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Climate Change

2014-08-28

Why the EU ETS needs reforming: an empirical analysis of the impact on company investments

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.

2014-06-21

Crop Insurance as a Strategy for Adapting to Climate Change

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.

2014-06-04

The Economic Impact of Weather Variability on China’s Rice Sector

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.

2014-04-28

Global warming: Improve economic models of climate change

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.

2014-04-21

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.

2014-03-01

Two world views on carbon revenues

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?

2014-02-18

Diffusion of NOx Abatement Technologies in Sweden

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.

2014-01-29

Optimal Expectations and the Welfare Cost of Climate Variability

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.

2013-09-01

Welfare and Economic Evaluation of Climatic Change Impacts on Water Resources at River Basin Scale

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.

2013-09-01

Will a Driving Restriction Policy Reduce Car Trips? A Case Study of Beijing, China

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.

2013-07-30

Determining Benefits and Costs for Future Generations

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.

2013-05-30

Travel Mode Choice and Impact of Fuel Tax in Beijing

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.

2013-05-13

The truth, the whole truth, and nothing but the truth—A multiple country test of an oath script

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.

2013-04-24

Community Controlled Forests, Carbon Sequestration and REDD+ Some Evidence from Ethiopia

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.

2013-03-01

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.

2013-03-01

Sweden’s CO2 tax and taxation reform experiences

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.

2013-02-21

Putting a price on the future of our children and grandchildren

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.

2012-11-28

    General Resilience to Cope with Extreme Events

    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.

    2012-11-15

    Harnessing Climate Finance for Climate Protection and Sustainable Development in Africa

    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.

    2012-11-13

      Electricity provision with intermittent sources of energy

      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.

      2012-10-18

      REDD+ and Community-Controlled Forests in Low-Income Countries Any Hope for a Linkage?

      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.

      2012-10-15

      Climate negotiations under scientific uncertainty

      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.

      2012-09-15

      Climate Conventions and Africa/Ethiopia

      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.

      2012-09-15

        The role of governance for improved environmental outcomes

        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.

        2012-08-15

        Discounting: Unbalanced Growth, Uncertainty, and Spatial Considerations

        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.

        2012-08-15

        China’s environmental challenges going rural and west

        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

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