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Understanding Environmental Economics: Key Concepts and

School
University of Guelph**We aren't endorsed by this school
Course
ECON 2100
Subject
Economics
Date
Dec 11, 2024
Pages
40
Uploaded by MinisterHippopotamusMaster1478
Econ*2100
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CourseOutlineAssignmentOutlineAssignment#115%OctoberzraAssignment#115%November5thMidterm#115%October17thMidterm#215%November14thFinalExam40%
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6.RealGDP,TotalPMIOemissions,andtotalSO2EmissionsintheUSA(1970Present,indexed1EstimatedConcentrationofParticpoina300RealGDPECON*2100totalPMIG250emissionsparticulationeatorIndexedanea200total502Assignment#emissions1582.Estimateonemissionsmes1001978PresentPartA7.TotalNationalPMIOemissionsfromindustryandhouseholds(1800Present)inCanada(1990PresentuSemissionsIndustryPMIOCANemissionsemissionsSO2EmissionsPMIO,tonnesemissions·EmissionsHouseholdPMIG18001990PresentFractionofTotalnationalPMIOemissionsbysectorinCanada3.Estimated%ofUrbanpopulationexposedtoairpollution8.(1990vs2021)AboveEUstandards(20002021)&Agricultuare%populationaPMIOmissions&...M4.Estimated200emissionsinGermanyrance,,Italy9MonthlyAverageDaytimehightemperaturesinTorontoforandtheUK(1990Present)July(1840PresentGermanyItFrancePMOONsTemperaturesaidgoPresent1850Present5.TotalVehicleMilestraveled,RealGDP,andcolevelsinthe10.Canada'stotaltreecover(000Hectares)(1992PresentUSA(1980Present,Indexec)300TotalVehicleMilestravelled250RealGDP200UrbanairIndexedvalueCOlevelsinTreeCoverretard=wood1000(19801501001988Present1992Present
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EconclassNotes(rewrite)Pre1800sAgriculturebasedSubsistenceeconomics-HighlevelofequalityLowlifeexpectancy(40s)Growthin1800smovedoffsubsistence-↑ininequality-lifeexpectancy4FossilFuelsexploitedGrowthbegetsgrowth=exponentialprocessGrowthrater(%)peryearsupposev=5%GrowthFactor(1+r)Then(1+r)=105TQuestion1,000/capitaGrowthSummaryCAN=3%=1,800=19,219Post18001lotsofgrowth,notevenlyexperiencedARG=2%-7,245~health,lifespan4VEN=1%=2,705-goodoutweighsthebadRefertospecificissues-insteadofENVIRONMENTUseairquality,Waterquality,StC.Harnessingofelectricity①HumanWhatarehumansifnotnature?②Wind,water,SunsomethingspecialORanabomination?③FossilFuelsNaturalharmvs.Unnaturalharmsonwhatscale?④hydroandnuclearEconomicgrowthPollutionarealllinkedthroughtheharnessingofenergy
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PowermechanismsFuelpowerreliesoncombustionH+c+02=CO2+H20+neatBUT-useofairratherthanOxygenImpuritiesinFuel-nomatternowcombustionhappens,therewillbepollutantsexpelledlowincomecountrieshaveahigherlevelofpollutants-TSPisanaggregatemeasureAirpollutionwasUshaped,doesthisstillholdtrue?=ifsowhyareweswitchingtoEU'sUSAairpollutioncostlytomakequalitycars(1996)TonnesOzonelevelsbuildintheSummer,almostonlyonnotdaysPollutionmainlyinhighdensityareas30,00050,000Waterpollutionisalsoonthedecline-concertedeffortstogetpollutiondownSincethe70s-80s-nowdoesthedeclineoflandusageforagricultureincreasetheWaterquality?=isthereacorrelation?WhatdoesOzonedepletionlooklikepost2000?GLOBALISSUES=canalmostguaranteeitsgottenWorsestratosphere I7BasicorSubstitutesForCFC'swerepatentedTroposphereCFC'smadeform,refrigerants,coolantsIglobalwarming03~GlobalWarmingcomesfromtheCO2emissions,RioConferenceunsuccessfullyEarthCFC'sdestroyinga btriedtostoptheemissionsofCO210kmNorthAmericat,China↑(CO2emissions)CO2isaninfraredabsorbinggas,WhichisthecauseoftheriseinglobaltemperatureSUMMARY-Environmentisanabstractterm:makesmoresensetodiscussspecifics-Viewingenvironmentalchangeas"damage"requirestheadoptionofa"human-centered"ViewpointCombustionOfFFtieseconomicgrowthtoairpollutionMostairpollutantsdon'tnecessarily↑WitheconomicgrowthStratosphericOzonedepletionmainlyoccursinpolarregionsandmid-latitudes,duringlateWinter,earlyspring>HCFCorCFC?CO2emissionswillgrowWithFossilFuelUseCO2isagreenhousegasthathasagradualWarmingeffectontheClimate
