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Global Climate Change Digest
A Guide to Information on Greenhouse Gases and Ozone Depletion
Published July 1988 through June 1999

FROM VOLUME 9, NUMBER 8, AUGUST 1996

PROFESSIONAL PUBLICATIONS...
POLICY AND ECONOMICS

Item #d96aug20

"Energy, Carbon Dioxide Emissions, Carbon Taxes and the Chinese Economy," Z.X. Zhang (Univ. Wageningen, Vakgroep Staathiushoudkunde, Hollandesweg 1, 6706 KN Wageningen, Neth.), Intereconomics, 31(4), 197-208, July-Aug. 1996.

Given China's potential importance as a source of CO₂ emissions, advocates of control call for substantial efforts there. However, the Chinese authorities have argued that they must receive substantial international aid for this purpose. This paper explains these positions based on characteristics of the Chinese energy system and by analyzing the economic implications of possible future CO₂ emissions limits in China. Advocates funding through joint implementation as a near-term solution that would effectively limit CO₂ emissions from China, and also lower the costs of undertaking carbon abatement in the industrialized countries.

Item #d96aug21

Two items from Energy Policy, 24(7), July 1996, a special issue on valuing air pollution damage:

"Climate Change Costs: Recent Advancements in the Economic Assessment," S. Fankhauser (PRINCE, Global Environ. Facility, 1818 H St. NW, Washington DC 20433), R.S.J. Tol, 665-673. The first generation of estimates of the damage costs of climate change is being substantially revised and complemented, without, as yet, invalidating earlier results. Newer studies increasingly emphasize adaptation, variability, extreme events, other (non-climatic) stress factors and the need for integrated assessment of damages. As a result, the market impacts in developed countries has tended to fall, and non-market impacts have become increasingly important. Lists five crucial research topics for the future.

"Air Pollution and Green Accounts," K. Hamilton (CSERGE, Univ. College, Gower St., London WC1E 6BT, UK), G. Atkinson, 675-684. Presents a theoretical approach to the treatment of pollution and its abatement in national accounts, and a first attempt to apply this approach to the European OECD countries. The empirical results are presented in the context of previously defined scheme in which "genuine savings" provide an indicator of sustainable development. Figures developed for the UK and Europe show that several countries had negative genuine savings during the 1980s.

Item #d96aug22

"Joint Implementation from a Public Choice Perspective," A. Michaelowa (Hamburg Inst. for Econ. Res. (HWWA), Neuer Jungfernstieg 21, 20347 Hamburg, Ger.), S. Greiner, World Resour. Rev., 8(2), 231-252, June 1996.

Joint implementation should facilitate greenhouse gas control at lower cost, but why is the concept encountering so many political difficulties? This paper analyzes the efficiencies of joint implementation, and then tries to explain the obstacles from a public choice perspective. Discusses the roles of different countries and their interest groups, then proposes a regime that takes into account both efficiency and public choice, as a real-world, second-best solution.

Item #d96aug23

"Fair Sharing of Greenhouse Gas Burdens," M.A. Ridgley (Dept. Geog., Univ. Hawaii at Manoa, 2424 Maile Way, Honolulu HI 96822), Energy Policy, 24(6), 517-529, June 1996.

Describes an approach for determining the relative accountability that each region and individual nation should bear, based on as many measures of equity that proponents want to support. However, each equity indicator yields a different profile of accountability, so multicriterion decision methods are proposed to achieve a compromise profile. The method is illustrated by applying 11 different equity indicators to 11 multinational regions.

Item #d96aug24

"Time Preference, Abatement Costs and International Climate Policy: An Appraisal of IPCC 1995," N. Khanna (Dept. Agric., Resource & Managerial Econ., Cornell Univ., Ithaca NY 14853), D. Chapman, Contemporary Econ. Policy, 14(2), 56-66, Apr. 1996.

Appraises current economic methods used in analyzing time preference and discounting, abatement costs, and value of life estimates, in the context of the draft 1995 report of Working Group III of the IPCC. Argues that the currently estimated disparity in the cost of greenhouse gas abatement between developed and developing countries may be inaccurate.

Item #d96aug25

"A Case Study in Pollution Markets: Dismal Science vs. Dismal Reality," J.V. Hall (Inst. for Econ. & Environ. Studies, California State Univ., Fullerton CA 92634), A.L. Walton, ibid., 67-78.

Describes the theoretical advantages of pollution trading, and clearly identifies three criteria that acceptable economic incentive-based programs must meet. Examines the experience of the existing Regional Clean Air Incentives Market (RECLAIM) program in Southern California, which is expected to reduce pollution control costs relative to direct regulation by 50% over a decade.

Item #d96aug26

"The SO2 Emissions Trading Program: Cost Savings Without Allowance Trades," D. Burtraw (Resources for the Future, 1616 P St. NW, Washington DC 20036; e-mail: burtraw@rff.org), ibid., 79-94.

Experience with the emissions trading program established under Title IV of the 1990 amendments to the U.S. Clean Air Act show that relatively little allowance trading has occurred, yet the costs of compliance have been much less than anticipated. This paper addresses this paradox: that the allowance trading program may not require (very much) trading in order to be successful.

Item #d96aug27

"Climatic Risks and Rational Actors," C.C. Jaeger (Swiss Fed. Inst. for Environ. Sci. & Technol. (EAWAG), Ueberlandstr. 133, 8600 Duebendorf, Switz.), B. Kasemir, Global Environ. Change, 6(1), 23-36, Apr. 1996.

The present state of research indicates that substantial reductions in greenhouse gas emissions can only be achieved by introducing a very high greenhouse tax. Such a measure is unlikely to be realized. A way out of this impasse can be found if a misleading assumption is corrected: that a system involving a multitude of rational actors operating on interdependent markets has only one equilibrium. The possibility of multiple equilibria implies that large reductions of carbon emissions could be feasible without massive long-run increases of fossil fuel prices.

Item #d96aug28

"Rolling Dice for the Future of the Planet," D. Chapman (Dept. Agric., Resource & Managerial Econ., Cornell Univ., Ithaca NY 14853), V. Suri, S.G. Hall, Contemporary Econ. Policy, 13(3), 1 ff., July 1995.

In an influential paper published in Science in 1992, Nordhaus employed an integrated climate-economy model to determine that optimizing climate change policy requires low levels of controls on greenhouse gas emissions. This paper takes the same approach, but using different though equally plausible parameters finds a much higher level of emission control to be needed.

Item #d96aug29

"Markets and the Environment: A Critical Reappraisal," F.L. Smith Jr. (Competitive Enterprise Inst., Washington, D.C.), ibid., 62 ff.

Environmental concerns have been addressed so far in the same manner that socialist nations sought to address broader economic concerns: a political entity determines the priority by which goals are satisfied with limited financial resources. Argues for greater attention to environmental quality, but concludes that we can better achieve it by integrating ecological resources into the economy via "ecological privatization," a property rights approach to environmental policy.

Item #d96aug30

"Improving Environmental Policy: Are Markets the Solution?" W.M. Hanemann (Dept. Agric. & Resour. Econ., Univ. California, Berkeley, Calif.), ibid., 74 ff.

Market mechanisms are only part of the solution to improving environmental policy, and they do not necessarily resolve what are perhaps the most troublesome aspects of environmental regulation. This theme is explored by emphasizing two fundamental components of environmental policy—the decision on the aggregate level of abatement needed, and the decision on how this aggregate is to be allocated among individual polluters.