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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 10, NUMBER 7, JULY 1997

PROFESSIONAL PUBLICATIONS...
POLICY & ECONOMICS

Item #d97jul6

"Targets for Stabilization." (See PROF. PUBS./OF GEN. INTEREST, this Global Climate Change Digest issue--July 1997.)

Item #d97jul7

"Crafting the Next Generation of Market-Based Environmental Tools," J.B. Hockenstein (McKinsey & Co.), R.N. Stavins, B.W. Whitehead, Environment, 39(4), 12-20, 30-33, May 1997.

In spite of a history of false starts and unmet expectations, market-based instruments such as tradeable emissions permits remain attractive tools for environmental problems, but policymakers and legislators need to work together to develop effective applications. Discusses improvements to program design, application at the state and local level, implementing new federal programs, and changing the basic approach to regulation.

Item #d97jul8

"Assessing the DICE Model: Uncertainty Associated with the Emission and Retention of Greenhouse Gases," R.K. Kaufmann (Ctr. Energy & Environ. Studies, Boston Univ., 675 Commonwealth Ave., Boston MA 02215; e-mail: kaufmann@bu.edu), Clim. Change, 35(4), 435-448, Apr. 1997.

This analysis of the DICE model, a widely accepted integrated assessment model of climate change, shows that it contains unsupported assumptions, simple extrapolations, and mis-specifications that cause it to understate the rate at which economic activity emits greenhouse gases and the rate at which the atmosphere retains greenhouse gases. After applying simple fixes for these problems, the economic impact of climate change increases several fold, as does the uncertainty of the estimate. Results indicate that considerable scientific and economic research is needed before the threat of climate change can be dismissed with any degree of certainty.

Item #d97jul9

"Strategic Risk Management: A Case Study of Climate Change," T. Beer (CSIRO, PB1 Aspendale, Vic. 3195, Australia), World Resource Review, 9(1), 113-126, Mar. 1997.

Australia is the continent most subject to the type of hydrological extremes that could result from global warming. This paper reviews risk management techniques in the context of a risk management framework recently established for the Australian states. It then discusses climate change as a case study. Concludes that problems of valuation over time scales ranging from decades to centuries make it difficult to apply cost-benefit analysis.

Item #d97jul10

"Seeking a Quick Fix on GHG Emissions Is a High-Risk Game-Hasty Climate Change Mitigation Measures Must Be Avoided," OPEC Bull., 28(2), 3, Feb. 1997.

Editorial comment that delaying drastic steps to mitigate climate change could provide a window of opportunity for "greener" technologies to mature, and for expanding natural sinks such as forests, reducing mitigation costs up to 90%.

Item #d97jul11

"Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," C. Böhringer (Inst. Energiewirtschaft & Rationelle Energieeanwendung, Univ. Stuttgart, Ger.; e-mail: cb@iers1.energietechnik.uni-stuttgart.de), T.F. Rutherford, J. Environ. Econ. & Mgmt., 32(2), 189-203, 1997.

To save jobs by maintaining international competitiveness, most CO₂ taxation schemes include exemptions for energy- and export-intensive industries. This paper applies a static general equilibrium model to West Germany to show that such compromises are costly. Proposes an alternative instrument, an uniform carbon tax with wage subsidy, which achieves an identical level of national emissions and employment at a fraction of the cost.

Item #d97jul12

"Monitoring Developments in the Field of Energy Use and the Environment," OPEC Bull., 28(2), 11-12, Feb. 1997.

Excerpts the latest Quarterly Environmental Report of OPEC's Environmental Task Force, which updates the status of the climate convention and related topics such as joint implementation and carbon taxes.

Item #d97jul13

"Discounting and Distributional Considerations in the Context of Global Warming," C. Azar (Inst. Physical Resour. Theory, Chalmers Univ. Technol., Göteborg Univ., 412 96 Göteborg, Swed.; e-mail: frtca@fy.chalmers.se), T. Sterner, Ecol. Economics, 19(2), 169-184, Nov. 1996.

Reviews the economics of global warming with special emphasis on the discount rate and how costs in poor and rich nations are aggregated into a global cost estimate. Determines a marginal cost of CO₂ emissions of $260-$590 per ton for a time horizon of 300-1000 years. This estimate is large enough to justify significant reductions in CO₂ emissions on purely economic grounds, and is 50-100 times larger than the estimate of Nordhaus from his DICE model.

Item #d97jul14

"Welfare Effects of Emission Taxes in Norway," J. Aasness (Research Dept., Statistics Norway, POB 3131, Dep., N-0033 Oslo, Norway), T. Bye, H.T. Mysen, Energy Economics, 18(4), 335-346, Oct. 1996.

Uses an empirical general equilibrium model of the Norwegian economy to analyze the welfare effects of introducing a CO₂ tax aimed at stabilizing emissions at the 1990 level in 2020. The tax reduces gross domestic product, but increases net national real disposable income and private consumption because some of the tax is paid by foreigners through exports. Poor households are less favorably affected than rich ones.