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ModelsineconomicgrowthWhatdowemeanbygrowth?Intensivegrowth:Outputgrowsfasterthaninputs=Percapitaincomerises=requiresoutputperworkertoriseWhydideconomicgrowthstartinEurope?-riseofscientificOutlook,riseinbookpublishingriseoftradingcenters,accountingattradingCenteradoptionoffamilylawbasedonChristianrules=Promotedmonogamyandinheritance,declineinclanloyalty-riseofnationstates,supportedbytechnologicalprogressinshippingTheoriesofgrowthMercantilist-Growthcomesthroughindustrialexports,gov'tshouldpromotetheseactivitiesPhysiocrats-GrowthderivesfromagriculturealoneGovtisasterileentityintheeconomySmith-voluntaryexchangeleadstospecialization,whichleadstogrowthPintheoryisthebasisofgrowthMalthusPopulationgrowthalwaysexceedsagricultureproductivitygrowthstarvationandsubsistenceisunavoidablePopulationaIPent·ᶐincomealwaysdriveaPercapita
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ClassicalModel-basedonMalthusSUMMARYor=FPriortoSmith,theoriesofeconomicgrowthweren'tsensibleland(Fixed)Smith:specialization&tradearekeytogrowth-diminishingreturnstolabourMalthus:Yes,butdoomedtostarvationSubsistenceoutput/Worker(Y/2)is"g"Classicals:diminishingreturnstolabourWagesatsubsistencelevel,callitgeAfterSmith-Subsistencelevelofoutput=g2x(-industrialrevolutionoutputy=gzxinvestmentCapitalformationmattered(v)Popgrowta1930'sKeynesarguedthat↑ADandconsumptionwerenecessarytoachievegrowthpdeclines1950'ssolowarguedthatsavings,notconsumptiondrivesgrowthLegLabour(1)BasicSet-upre-expressinper-workertermsProductionFunctionI=A+k*x1LClabour]+[capital]+(knownow]#OutputLowercasedenotes"perworker"*=Axk*x("-YY=Axk*+1)Mer--1=aY=Axk*+2a=AxE=A+(t)aL>DiminishingreturnstoCapital/WorkerSavings&InvestmentAteachperiod,t,incomeiseitherusedforconsumptionorinvestmentYt=C+LtYe=Ct+Ltd%ofcapitaldisappearsduetodepreciation⊥so,netperiodcapitalis:Kt+1=ke- d+ke+itsavingsisCt=Yt-Lt,NOTEYe=Ce+itSo...It=YpL=Stinvestment=savings
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CapitaldynamicsSupposeSavingsisalwaysafractionofincomeSt=V+YeCapitaldynamicsequationk++1=ktd+kt+V+A(kt)aSteadyStateKstopsgrowing:investment=depreciationSteadyStateCapitalstock=k++1=k+=KsKs=(VA)↓the4depreciation,↓the4savingsSconsumptionC=Ys-VisSSincomeY=A(ks)aSSCapitalstockdoesnotdependonstartingCapitalStock(10)Mainlydependson(v)and(A,a)X*ProductivitysavingsParametersImplications10doesn'tdetermineoutcomes-savings&productivityarekeytogrowth- lowincomecountriesshouldgrowrapidlycomparedtohigh-incomecountriesCountriesWithSimilartechnology sSavingsratesWillconvergetosimilarincomelevelsPopulationgrowthTheMalthusianViewFeasiblelimitgrowsslowlyMalthusdidnotforeseeadvancesinagricultureUnderestimatedSocietiescapacitytoincreaseproductionoffoodandessentialsGeneralPatterns-Demographictransition(GRisgrowthrate,DRisdeathrate)Initially-HighGR,lowDRNext-BRstayshigh,DRFallsNextthBRFalls
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HowtoFundWelfareofStateWithaninvertedpopulationPyramidLookisimmigrationjustacheaperoptiontosubsidizingwomen/familiestohavingmorechildronOverpopulationdebateThe"Yes"ViewdeforestationoftheAmazon-Slums-largecountriesSuchasIndiaChinaCan'tindustrializebecausepollutionwouldexplodeThe"No"view3"WorldurbanizationtakeslongerthantheCitiesintheWest-Smallpopulationscanalsooverexploitbadly-managedresources-AslargecountriesgetlargersMorewealthy,theyhavemoremoneytoputintopollutioncontrolDependencyissuesrisingaroundtheWorldResourceManagementandtheEconomyMessageswemighthaveheard-Weareconsumingalltheworld'sresourcesatanalarmingrateuptonow,PeoplethoughttheworldWasinfinite,butnowweknowbetterWearethefirstgenerationtotackletheSustainabilityCrisisPrinciplesofResourceManagementNon-renewableresourcesHotellingruleRenewableresourcesForests:FaustmannruleIdeasincommonAresourceislikeanassetWithapotentialdollarvalueThecrucialdecisioniswhentoconvertitfromaphysicalassettoafinancialassetWhentoextractresources?Qtonnesofone,couldbesoldfor$P/tonne-OnceextracteditisWorth$PXQattoday'sprices-Youcaninvest$PXQandearn,say5%inthebank-IfthemarketPriceofOnegoesupby10%,You'dhavebeenbettertoleaveitintheground
