The European Union's Emissions Trading Scheme (EU ETS) is so far the largest emissions trading system in the world. A rigorous ex post empirical analysis of the scheme is presented. The effect of the scheme on firms' investment decisions in carbon-reducing technologies is analysed by using detailed firm-level data from Swedish industry. Based on difference-in-difference estimation as well as a before–after difference estimation, the results reveal that the EU ETS has not had a significant effect on firms’ decisions to invest in carbon-mitigating technologies. However, although the EU ETS appears to have no direct effect on investments, it is too early to dismiss the system. Consideration is given to how the EU ETS can realize its potential to become an effective tool in the EU climate and energy policy portfolio.
The Impact of Climate Change on Net Revenue and Food Adequacy of Subsistence Farming Households in South Africa
This paper examines the impact of climate change on poor households across South Africa who practice subsistence farming to supplement their household income and dietary requirements. We consider three production systems: specialized crops, livestock and mixed crop-livestock farming.
Weather fluctuations tend to be as important as climate change in farmers’ decision making in countries such as Ethiopia that have virtually no weather insurance. This paper assesses the distinct impacts of weather and climate change measures on agricultural productivity of households, measured in terms of crop revenue, in the Amhara region of Ethiopia.
The bulk of existing work on the statistical forecasting of air quality is based on either neural networks or linear regressions, which are both subject to important drawbacks.
Financial insurance for extreme events can play an important role in hedging against the implications of climate change. This paper combines a comprehensive estimation strategy and a unique panel dataset to study the role of financial insurance in farmers' welfare under uncertainty.
This paper provides the first county-level analysis of the impacts of weather variability on rice yield in China, by compiling a unique panel on irrigated single-season rice and daily weather data. We found that temperature and solar radiation had statistically significant impacts on rice yield during the vegetative and ripening stages, while the effects of rainfall on yield were not significant.
On 31 March, the Intergovernmental Panel on Climate Change (IPCC) released its latest report on the impacts of climate change on humans and ecosystems (see go.nature.com/ad5v1b). These are real risks that need to be accounted for in planning for adaptation and mitigation. Pricing the risks with integrated models of physics and economics lets their costs be compared to those of limiting climate change or investing in greater resilience.
Biofuels Can Have a Win-win Outcome that Improves Smallholder Productivity and Increases Household Welfare
Rising prices of fossil fuels, together with apprehension about the environmental harm created by them, have resulted in increasing efforts to search for alternative energy sources such as biofuels. Biofuels production is still a debatable issue regarding the opportunities it creates and the challenges it poses.
Adaptation to climate change in Sub-Saharan agriculture: assessing the evidence and rethinking the drivers
In this paper, after a review of the evolution of the literature on climate change economics in agriculture, I present some evidence of the impact of different moments of the distribution of rainfall on farmers risk aversion.
Managing Environmental Risk in Presence of Climate Change: The Role of Adaptation in the Nile Basin of Ethiopia
This study investigates the impact of climate change adaptation on farm households’ downside risk exposure in the Nile Basin of Ethiopia. The analysis relies on a moment-based specification of the stochastic production function. We use an empirical strategy that accounts for the heterogeneity in the decision on whether to adapt or not, and for unobservable characteristics of farmers and their farm.
Except for the lowlands and pastoralist areas, mixed crop-livestock farming is the dominant farming type in Ethiopia. However, there have been few attempts to look into the economic impacts of climate change in the context of Ethiopia. Particularly, the role of livestock was disregarded in the previous studies.
The introduction of a price on CO2 is expected to be more efficient than prescriptive regulation. It also instantiates substantial economic value. Initially, programs allocated this value to incumbent firms (grandfathering), but the growing movement toward auctioning or emissions fees makes carbon revenues into a payment for environmental services. This paper asks to whom should this payment accrue?
This paper studies how different NOx abatement technologies have diffused under the Swedish system of refunded emissions charges and analyzes the determinants of the time to adoption. The policy, under which the charge revenues are refunded back to the regulated firms in proportion to energy output, was explicitly designed to affect investment in NOx reducing technologies.
Uncertainty about the future is an important determinant of well-being, especially in developing countries where financial markets and other market failures result in ineffective insurance mechanisms. However, separating the effects of future uncertainty from realised events, and then measuring the impact of uncertainty on utility, presents a number of empirical challenges.
Evaluation of potential impacts and vulnerability reduction of fisheries to climate change: the case of the main fisheries of central-south Chile - (in spanish)
Chapter in book "Climate change, fisheries and aquaculture in latin America: Potential impacts and challenges for adaptation (In Spanish)" Editors: Doris Soto and Renato A. Quiñones, FAO Acts of Fisheries and Aquaculture Nº29, 335 pp., FAO, Rome, Italy.
