació, però tan sols després que el govern xinès implementés el monitoreig adequat. A més, quantifico l'eficiència de diferents instruments polítics destinats a controlar la contaminació de l'aire a la Xina. Els resultats indiquen que - en contrast amb els EUA - pràcticament no hi ha diferències entre un instrument de mercat i l’ús prescriptiu de depuradores de gas. Finalment, el capítol 3 analitza si el fet d’introduir canvis en la informació pot ajudar els consumidors a seguir les seves intencions a l'hora de triar un contracte d'electricitat. A través d'un experiment en forma d’enquesta es demostra que només una preselecció té un efecte significatiu en els sentits estadístic i econòmic sobre la presa de decisió dels consumidors a l’hora de contractar energia renovable

China’s national carbon emissions trading scheme: lessons from the pilot emission trading schemes, academic literature, and known policy details

Upon completion, China’s national emissions trading scheme (C-ETS) will be the largest carbon market in the world. Recent research has evaluated China’s seven pilot ETSs launched from 2013 on, and academic literature on design aspects of the C-ETS abounds. Yet little is known about the specific details of the upcoming C-ETS. This article combines currently understood details of China’s national carbon market with lessons learned in the pilot schemes as well as from the academic literature. Our review follows the taxonomy of Emissions Trading in Practice: A Handbook on Design and Implementation (Partnership for Market Readiness & International Carbon Action Partnership. (2016). Retrieved from www.worldbank.org): The 10 categories are: scope, cap, distribution of allowances, use of offsets, temporal flexibility, price predictability, compliance and oversight, stakeholder engagement and capacity building, linking, implementation and improvements. Key policy insights Accurate emissions data is paramount for both design and implementation, and its availability dictates the scope of the C-ETS. The stakeholder consultative process is critical for effective design, and China is able to build on its extensive experience through the pilot ETSs. Current policies and positions on intensity targets and Clean Development Mechanism (CDM) credits constrain the market design of the C-ETS. Most critical is the nature of the cap. The currently discussed rate-based cap with ex post adjustment is risky. Instead, an absolute, mass-based emissions cap coupled with the conditional use of permits would allow China to maintain flexibility in the carbon market while ensuring a limit on CO 2 emissions

Turning the corner on US power sector CO2 emissions—a 1990–2015 state level analysis

Total CO2 emissions from the United States power sector increased over the period 1990–2005, but peaked soon after, and by 2015 they had declined by 20% compared to 2005. This study analyzes the supply-side drivers of the increasing trend up until 2005 as well as the factors across US states that enabled significant reductions in the following decade. Using index decomposition analysis, we show that the two main factors driving the CO2 decrease were natural gas substituting for coal and petroleum, and large increases in renewable energy generation (primarily wind)—which were responsible for 60% and 30% of the decline respectively since 2005. Both effects were concentrated in states where low natural gas prices or a combination of federal tax credits, state energy policies, decreasing costs of renewables, and advantageous wind conditions drove significant reductions of CO2 emissions—resulting in the overall national emissions decline