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Hotellingrule(mining)-Ifyouexpecttheresourcevaluetogoupfasterthantherateofreturnonfinancialinvestments,SCODOWNextraction-Ifyouexpecttheresourcevaluetogoupslowerthanthevalueoffinancialinvestments,SEEDUPextractionFarstmannRule(Forestry-Aforestadds9%toitswoodvolumeeachyear-Atfirst,9isveryhigh,butasstandmatures,adropstoZeroWhenadropstothemarketinterestrate,itistimetocutthestand"Provingup"ReservesAtanyonetimethereareabout30yearsworthofprovenoilreservesInaddition,thereareestimatedandpotentialreservesinmanyregions-Itiscostlytogointonewregionsanddothedrillingrequiredto"proveup"reservesCompaniesonlyinvestinthisactivityuptothepointWherethelikelyPayoffisworththecostSupposewearerunningshort-Iftheresourceisindemandandsupplyshrinks,thepriceWillStartrisingResourcemanagersWillslowdownextractionandkeepmoreinthegroundTheupwardswinginpricescarsesdemandtodeclinePeoplecurtailtheiruseasmuchaspossiblePriceWeexpecttoobservethepricegethigherandhigherAsaresult,quantitydemandedgetslowerandlower↑Wenever"runout",itjustgetstooexpensiveformostusersQuantityInstitutionsMatterWashington-PropertyrightsForestsprivatelyownedControllingaccess-smallercutblocks,goodroads,intensivereforestationStableplanningClimatePublicForestsinBCPropertyrights-Formanyyears,timberharvestinglicensesWere5yearsorshorterBCweakreforestationyCompaniesdoingthecuttinghadnofinancialstakeinthenextgeneration'sForest-ForestspubliclyownedPrivateForestsinWashington-largeCutblocks,Poorly-drainedroads,-LargeCompanieslikeWeyerhauserhaveapermanentinterestinmaintainingtheproductivityoftheirforestTheybenefitfromdoingagoodjobofcuttingandreplanting
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PropertyrightsBC,1990sBeganmoretowards30-yearTreeFarmLicenseWithautomaticrenewals-TheaimistogiveForestcountriesStable,long-terminterestinaForestsectionsotheyexpecttobenefitiftheydocarefulcuttingandreplantingButitispoliticallydifficult,andlong-termleaseshaveactuallydeclined"ThetragedyoftheCommons"Whatifnooneownsaresourcebuteveryonecanaccessit?Thisusuallyleadstoover-exploitationExamples->OceanFisheriesEveryoneknowsthattheyareover-exploitingtheresource,butnoonehastheincentivetostopEachCaptainthinks:IfeveryoneelsekeepsharvestingandIstop,IloseoutandtheFisheryWillberuinedanyway,soIambetteroffharvesting-Ifeveryoneelsestopsharvesting,mycatchwon'tmatter,soIambetteroffharvesting-EitherWay,IambetterofftakingtheCatch,evenifIknowtheFisheryWillberuinedSolution:mechanismstocontrolaccessAccessControlEnclosuresMovementEngland- -1760-1832Openfieldsbroughtupandfenced-PeasantFarmersdisplacedtocities,landownersbeganinvestinginmodernmethodsOceanFisheries200milelimitimposed,Catchlimitsset,tradeableCatchquotasStableplanningClimate"Sovereignrisk"TheFearthatoncearesourceisdeveloped,thegovtWillSeizeOwnership->Miningrequirescostlyexplorationanddevelopment-Equipmentisalsoverycostly->Whybotherifthegov'twillseizeorblockyourminebeforeyoucanprofitfromit?SUMMARY-Everydecadewehearwarningsofdoomfromrunningoutofresources-ResourcesaremanagedascapitalassetsrateofextractionisrelatedtoexpectedgainFromWaiting,relativetoexpectedgainfromFinancialinvestmentLWedon'trunout,resourcesjustgettoocostly-Explorationiscostly,soindustryonlymaintainsa30-40yearsupply-Institutionsmatter:Propertyrights,controlledaccess,SovereignRisk
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SustainabilityandSubstitution:The"HartwickRule"ConventionalOutputModelProductionFunction:OutputisafunctionoflabourTIMESCapital(notPLUSCapital)XWhythisform?YLabourWithoutCapital=OOutputCapitalWithoutlabour=0OutputForagivenlevelofcapital,therearediminishingreturnstolabourLWhatsmissing?Resources,R,ifRgoesup,outputdoesaswell⊥supposeRgetsa10%Share,thenKOnlygets20%↑becausetheexponentsdetermineincomeshares,andlabourgetsabout70%ofnationalincomeWhatifRisnon-renewable?HowcananeconomykeepgrowingifRlepsdeclining#Afterall,ifR=0,y=0aswellCapitalKismanagedoptimally⊥costperunit,generatesareturncalled"marginalrevenueproductofCapital"150-quantpictureHartwick'sRok1↑↑IftherentfromresourceextractionareinvestedinFormsofCapitalthatYieldsthemarketrateofreturn*k=theincreasein1)overtimewillcompensateforthedecreaseinR,justenoughtokeepoutputconstantRGeneralizingtheconceptNon-renewableassetsSocietyhasaportfolioofassets:OneinthegroundisWorthlessifitisneverextracted⊥Natural,industrial,institutional,Financial,humanandnon-renewable⊥Onceextracted,itisworthacertainamount,say$x⊥Ifwejustspend$Xoncurrentconsumptionwehavedepleted"Value"ofanassetourwealthValueisnotthesameasthecostofpurchasingit⊥IfWeinvestitinsomethingWithrisingvalue,wecanpreserve⊥Itmeansthecapacitytogeneratehumanwelfareinthefutureouroverallwealth