Item #d97jul15

"The Damage Cost of Climate Change: Towards a Dynamic Representation," R.S.J. Tol (Inst. Environ. Studies, Vrije Univ., De Boelelaan 1115, 1081 HV Amsterdam, Neth.; e-mail: richard.tol@ivm.vu.nl), Ecol. Economics, 19(1), 67-90, Oct. 1996.

Evaluates the state of the art of estimating socio-economic damage costs of climate change, and attempts to take it a few steps further by incorporating the dynamics of socio-economic change with regard to agriculture, migration, and the valuation of intangible losses. Presents a damage cost model in the Appendix.

Item #d97jul16

"Indices for Comparing Greenhouse Gas Emissions: Integrating Science and Economics," M. Kandlikar (Dept. Eng. & Public Policy, Carnegie Mellon Univ., Pittsburgh PA 15213), Energy Economics, 18(4), 265-281, Oct. 1996.

Uses an optimal control approach to determine greenhouse gas indices for methane, nitrous oxide and HCFC-22, and makes several qualitative observations regarding the dependence of trace gas indices on the scientific and economic uncertainties involved in climate change policy.

Item #d97jul17

"An Agenda for the Design and Study of International Environmental Agreements," A.A. Batabyal (Dept. Econ., Utah State Univ., Logan UT 84322; e-mail: batabyal@b202.usu.edu), Ecol. Economics, 19(1), 3-9, Oct. 1996.

Proposes that the question of designing international environmental agreements be posed as a problem in mechanical design, allowing the use of the theory of common agency and the theory of hierarchies to generate interesting new insights.

Item #d97jul18

"Regulatory Taxation of Fossil Fuels: Theory and Policy," D.J. Wolfson (Netherlands Scientific Council for Govt. Policy (WRR), POB 20004, 2500 EA The Hague, Neth.; e-mail: postmaster@wrr.nl), C.C. Koopmans, Ecol. Economics, 19(1), 55-65, Oct. 1996.

Argues for the introduction of a tax on fossil fuels, offering a unique approach that brings together three crucial elements: (1) ways of dealing with the uncertainties involved in setting environmental goals; (2) methods for modeling the impacts and unintended consequences of fiscal measures; and (3) ideas on how to generate national and international acceptance of the policies.

Item #d97jul19

"Fiscal Policy and Greenhouse Gases: The Case of the Netherlands," F. Laroui, M.J. van Leeuwen (Foundation for Econ. Res. (SEO), Univ. Amsterdam, Roetersstr. 11, 1018 WB Amsterdam, Neth.), Ecol. Economics, 18(3), 231-241, Sep. 1996.

Reviews recent studies, papers and reports to give the flavor of the debate on fiscal policy and the environment since the mid-1980s, when the Netherlands adopted a more integrated approach to environmental policy. Then discusses the actual outcome of this debate, especially the combined carbon/energy tax introduced in January 1996.

Item #d97jul20

"Bilateral or Multilateral Bargaining in the Face of Global Environmental Change?" G. Rotillon, T. Tazdaït (Dept. Econ., Univ. Marne La Vallée, Cité Descartes - rue Galillée, 77420 Champs sur Marne, France), S. Zeghni, Ecol. Economics, 18(2), 177-187, Aug. 1996.

Determines the conditions under which it is preferable for developing countries to speak with a united voice, and those conditions under which it is preferable for them to negotiate separately. Shows that the agreements arising from bargaining cannot be equitable, and for that reason they include only a limited number of countries.

Item #d97jul21

"Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions," C.D. Kolstad (Dept. Econ., Univ. California, Santa Barbara CA 93106), J. Environ. Econ. & Mgmt., 31(1), 1-18, July 1996.

Uses an empirical stochastic model of climate-economy interactions to investigate the tension between postponing control until more is known (learning), versus acting now before irreversible climate change takes place (because of the slowly changing stock of greenhouse gases in the atmosphere). Results suggest that current rapid rates of learning should cause society to go slowly on (but not abandon) control of greenhouse gases, and that we should pursue emission control policies that are reversible, for instance a temporary (5- to 10-year) tax on carbon emissions.

Item #d97jul22

"Discounting of Long-Term Costs: What Would Future Generations Prefer Us To Do?" A. Rabl (Ecole des Mines, 60 boul. St.-Michel, 75272 Paris, France), Ecol. Econ., 17(3), 137-145, June 1996.

Discusses the problem with applying the conventional social discount rate to intergenerational costs such as the cost of controlling global warming or the cost of nuclear power (and its radioactive waste). Recommends a two-step procedure, using the conventional social discount rate for the short term (about 30 years) and the growth rate of the economy for the long term. Data on the latter since the industrial revolution suggest an intergenerational discount rate in the range of 1-2%.