There is reasonable hope that the upcoming United Nations Conference on Climate Change in Paris (COP21) will reach a consistent global climate agreement. What makes the negotiations particularly difficult is not economic efficiency, but the equity implications of climate policy. This column presents a framework for incorporating equity concerns into policy design. Building from four equity principles, it reduces the complex problem of international burden sharing to a simple rule tied to a single metric.
Lucas Bretschger, 11 October 2015
Jason Furman, Ron Shadbegian, Jim Stock, 25 February 2015
The cost of delaying climate action has been studied extensively. This column discusses new findings based on a meta-analysis of published model runs. A one-decade delay in addressing climate change would lead to about a 40% increase in the net present value cost of addressing climate change. If anything, the methodology used in this analysis could understate the cost of delay. Uncertainty and the possibility of tipping points provide a motivation for more action as a form of insurance against worse outcomes.
Laura Grigolon, Mathias Reynaert, Frank Verboven, 10 January 2015
Using a rich dataset for the European car markets, this column shows that consumers moderately undervalue future fuel costs. This investment inefficiency is too small to justify upfront car taxes to promote fuel efficient cars. A car tax results in a more fuel efficient vehicle fleet than a fuel tax, but fails to induce high-mileage consumers to substitute to more fuel efficient cars. Once we take this targeting effect into account, fuel taxes turn out to be more effective.
Radek Stefanski, 30 May 2014
No comprehensive database of directly measured fossil-fuel subsidies exists at the international or the sub-national level, yet subsidies may be crucial drivers of global carbon emissions. This column describes a novel method for inferring carbon subsidies by examining country-specific patterns in carbon emission-to-output ratios, known as emission intensities. Calculations for 170 nations from 1980-2010 reveal that fossil-fuel price distortions are enormous, increasing, and often hidden. These subsidies contributed importantly to increasing emissions and lower growth.
Richard S J Tol, 25 April 2014
The IPCC’s Fifth Assessment Report estimates lower costs of climate change and higher costs of abatement than the Stern Review. However, current UN negotiations focus on stabilising atmospheric concentrations of greenhouse gases at even lower levels than recommended by Stern. This column argues that, given realistic estimates of the rate at which people discount the future, the UN’s target is probably too stringent. Moreover, since real-world climate policy is far from the ideal of a uniform carbon price, the costs of emission reduction are likely to be much higher than the IPCC’s estimates.
Carlo Carraro, Valentina Bosetti, Massimo Tavoni, Thomas F. Rutherford, Richard Richels, Geoffrey Blanford, 07 December 2009
China and other key developing countries must participate for any global carbon deal to succeed, but they make a strong case for a free pass. What can be done? This column says that they could commit now to accept pre-specified future emission reduction targets in order to effectively address these concerns.
Jaime de Melo, Nicole A. Mathys, Jean-Marie Grether, 28 November 2009
The “pollution haven” view asserts that globalisation draws industries to countries with lax environmental regulation. This column presents evidence that that the major polluting industries are not very footloose and that changes in emissions through the relocation of activities are relatively small. The growth of trade itself, however, is likely to contribute to growing emissions associated with transport.
Jean-Marie Grether, Nicole A. Mathys, 21 November 2009
What is the geographical distribution of CO2 emissions? This column identifies the Earth’s “polluting centre of gravity” since 1970. It is heading east faster than GDP, which suggests that Asian production is getting more carbon-intensive.
Jisun Kim, Gary Clyde Hufbauer, 17 October 2008
US climate change policy seems likely to include border measures to address competitiveness concerns. This column warns against such measures, arguing that they will do little to protect US industries, expose the US to retaliatory trade restrictions, and significantly burden the global trading system. The US would be better served by addressing its competitiveness concerns in international negotiations.
Valentina Bosetti, Carlo Carraro, Alessandra Sgobbi, Massimo Tavoni, 14 October 2008
The future of climate change policy is very uncertain due to economic, environmental, and political complexities. This column quantifies the economic cost of delaying action to reduce carbon emissions and argues that the best strategy is to hedge our bets by adopting a mild emissions reduction policy now rather than naïvely waiting for the uncertainties to be resolved.
Arik Levinson, 02 January 2008
Since the 1970s, US manufacturing output has risen by 70% but air pollution has fallen by 58%. Was this due to improved abatement technology or shifting dirty production abroad?
Nicholas Stern, 30 November 2007
Targets and trading must be at the heart of a global agreement to reduce greenhouse gas emissions, according to Sir Nicholas Stern delivering the Royal Economic Society’s 2007 annual public lecture today, ahead of next week’s world summit on climate change in Bali.
Jeffrey Frankel, 25 June 2007
Quantitative emission targets for the 21st century must be set sequentially, a decade at a time, within a long-term framework. A good analogy is the GATT, which produced 50 years of trade liberalisation, the specifics of which the original signers could only have guessed.