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InvestmentOptionsPreservingnon-renewablesisnotnecessarilythebestOptionforfuturegenerationsIfotherassetsgrowinvaluemorequickly.Weshouldinvestinthose⊥WhatWouldfuturegenerationswantustoinvestin?sameaswhatwewantedfromgenerationsearliertous:⊥Aportfolioofvaluableassets,notjustonetypeSUMMARYsocietyhasaportfolioofvaluableassets,includingnon-renewableone-Hartwickrulesaysiftherentsfromnon-renewableresourceextractionareinvestedinotherformsofproductiveCapital,FutureOutputneednotgodownEconomicEfficiency"Efficiency"encompassesseveralconcepts:-makingthebestuseofavailableresources-maximizingthevalueofproductiveactivitymakingthepeopleinaneconomyaswelloffaspossibleItdoesnotguaranteeanequitableoutcomeMicroeconomicslooksatwaystoachieveefficiencyusingmarketmechanismsImagineaperfectsocialplanner:CompetitiveMarketssomeonewhoknows+seeseverything-manybuyersandsellerssomeonewhomakesdecisionsineveryonesbestinterest-noonepersoncontrolsoutcomesomeonewhocontrolstheoutcomeanddecideswhogetswhat-peoplemakeuntarydecisionsbasedontheirownself-interestCallsthisthe"Planner'soutcome"Microtheory:Canwearrangethingssoamarketyieldsanoutcomeasgoodasaplanner'soutcome?WeaskthisquestionbecausemarketsexistWhiletheperfectsocialplannerdoesn't!(AttemptsatsocialplanninghavebeendisastrousEfficientmarketoutcomes:Marginalbenefits=marginalcostsBenefitsrevealedbyWillingnesstopayWTPcg.apples6-j$5005-!lig/Week"inT521-7$150&ic's5aioBquantity
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DiminishingMarginalINTPIfyouhavequantity(a),howmuchwouldyoubeINTPtogetonemoreunit?TotalWNTP:totalamountyouareWTPForquantity(a)Marginal(NTP:amountyouareWTPForonemoreUnit$atQ,totalWTP=Q+DDemandbcurveMarginalINTP=P,PiAQQAggregate,orMarket,DemandCurveatapriceof$3/kg.Onepersoniswillingtobuy41gofapples.AnotherpersonmaybeWillingtobuyIkg,anotherTkg,etcHowdowegraphthis?-3demandcurvesP6-146111,111 aPickapriceandaddupquantitieseg.at$3,totaldemandis2+4+7=13,at$5,1personWillbuylkgat$0,totaldemandis35+10+8=315thatgivesus3pointsandwecanconnectthem(Grayline)InterpretingtheaggregatedemandcurveKeyidea:addhorizontallynotverticallyPAPP,↓snowsaggregatedenisbCQ9.929.Qata:TotalWTP=a+areaa=ConsumersurplusCost=P,xg,=DMoreFromg,upto92:areacisthetotalINTPThisisameasureofthesocialbenefitoftheincreasedsupplyAt91:P,isthemeasureofmarginalWTPForonemoreunitTurningtocostsOpportunitycost=valueofthebestalternativeuseofaresourceeg.timeakisureactivityMightbe"Free"likeSittingonthecouchWatchingTV.ButtheopportunitycostisthevalueofwhatelseyoucoulddoWiththetime,eg.-WorkForXperhour,readabook,dosomethingelsePeopleWeighopportunitycostWhenmakingdecisionsaboutwhattosupplytothemarket
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costcurvesapleIfthemarketpriceis$1,theOrchardisWillingtosupply20kg#Ifthepricegoesupto$2,theyWillsupplymore:theynowoffer30kgTosupply40kg,thecostgoesupto$3,It·Asthepricerises,theorchardisWillingtooffermoreissosodosodoThepricemustcoverthemarginalcostofadditionalsupply$thesupplycurveshowsthemarginalcostofsupplyingapplesPithefirmproduceswherep=MCareaunderMCcurvea=TotalcostofproductionAat9.,4,measuresmarginalcostofsupplyingImoreunit9.&Aggregatesupply:asbefore,iftherearemanysuppliers,addupthesupplycurveshorizontallyPuttingthesetogetheratQ,MWTP=MCPMWTPUptothispoint,themarginalvalueofthenextunitexceedstheMarginalcosttoproduceitbeyondthispoint,themarginofvalueofthenextunitislessthanthemarginalcostofproducingitPoTherefore,Q*istheefficientoutputlevelQQ*EfficiencyandOptimalityatQ9,MB=MC,ThevalueofthelastunitsuppliedjustequalsRecallthemarketdiagramsnowingMWTP(orMB)andMCtheMarginalcosttoproduceitPMWTPMCPo9Q,wecan'tmakethebuyerbetteroffWithoutmakingthesellerworseoff.-MorefromQto9FQ->additionalhouseholdbenefit=F,Cost=F+gQ*9,->Extracosttoproduce=maxWTPbyConsumerWhenyoucan'trearrangeanoutcomeWithoutmakingatleastOnepersonworseoff,wecallitaParetoOptimumBycontrast:MBMCstartat92,moreuptoQTotalcost=F9Totalbenefit=F+gF92=Q*ConsumergetsenoughbenefittoFullycovercosttoproducecanbemadebetteroffWithoutmakinganyoneworseoff,thereforeaeisNOTParetooptimal