Ocean Food-Web Patrol – Climate Effects: Reducing Targeted Uncertainties With An Interactive Network
The project has the goal of providing more comprehensive and reliable information to climate scientists and politicians who must make decisions about climate actions. It will rely on collecting existing knowledge from databases and will generate new knowledge where gaps are identified.
The authors analyze the impact of different adaptation strategies on crop net revenues in the Nile Basin of Ethiopia and they estimate a multinomial endogenous switching regression model of climate change adaptation and crop net revenues and implement a counterfactual analysis.
The general objective is to estimate, from an interdisciplinary perspective, the economic and social impact of changes in water availability due to climate change. This objective involves quantifying the relationship between changes in water availability due to climate change, and population growth, land use changes, carbon sequestration and other social and environmental stressors that affect the quality of life of people relaying on water provision in a geographical region.
A driving restriction policy, as a control-and-command rationing measure, is a politically acceptable policy tool to address traffic congestion and air pollution in some countries and cities. Beijing was the first city in China to implement this policy. A one-day-a-week driving restriction scheme was expected to take 20 percent of cars off the road every weekday.
REDD (reduced emissions from deforestation and degradation) aims to slow carbon releases caused by forest disturbance by making payments conditional on forest quality over time. Like earlier policies to slow deforestation, REDD must change the behaviour of forest degrading actors.
This article is a good example of EfDs mission: combining policy advice and research. It is based on a consultancy for the US EPA who asked Maureen Cropper to lead a process with a panel of experts to help advise them on what discount rate to use for climate change – and specifically about falling discount rates. This paper (and a longer one in REEP that is forthcoming) is a byproduct of that work.
We examine the choice of policy instruments (price, quantity or a mix of the two) when two pollutants are regulated and firms’ abatement costs are private information.
This study examines the linkage between the profitability of firms measured by return on assets (ROA) and environmental performance measured by eco-efficiency and also the impact of a good environmental management system (EMS) on profitability and eco-efficiency of firms.
As an international metropolitan area undergoing rapid development, Beijing is facing a sharp rise in the volume of motor vehicles and mobility, which has become the major contributor to the air pollution in this city.
Hypothetical bias is one of the main issues bedeviling the field of nonmarket valuation. The general criticism is that survey responses reflect how people would like to behave, rather than how they actually behave. In our study of climate change and carbon emissions reductions, based on the increasing bulk of evidence from psychology and economics regarding the effects of making promises, we investigate the effect of an oath script in a contingent valuation survey.
Neoclassical realism and international climate change politics: moral imperative and political constraint in international climate finance
In this article, I present a neoclassical realist theory of climate change politics that challenges the idea that cooperation on climate change is compelled alone by shared norms and interests emanating from the international level and questions if instead material factors also play a significant constraining role.
REDD+ (Reduced Emissions from Deforestation and Forest Degradation, “plus” afforestration) is a tool that supports forest carbon-enhancing approaches in the developing world in order to mitigate and hopefully reverse climate change. A key issue within REDD+ is to appropriately bring in the almost 25% of developing country forests that are effectively controlled by communities.
REDD (Reduced Emissions from Deforestation and Degradation) aims to slow carbon releases caused by forest disturbance by making payments conditional on forest quality over time. Like earlier policies to slow deforestation, REDD must change the behaviour of forest degraders.
Water Resources Planning under Climate Change A “Real Options” Application to Investment Planning in the Blue Nile
This article develops a “real options” approach for planning new water resources infrastructure investments and their operating strategies in a world of climate change uncertainty. The approach is illustrated with an example: investments in large new multipurpose dam alternatives along the Blue Nile in Ethiopia.
Governance, Location and Avoided Deforestation from Protected Areas: Greater Restrictions Can Have Lower Impact, Due to Differences in Location
For Acre, in the Brazilian Amazon, we find that protection types with differences in governance, including different constraints on local economic development, also differ in their locations. Taking this into account, we estimate the deforestation impacts of these protection types that feature different levels of restrictions. To avoid bias, we compare these protected locations with unprotected locations that are similar in their characteristics relevant for deforestation.
A CO2 tax assures that different fossil fuels are taxed in a neutral way according to actual CO2 emissions. The Swedish experience can be summarized by increased tax levels over time and steps taken towards a more uniform national price on fossil CO2. Moreover, the CO2 tax base is only moderately elastic to price changes (particularly in the short run) when it comes to petrol and diesel implying quite stable tax revenues. On the other hand, the CO2 tax seems to have had a major impact on fuels used for heating purposes, where biofuels and other non-fossil energy sources (such as energy from waste and surplus heat from industrial processes) have significantly increased their shares.
