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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, NUMBERS 10-11, OCTOBER-NOVEMBER 1996

PROFESSIONAL PUBLICATIONS...
POLICY & ECONOMICS

Item #d96oct13

"Development of a Risk-Hedging CO₂-Emission Policy," L.D.D. Harvey (Dept. Geog., Univ. Toronto, Toronto ON M5S 3G3, Can.; e-mail: harvey@geog.utoronro.ca), Clim. Change, 34(1), Sep. 1996. "Part I: Risks of Unrestrained Emissions," 1-40; "Part II: Risks Associated with Measures to Limit Emissions, Synthesis, and Conclusions," 41-71.

Part I. Argues that a guiding principle in the formulation of global emission targets should be that of minimizing total risk, that is, risks from climate change and risks from measures to limit CO₂ emissions. Many of the risks cannot be quantified in economic terms, and although the approach taken here rests on subjective judgment, it is superior to so-called optimization approaches which pretend that all costs can be cast in economic terms, now and into the future.

Part II. A risk hedging strategy is needed to deal with unforeseen scientific and climatic developments. Concludes that a reasonable near-term (20-30 year) strategy is one which seeks to stabilize global fossil-fuel CO₂ emissions at the present level. This implies an emission reduction of 26% for industrialized countries as a whole and 40-50% for Canada and the U.S., assuming developing country emissions increase by no more than 60%, which in itself will require major assistance from the developing countries.

Item #d96oct14

"PAGE95: An Updated Valuation of the Impacts of Global Warming," E.L. Plambeck (Judge Inst. Mgmt. Studies, Univ. Cambridge, Cambridge, U.K.), C. Hope, Energy Policy, 24(9), 783-793, Sep. 1996.

Attempts to refine estimates of the marginal impact of a ton of carbon emitted to the atmosphere, corresponding in economic terms to the carbon tax level needed to internalize the external costs associated with climate change. The study accounts for new scientific and economic understanding of the cooling effects of sulfate aerosols and ozone depletion, the regional distribution of global warming damages, non-linearity in damage as a function of temperature rise, and the appropriate discount rate. The best estimate is $21 per ton (corresponding to $2 per barrel of petroleum), with a 90% uncertainty range of $10 to $48, a range that is large compared to accepted values in the literature of $5 to $25. Policymakers, when reading any such study of impacts, should carefully consider the treatment of uncertainty and underplayed or unstated assumptions, which this paper shows can have a profound effect on the outcome.

Item #d96oct15

"Exercises in Hedging Against Extreme Consequences of Global Change and the Expected Value of Information," G. Yohe (Dept. Econ., Wesleyan Univ., Middletown CT 06459), Global Environ. Change, 6(2), 87-101, June 1996.

Recent integrated assessments based on a wide range of relatively likely future scenarios have offered little support for immediate, strong measures to offset climate change. Yet, many are uneasy with the "do little early" approach because of an uneasy feeling that scientific research has thus far missed something important. This study attempts to account for such low-probability, high-consequence events, as reflected in extreme values of climate and economic sensitivity to greenhouse gas concentrations. Calculates damage costs as high as $28 per ton of carbon emitted by the year 2020 along a median emissions trajectory.

Item #d96oct16

"Depletion of Fossil Fuels and the Impacts of Global Warming," M. Hoel, S. Kverndokk (Res. Dept., Statistics Norway, POB 8131 Dep., N-0033 Oslo, Norway; e-mail: snk@ssb.no), Resour. & Energy Econ., 18(2), 115-136, June 1996.

Unlike most economic studies of global warming, this one takes into account not only the external effects of fossil fuel combustion, but also the exhaustibility of these resources, especially in relation to the existence of non-polluting technology options. One outcome is that a carbon tax should initially rise, but eventually fall to zero as resources are depleted. Another case considered is when ecological damages are especially sensitive to the speed of climate change; in an extreme case it could even be optimal to subsidize carbon emissions, to avoid future rapid changes in atmospheric carbon levels.

Item #d96oct17

"The Effects of Energy Taxes on Productivity and Employment: The Case of the Netherlands," G.H. Kuper, ibid., 137-159.

Examines quantitatively the "double dividend" hypothesis introduced by Bovenberg and Van der Ploeg: the idea that higher pollution taxes and lower taxes on labor would not only improve the environment but also boost employment. The main conclusion is that shifting taxes from labor toward energy actually reduces economic activity. One important factor in the outcome is that firms spend about 5.5 times as much on labor as they do on energy.