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EfficientoutcomesareParetooptimalCompanymarketequilibriumWithefficientoutcomeMARKETEfficientMarketForcesdrivebuyersandsellerstopointwhere(supplyIdemand)CastS=D,callthis(Qm,PM)PSPMCEfficientoutcomeat(Q%,PG)PMpoWillitbethecasethatSQ"=Qm)?DMBOnlyifS=MC2pP=Pm)QMQQQD=MBNotethatSisbasedonPrivateMarginalcostandDisbasedonprivateMBButefficientoutcomeisbasedonsocialmarginalcostandsocialmarginalbenefit-What'sthedifference?Privatemarginalcost:costsincurredbyProducertobringgoodstomarketsocialmarginalcost:totalcosttosocietytobringgoodstomarketSMC=PMC+"externalcosts"SometimesPrivateactionsgeneratepubliccosts.Examples:PollutionControl,damagetoland,creatinganeyesore,roadCongestionExample:RoadCongestionEachdriverconsiderstimeheorshewilltakeontheroad-But,themorecarsontheroad,thelongereachdrivertakes,onaverageSupposethereare100carsonroadinatownandeachdriverspends5minutesgettingthroughabusyarea⊥nowthe181*drivercomesalongandtheaveragetriptimegoesupto5%minutesduetotheextracarPrivatetimecost:5minutesSocialtimecost:5minutes&newdriver2x100minutesEextratimeforothers=55minutes(Externalcost)Indexample:Cottages4cottagesonalakeEachdrawsWaterandPurifiesitatacostof$10,000/year.⊥Now,anewcottageappearsandbecauseofitssepticsystem,thecostofwaterpurificationrisesto$12,000/CottagePrivatecost=$12,000Externalcost=$2,000x4=$20,000extracostsforothers
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MSCPDuetoexternalcosts,themarketoutcomeinvolvesMPCPa①MECtoomuchproductionandtoolowapricePmOMWTPQQQMMINTD:MarginalWillingnesstopay(QM,Pm)-marketoutcomeMEC:marginalexternalcost(Q9,pP)=OptimaloutcomeMPC:marginalprivatecostMSC:MarginalSocialcost=MPC+MECTherecanbeMarginalExternalBenefitstooEg.Cruiselinedockinginasmallcoastaltownbringstorristswhobenefitthetownshops+restaurantRelativeconcept:PublicgoodsSomegoodsaresubjecttonon-exclusionandnon-rivalryExample:Nationaldefense,Police,FireNationaldefense:Whenitsprovidedeveryonederivesanequalbenefit,oneperson'sbenefitdoesn'tdiminishothers'⊥PoliceprotectionissimilaralthoughthereissomerivalrousaspectbecauseifPoliceareoutoncalltheycan'trespondtoanother⊥reductionofcrimeingeneralisapublicgoodOptimalpublicgoodsprovision:addupMINTPVertically-Example:damuprivertoControlfloodingWouldcost$100ktobuild,wouldprovidefloodcontrolandrecication,20homesdownriverEachhouseholdWTP$10,000fordamNooneWillingtobuilditbecausecost=Privatebenefit,buteveryonewouldbenefitifPersonWorldbuilditSocialvalue=20x$10,000=$200,000Sincesocialvalue-costitshouldbebuiltP-SocialdemandasupplycurveGivensupplycurve,noindividualwouldpayforpublicgood,Q=ButSocialMINTPishighenoughthatQisoptimum-individuaa⊥thisrequiresapolicyMechanismtoCoordinateInPresenceofexternalcostsandpublicgoods("marketFailures")theequilibriuminthemarketWillQnotbeefficient.NeedpolicyMechanismstocorrectthis.Q
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OptimalPollutionControlWhatistheoptimallevelofpollution?nottheunregulatedlevel7notzeroeitherjuallyPastexamples-SO2,nearlyeliminatedNot,reducedbutstillemitted-CO2,stillgrowingWhythedifferences?⊥gobackastepWhyistherepollutioninthefirstplace?Thinkofitthisway:HowcleanisyourkitchenWhenyouuseyourkitchen,theactivityyieldsbenefits(meals),andcosts(dirtydises,spills,greaze,garbageBenefitsSlopeofTBTotalcostEcost·NeTotalbenefitsBenefits:ofactivitythatcreatesthemess(Mealprep)notthemessitselfCosts:intermsofsmell,appearance,inconveniencevslopeofThMessinIntuitiveanswer:aimforlevelofmessthatmaximizesNetbenefit,TB-TCMatheKitchenNBmaximized:WhereslopeofTB=slopeof↑Marginalbenefit=marginalcostPollutionCaseIActivitythatcausesemissions+yieldsbenefitsActivities:snowninthechartsbyemissionsbysourceTotal-transportation,industry,agriculture,Mining,etcTBEmissions$/MarginalBenefitsTBEmissionsMB
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/CMACMACAt2,8,1*E=c,9+cP2XDaMAC,=PB=MACPTThisisacostefficientoutcomewhereMAC,=MAC"equimarginalrule"mostcost-efficientwaytoreduceemissionsistogotoapointWhere:EMAC'sofallemittersareequal.e2C,22Economicinstruments:taxe+tradeablepermitsleadstoequiMarginalrule#Marginalcostsofemission$TCAssumeitgoeupatanincreasingrate(usuallyE$/2MC=SlopeofTCCallit"MarginaldamagesE$12MDatE,MD=P,=MarginalcostofincreasingemissionsOR=benefitsofreducingP,IIIIIBetweenECE,,Shadedarea=TDof↑emissionsfromE,UptoEEsMDendogenoustoasupplycurveOptimumHowtomeasuredamages?MDmoredifficultthanMACvarioustechniqueslikesurveys,propertyvalues,biologicalmodelingDaAim:identifywhatpeoplewouldbeWillingtopaytogetreductioninemissionsMACE*E