Discounting has the dubious distinction of being the most controversial issue in social cost-benefit analysis. This is largely because choosing the discount rate will often dominate other choices a modeler makes. For example, consider how we might estimate future damages from greenhouse gas emissions.
Using a sequential discrete choice experiment, we investigate preferences for distributing the economic burden of reducing CO2 emissions in the two largest CO2-emitting countries: the United States and China.
Resilience to specified kinds of disasters is an active area of research and practice. However, rare or unprecedented disturbances that are unusually intense or extensive require a more broad-spectrum type of resilience.
So far Africa has benefited little from climate finance as compared to other continents with emerging economies. Climate projects are distributed unevenly across regions as well as among developing countries. This is partly due to lack of trained manpower in some of these countries and too restrictive criteria of most of the climate fund projects and programs that are designed to the disadvantage of Africa.
Cooperation and Climate Change Can Communication Facilitate the Provision of Public Goods in Heterogeneous Settings?
International and domestic efforts to reduce greenhouse gas emissions require a coordinated effort from heterogeneous actors. This experiment uses a public good game with a climate change framing to consider whether cooperation is possible in just such a climate change context.
Climate change represents a serious threat to the economic growth potential in low income countries. Instead of investing in growth, they may be drawn into strife and conflict. Climate change and the global politics to deal with it, could however also present a number of interesting opportunities for developing countries.
This paper presents an empirical analysis of the role of different climate change adaptation strategies in supporting food productivity in Ethiopia. The analysis relies on unique primary survey data on 1000 farms producing cereal crops in the Nile Basin, Ethiopia.
We analyze the interaction between a reliable source of electricity production and intermittentsources such as wind or solar power. We first characterize the optimal energy mix, emphasizing the availability of the intermittentsource as a major parameter for the optimal investment in capacity.
This Brief presents a framework that can be used to assess the potential impact of Payments for Environmental Services (PES) schemes.
Incentives, Impacts, and Behavioral issues in the context of Payment for Ecosystem Services programs: lessons for REDD+
A framework that can be used to assess the potential impact of Payments for Environmental Services (PES) schemes.
What are the impacts of climate change on the Ethiopian economy?
Deforestation and forest degradation are estimated to account for between 12 percent and 20 percent of annual greenhouse gas emissions. These activities, largely in the developing world, released about 5.8 Gt per year in the 1990s, which was more than all forms of transport combined. The idea behind REDD+ is that payments for sequestering carbon can tip the economic balance away from loss of forests and in the process yield climate benefits.
How does uncertainty about “dangerous” climate change affect the prospects for international cooperation? Climate negotiations usually are depicted as a prisoners’ dilemma game; collectively, countries are better off reducing their emissions, but self-interest impels them to keep on emitting. We provide experimental evidence, grounded in an analytical framework, showing that the fear of crossing a dangerous threshold can turn climate negotiations into a coordination game, making collective action to avoid a dangerous threshold virtually assured.
Protecting forests, biodiversity, and the climate: predicting policy impact to improve policy choice
We argue for integrating the consideration of location in policy planning in three ways, in order to help to predict policy impacts on deforestation and, thereby, improve policy choices.
Climate change is one of the main problems affecting the global environment which is critical to human welfare. Although the least developed countries (LDCs) in general and Africa in particular contribute the least to the problem, they are the most affected, with reasons varying from lacking resources to cope, immense poverty, and that many LDCs are located in regions where severe weather will hit the most.
Climate change and escalating environmental degradation risk becoming key constraints to economic growth and human development. Poor women and men in developing and transitional countries are disproportionally affected by pollution, land degradation and other environmental problems due to high dependence on natural resources and high exposure to risks. Managing the environment is important for the well-being of all citizens, particularly for the least well-off.
Estimating the Impact of Climate Change on Agriculture in Low-Income Countries: Household Level Evidence from the Nile Basin, Ethiopia
This paper presents an empirical analysis of the impact of climate change on agriculture in a typical developing country. The economic implications of climate change are estimated by using both a farm productivity and a Ricardian framework.
The economics of climate change and the various measures that should be implemented to reduce future damages are highly tied to the use of cost-benefit analysis. Traditional approaches ignore the fact that environmental amenities do not experience the same growth rate as do most of the sectors in the economy, which leads to changing relative prices. Uncertainty should also be considered, especially when one is conducting cost-benefit analysis involving the long-run damages from climate change. This article reviews some theoretical approaches to the economics of discounting and discusses issues associated with unbalanced growth, uncertainty, and spatial discounting.
China is increasingly suffering from ‘growing pains’ of severe environmental challenges arising during the past decades’ economic boom (Fu et al, 2007; Liu and Diamond, 2008). While this has been widely discussed, more attention and effort has been focused on the problems directly resulting from urbanization and industrialization, such as growing greenhouse gas emissions and worsening urban air and water quality