Climate Change Economics

We employ a numerical economy-wide model of India with energy sector detail to evaluate the impact of achieving India’s commitments to the Paris Climate Agreement. We simulate targets for reducing CO₂ emissions intensity of GDP via an economy-wide CO₂ price and for increasing non-fossil electricity capacity via a Renewable Portfolio Standard. We find that compared with the no policy scenario in 2030, the average cost per unit of emissions reduced is lowest under a CO₂ pricing regime. A pure RPS costs more than 10 times the cost of a CO₂ pricing regime. Projected electricity demand in 2030 decreases by 8% under the CO₂ price, while introducing an RPS further suppresses electricity demand. Importantly, a reduction in the costs of wind and solar power induced by favorable policies may result in cost convergence across instruments, paving the way for more aggressive decarbonization policies in the future.

Using an economy-wide model, we evaluate the impact of policies to meet South Korea’s Paris pledge to reduce greenhouse gas (GHG) emissions by 37% relative those under business as usual (BAU) in 2030. Simulated BAU emissions in 2030 are 840.8 million metric tons (Mt) of carbon dioxide equivalent (CO₂e), indicating that economy-wide emissions should be constrained to 529.7 MtCO₂e. Under South Korea’s Emissions Trading System (KETS) and fuel economy standards, a 2030 carbon price of $88/tCO₂e is needed to meet this goal. Without considering benefits from avoided climate damages, these policies reduce 2030 GDP by $21.5 billion (1.0%) and consumer welfare by 8.1 billion (0.7%). Declines in sectoral production are largest for fossil-based energy sectors and chemical, rubber and plastic products, and iron and steel sectors.

We investigate whether global cooperation on emissions abatement can be improved if asymmetric countries agree to sign one out of several environmental agreements. The analysis is based on a two-stage game theoretical model. Conditions for stable coalitions and the resulting global emissions are determined. We allow for multiple coalitions with all countries being different, and analyze the effects in the cases of increasing marginal damages from emissions and of decreasing marginal benefits of emissions. We find that in the case of decreasing marginal benefits and constant marginal damages, admitting multiple coalitions increases the number of cooperating countries and reduces emissions (compared to the standard case with a single coalition). For increasing marginal damages and constant marginal benefits, however, multiple stable coalitions cannot coexist. If both damages and benefits are nonlinear, admitting multiple coalitions can decrease emissions. The paper thus contributes to the emerging discussion on the scope and limits of climate clubs.

Introduction: Climate change has emerged as a major threat to Bangladesh. Higher and fluctuating temperatures and changes in rainfall caused by climate change and extreme weather events have reduced crop production. A better understanding of the local dimensions of vulnerability is therefore essential to develop appropriate adaptation measures that can alleviate these adverse impacts. Purpose and methods: The main purpose of this study was to identify the determinants of Aman rice farmers’ choice of adaptation strategies to climate change and weather in Khulna district, Bangladesh. About 100 farm households susceptible to salinity intrusion, extreme temperatures and drought were surveyed, and these data were supplemented by major climate data of the district for 65 years (1948–2013). A binary logistic regression was then utilized to estimate the factors that influence households’ choice of adaptation strategies. Results and Conclusions: About 97% of farmers perceived that the climate had changed over the past 30 years while only 3% did not. Further, 97% believed that rainfall had decreased and reduced rice production, yet the data show this not to be the case with a significant increase in rainfall observed in the area in the study period. About 89% of farmers have undertaken some form(s) of adaptation and they were further asked about their main adaptation type. Family size, annual income, farmer-to-farmer extension and access to subsidies have a positive and significant impact on rice farmers’ adaptation strategies to climate and weather change effects. Farm size and credit access had a negative and significant impact on adaptation. Four variables: age, education, household assets and occupation were not statistically significant in explaining adaption strategies. The chief adaptation strategies of farmers are cultivation of salinity-tolerant rice, rice variety switching, replanting of rice, changing planting dates, conversion of rice paddy to fish production and use of different crop varieties in alternate years.