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OptimalPollutionControlpart11Puttingthesetogether:AMDcurve*bMACcurveMeMDCunregulatedemissionsdCrossingPointwhereMD=MACCOptimalemissionsquantitydFOptimalemissionspricegp*i9TACofreducingemissionsFromE toE*n+iTDofincreasingemissionsfromEPtoEjnCiNetbenefitofreducingemissionsfromEtoE*EstEEjTDatE*2firms-MACMACMDEunregulatedtotalemissionsAtthisoutcomewehave:EnOptimaltotalemissionsoptimalemissions:MD=MACPoeg,22Optimalallocationofemissionscost-efficientreductions:MAC,=MAC**EsEpoOptimalemissionspriceNumericalexampleMD=ZEOptimalemissionslevel:1200MAC=1200-EUnregulatedemissionslevel:Verticalintercept:SetE=0SetMAC=MD800SolveMAC=OMAC=120001200-E=ZE1200E=0=1200=E=12001200=2E+E=3E4001200/3=E*=400MDatoptimum:plugE*intoMDCheckMAC"=1200E*TACatE*=areaunderMAC#MD*=2x400=800=1200400=800=x(1200400)x000=X800x800TDatE*=areaunderMDuptoE*MD=YEMAC=1000 -ZE=320,000=X400+800=160,000find:unregulatedemissionsI①SolveMAC=OtogetEAnswers:0E=500Optimalemissions&②solveMD=MACtogetE=②E*=400MDatOptimum③③PlugE*intoMDCheckby③MD"=200PluggingintoMACaswellTACatOptimum④①calculateareaoftriangleenda④TAC*=19,000TDatOptimum⑤⑤calculateareaoftriangleUnsa⑤TD*=40,000
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SupposeMAC,=500 - e,MAC=500teFindtheaggregateMACcomputeC,+e<foreachpricelevel/E->MAC,->MAC2adduphorizontally5001000,+ENeedtoinvertMAC'sMAC=500-tenowSetMAC,=MAC=ME:SetM=MAC,=500e,==500MAC2,=500ME=15002=10002M=e,=500-MAC,22=10002MAC,E=C,+e=15003MSupposeMAC,=500-e.weobserve:=50↓SupposeWecapeachfirmsemissionsat250.MAC,=500 -tesisthiscostefficient?NeedtocheckifMAC,=MACIfWekeeptotalemissionsatE=500WhatWouldMAC,=500-250=2507becost-efficientemissionlevels?MAC=500-250)=315/no.SupposeMAC,=1000-Ze,FindE,,E2①SolveforaggregateMACMAC=500es②SolveitforvalueofMWhereE=250③PlugthatvalueofMintoindividualemissionFunctionsSupposeWelimitemissionsto2,=300,==325①2,=500M①Isthiscost-efficient?2= =1000-IM②Ifnot,findanallocationofemissionsthatkeepstotalE=625butequatesMAC'sE=15003MnowsetE=500①MAC,=1000Ze,②MAC,=500esMACEMAC>500=15003M=1000600=500325notcost-efficient3M=1000/3=400=175M=333Check[,+==500-2,=500,2==500625=1000EM2=500-M=500125=3752==500-333%2,=500-MM=1000-6252=500250=250=16672=500MM=2+375625r2==10002x333'E=1000EM=750=333%=258
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SupposeMAC,=10e,MAC=30-3e,1Computeunregulatedtotalemissions2Supposeregulatorwantstoreducetotalemissionsinhalf.HowmuchshouldeachFirmCut?1C,:10MAC,32=30MAC2SetMAC,=MAC=M,=1022=10-MAC2,=10M[2=182=10ME=E,+Iz=202,+2=20-MtargetE=1010=20MM=10H=3=752,%=10-75=2522=105 (75)=75BenefitCostAnalysis1ConsiderthefollowingdiagramFLAI:assumespollutesarebehavingirrationallybutNOTemittingattheoptimalrate$/EMD$EsExunregulationnTBofemittingPollutionMAC"McKinseyCurve"EE⊥WhatistheFlawinthisargument/EMAC=MarginalBenefitofemittingActivityMAC=SlopeofTBlineEE⑧
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/EEstimataIffirmshavethemostknowledgeoftheirownoperations,theMACislikelythecorrectMACcurveE!EnMAC,2SupposeMAC=20004E(a)Whatisunregulatedemissionslevel?(b)SupposeGovttaxesemissionsE=500at=$20.HowmuchdoemissionsFall?ORMAC=2000-4EFirmswillchosetoemitWhenMAC=taxrate4E=2000-MACE=500MASetMAC=E=2000MAC=5004&=495~C)SupposesomeoneArgues:EmissionsonlyFallby1%.Clearlytaxdoesn'tworkandneedstobesupplementedWithregulatestillwegetemissionsdownfurtherinthiscorrect?No.thetax"worked"byassumptionandthedemandforemissionsismoderated2000MAC=2000-4E800A+ +=20,E=495ifwewanttogettoloweremissionstheMACwillbehigherT=20Era-EIfweWantEx=300,MAC=40004x300,=4000-1200,=800SupposeMD=E,Whatistheoptimalemissionslevel?MD=MACLE=2000-4E,5E=2000,EP=400Ifwehaveatax,whatisthetaxbill?2000MDSubEP=400intoMDcurvetaxbill=+*x E?+O=MD=E=400+400IIIIXMT+8=400-=$160,000