Item #d96oct18

"How Large a Carbon Tax Is Justified by the Secondary Benefits of CO₂ Abatement?" P. Ekins (Dept. Econ., Keele Univ., Keele, Staffs ST5 5BG, UK), ibid., 161-187.

Abatement of CO₂ emissions would bring secondary benefits from accompanying reductions in pollutants other than CO₂. A review of the limited number of estimates of secondary benefits suggests that they are comparable to the gross costs of medium-to-high CO₂ abatement, and are substantially larger than the relatively near term primary benefits of CO₂ abatement. In addition, secondary benefits of abating SO2 alone beyond the limits of the Second Sulfur Protocol substantially offset the costs of a carbon tax. The existence of secondary benefits greatly reinforces the economic case for an aggressive policy of CO₂ abatement.

Item #d96oct19

"Global Warming Policy, Energy and the Chinese Economy," A. Rose (Dept. Energy, Environ. & Mineral Econ., 221 Walker Bldg., Penn. State Univ., Univ. Pk. PA 16802), J. Benavides et al., ibid., 18(1), 31-63, Mar. 1996.

Analyzes the impact of greenhouse gas mitigation policies on the growth of the Chinese economy over the next 30 years. Uses a dynamic linear programming model to simulate five alternative strategies to stabilize CO₂ emissions 20% below projected year 2000 baseline levels, by the year 2025. Focuses on coal use but also considers implications for other fossil fuels, renewable energy, and other air pollutants. Under optimistic assumptions the goal could be achieved with no growth penalty, but only if major technological changes relating to energy conservation and coal displacement are forthcoming.

Item #d96oct20

"The Global Warming Game—Simulations of a CO₂-Reduction Agreement," S. Fankhauser (Ctr. Social & Econ. Res. on the Global Environment, Univ. E. Anglia, Norwich NR4 7TJ, UK), S. Kverndokk, ibid., 18(1), 83-102, Mar. 1996.

Analyzes the incentives for, and the benefits of a possible international cooperation to reduce CO₂ emissions. Negotiations are modeled between five world regions where each country's income depends (via energy inputs) on the amount of CO₂ emitted, but each country is also subject to damages of climate change.

Item #d96oct21

"Towards Integrated Energy and Materials Policies? A Case Study on CO₂ Reduction in the Netherlands," D.J. Gielen (Netherlands Energy Res. Foundation, ECN Policy Studies, POB 1, 1755 ZG Petten, Neth.), Energy Policy, 23(12), 1049-1062, Dec. 1995.

Energy and material flows are closely related, and both strongly influence national energy consumption and CO₂ emissions. This paper uses a case study of the Netherlands to demonstrate how integrating energy and materials studies leads to significant new policy options for energy savings and CO2 emissions reduction. This type of integrated policy crosses the lines of traditional governmental departments, and international trade issues further complicate trade policies. But the significant cost reduction potential should appeal to policy makers.

Item #d96oct22

"Joint Implementation and North-South Cooperation for Climate Change," J.K. Parikh (Indira Gandhi Inst. of Development Research), Intl. Environ. Affairs, 7(1), 22-41, Winter 1995.

Analyzes several factors in the debate over joint implementation (some of them primarily from the point of view of the South), such as cost-effectiveness to the North, sustainable development in the South, fair compensation, carbon-sink projects, links with carbon reduction targets by the North, and effectiveness of global environmental objectives. Concludes that joint implementation should be considered in addition to the developed countries' commitments as only one of the options for containing the emissions of developing countries without compromising their development. Supports a pilot phase of joint implementation, which should be closely monitored.

Item #d96oct23

"The Promise of National Environmental Funds in Developing Countries," K.W. Danish (Temple Univ. School of Law), Intl. Environ. Affairs, 7(2), 150-175, Spr. 1995.

An emerging international challenge is determining how to support in poor countries the development of human and structural resources needed to protect the environment. Traditional approaches to financing development have consistent shortcomings, such as failing to engage the assistance of the full range of recipient country stakeholders. This paper describes an alternative approach. National environmental funds (NEFs) are organizations within a recipient country that can coordinate donations and engage a broad cross-section of the country's stakeholders in managing and disbursing them. The great majority of NEFs have been in existence only since 1991; several are discussed.