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Totaldamagesatoptimum?(AreaunderMDcurve)2000MDTD=EbXh=*x400x400=$80,000.I/III"TotalabatementcostsattheOptimum?TMTAC=bxn=2x100x400=$20,000SupposefirmsarguedtheFollowing:Thispolicycostsus$20,000inTACand$10,000intaxesfor$180,000totalBUT,accordingtoyourdatathereshouldOnlybetotaldamagesof$80,000.Therefore,WearebeingoverchargedandthetaxrateshouldbecutIsthiscorrect?Thenumbersarecorrectbuttheconclusionisnot./EMDXMACTotalCompliancecost=b+c+d=CQuestionis,Whatistheoptimaltaxrate?aFirmsarguetaxesshouldbereducedbecause⊥WhenMAC=MD,at400tFcould↓bBUT,thatistrueatanytaxrategiveFirmsCd((be)400500ESupposeMD="50/tonnePoliciesacting->oxincludingallotherDoesthisimplyWeshouldonlyimplementpoliciesthatcost$50/tonne(ofabatement)chargedXcarbon⊥yesMD=50↑WhatgousaysWill⊥MAC=MD,andthat=$50bechargedEDESo,Wewantemissionreductionatmarginalcostupto$50/tonneCriteriaforEvaluatingPolicyWhatdowemeanby"Policy"⊥Atthegov'tlevellegislation=createslawsWithlegalForce⊥alsoleavessomeissuestodiscretionofMinisterorMinistry-regulations-Canbeimposedoradjustedmoreeasily
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LegislationneedsanactofParliamentslowprocess,requiresbroadpublicsupportRegulations-needstofollowprocess↑-announceintenttoregulateeasierand-takecomments,vewriteifnecessaryquicker-enterintoForceEitherwaywefacequestion:Whatmakesagoodpolicy?Economics:①cost-efficiency②Optimality①Achievesoutcomeatlowestpossiblecost②maximizestbenefitNetbenefits:BenefitsminuscostsMostpoliciesyieldsomebenefits⊥dobenefitsexceedcosts?(includingopportunitycosts⊥doMB=MC?(thinkaboutscale2insightsfromeconomics1)"Jobcreation"isacost,notabenefit⊥#ofworkersneedediscomparabletotheamountofCapital,energy,materials,etc.Thesearecosts!2)Policiesdon'tcreateoutcomes,theycreateincentives,incentivescreatetheOutcome⊥ExEndangeredSpeciesAct,USA-Provisionthatifthehabitatofanendangeredspeciesisdiscoveredonyourland,restrictionsimposedtostopyoufromUsingland"Shoot,Shovel+Shotup"ConservationEasementContaminatedSiteRecommendationsCERCLA"Superfund"rule,USA=BrownFields,trictjoint+lliabilitaEndedupinlandabandonmentanewsites.everenerdefenseresponsible
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Economicconsiderations①Optimality②cost-efficiency③dynamicefficiency(innovation⑦Informationgeneration⑤Enforcability⑥Fairness+Equity①MD=MC②equimarginalrule③Incentivestoinnovate=SometimesregulationsleadfirmstostopimprovingExNewSourceReview1990CleanAirActAmendments⊥grandfatheredoldpowerplantsunderlatrules⊥executedStrictrulesfornewplants-Generatorsrespondedbyslowingdownprocessofbuildingnewplants,insteadkeptoldonesoperatinglonger⊥EPAbeganassessingplantupgradestoseeiftheyamountedtotheplantbecominganewOneE"NewSourceReview"-firmsrespondedbyMinimizingPlantupgrades,Innovationsloweddownconsiderably/EsupposeforinvestmentX,firmscanSwitchfromMAC,toMACMALIMAC2StandardsatE,Initially,FirmisincomplianceatTAC=a+D.CCDEIftheyswitch,theypayXandsaveanotgainofaXEsElE⊥IftheyexpectstandardstoChangetoEL=TACz=b+StandardscreateWeakTAC,=a+bygainisa-c-xincentivestoinnovateTaxes/EUnderMAC:MALITotalCompliancecostTCC,(taxbill+TAC)=F+d+c+b+aMAC2UnderMACz:emissionsFalltoEc=TCC=F+C+DtfaESavings=a+d-netgainisa+d-X,RATHERTHANa-2*E,EStrongincentivetoinnovate
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ᶍInformationStandards:havetopickapointE,/E⊥isthisoptimal?Wedon'tknowTaxes:Supposeweser[=MD,emissionsfalltoEl,isthisoptimalMDO⊥YES!firmsgotoWhereMAC=t=MD--EEEStandards:pickEl,therefinementispossible$/ETaxes:pick[,emissionsFelltoEz>isthatoptimal?E2·MD-NO,MDatEs=MAC⑧OptimalTWillbebetweent,&,It·MAC⊥adjustIupward,aimforwhereMAC=T=MDE,ElE⑤Enforceability-thisaffectsallpoliciesSometimestheidealpolicycan'tbeenforcedbecausepollutersactionscan'tbeobserved.eg.motorvehicleexhaustWecanobservetechnology+enforceCatalyticconvertersSmallmanufacturerStandards=emissionsoutofstacksSometimesthemostefficienttypeofpolicyCan'tbeenforced,soweuselessefficientpoliciesthatcanSelf-reportingrequirementsManyregulatorysystemsrequirepeopletomonitorthemselves+reportinfractions-MostONTpollutionregulationsincluderequirementsforrecord-keeping⑥FairnessandEquityCosts+benefitsdistributedunevenly⊥Energyisalargerfractionofhouseholdbudgetsinlowincomehouseholds(↓Lowincomeareasmayhostmorepollutingactivitiesthanhighincomeareas-Figuringoutcause+effectcanbetricky
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⑥Cont=Acrosscountries$/EMDrichMACMDpoorMarginaldamages.FunctionofincomeEEP EEsEconomicsofpollutionStandardsIPC)TechnicalStandards=PrescribeequipmentEmissionsStandards=PrescribeemissionscapIntensityStandards-=Prescribeemissions(outputAmbientStandards-PrescribeconcentrationsAmbient:maybeimposedbyonelevelofgov'tonanotherExample=USA,EPA:imposes"attainment"ruleonstatesCanada:provincescansetownambientstandardsbutmostFollowCanada-Widestandards⊥ActbyCCME,CouncilofCanadianMinistryoftheEnvironmentDisadvantagesofStandards⊥failtoachieveequimarginaloutcomes$/EMACIMAC2OAtE,FirmIhashigherMACthanFirm2OE,EE⊥Oftentargetedatthewrongthing-EnergyefficiencyStandards⊥itsconcernisthesmokefromthepowerplant(PP),itmakessensetoregulatethesmoke,notthekindoftoastersomeoneuses100kmaway⊥failuretocapturerents/EMACsupposewecutemissionsFromEtoE*⊥costsarenotapparentfrompolicyannouncementTPOTAC=abb="rentsassociatedwithregulationAEEsE
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Don'trevealMACinformation=WeakincentivetoinnovateEg.ONT=0Reg530/18underEPA(EnviroProtectionActfuelrefiningfacilitycanemitnomorethan225kg/dayofSO2⊥assumingeveryoneisincompliance,wedon'tknowifthatsefficientornotAdvantagesofStandards①Simple+easilyunderstandable②FitsexistinglegalFramework③canbeFlexible④Sometimes,theonlyFeasibleoption②CCME,Provincialenviroprotectionacts,FederalCanadianEnu.ProtectionActEStandards,ConcentrationofPhosphos=1msk)Lead-5 my//limitsreducedforracecarsoraircraftsSulpher->12my/1~$/MDMACSulfurlimitisRmg/kg,butcanbeaveragedoverapoolofdomesticandimportedMAFuelatlong/kg,Withnobatchexceeding80mg/kg·rMars&EAmbientAirQualityCriteriaPM25=Zing/m3-3-yearaverageofgothpercentilereadingsofdaily24hraverageconcentration8O,ng/m2-3-yearaverageofdailyconcentrationsOzone=Glppb23yearaverageofannual4th-highestdailymaximumO-houraverageSummerGasoline=0Reg271/91Summer=May16toSep157Duringthesummer,gasolinegoldinONTmusthavevapourpressurebelowd2kilopacialsNorthernSummer>June1toAug21VOC's=OzoneFormationLateSummer--June1toSep15
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SummerGasoline/EMDsummerMDWinterETechnicalStandardsONT=0Reg102/73=Smallscalebreweries⊥mustuseadustcollectorwhenMillinggrain.HeatfromKettlesmostberecoveredbyacondenserAirflowrateofprocessequipmentexhaust118Cubicmeters/secondat10%C+pressureof1013kilopascalsFermentationVendorsmustintoawatertrapMidtermmaterialAutoSpraybottlesforrefinishingWeek4TodayHVLPSprayerw/minimumefficiencyof65%⊥exhauststackmustbe50%tallerthantheroofEmissionTaxesBasicidea:insteadofprescribingquantity,imposeapriceperunitofemissionsandletthepolluterschoosequantity2gONT0Reg530/0SO,emissionslappedat225kg/day,PerFacility)=82125tonnesperyear)Whatifwechargeataxof$300/tonne/yearinstead?/EWouldemissionsgoupordown?IMAC,Advantagetoemissionstax:everyemitterwouldgotothePointWhereMACi=T,i=1,.,NMMAC,=T,MAC=TiMAC=TMACs50225375EEMAC'sallequal,cost-efficiencyIFT=MDthenitisalsooptimaloutcome.Question:Howshouldwesettheleveloftax?ItisimportanttohavereasonableestimatesofMD-regardlessofwhetherweareusingtaxesorstandardsMDisameasureofsocialcostthatMarketFailstopricein⊥Allothercostsofproductiongetpricedin:labour,energy,materials,Capital-alsoWastedisposal⊥Firmshavetopayforeachofthese
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DisposalofSO2inboilerexhaustisaserviceprovidedbysocietyatlargeintheformofputtingUpWithlowerairqualityJustaspeopleputupWithlossofleisuretime,inexchangeforpay,Peoplearewillingto"supply"airqualityforaprice,exceptthereisnomarketmechanism"Supplyair-quality"=PutupwareductioninairqualityAnemissionstaxprovidesapseudo-marketMechanismIdealForm:T=MD/EMD(S)MA((D)poFirmstypicallyPreferstandardsbecausecompliancecostsarelowerE①Example:Sawmillnormallybuys100logs/week&200eachfromtimbercompanySuppose:goutsaysWe'llgiveyougofreelogs/weekbutthatsyourcapChoice:①missionscapof90tonnes/year②emissionstaxof$200/tonneandemits100tonnesFromSocietys/PolicyMakersPOU:taxDillisatransfernotacost"Lost"DINLoraresourcecost⊥actualdisappearanceofwealthWhatshouldwedowithmoney?BestCowerothertattoreduceDLecwhrnatarecurrentlytocostlyforFirmstoadoptGinnyisthistheworst?TaxpromptsfirmtorankabatementoptionsandimplementcheapOnes(onlist#1)andRejectcostlyones(list#2)⊥-ThatswhatwewantthemtodoSubsidizinglist#2destroystheefficiencyofthepolicy
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3"Option:taxthreshold/ETotalcomplianceCosts=(t+25x200)+bTCC=a+d=2500+b=1500+200x225200YYb=47,500200eioESupposegov'tsaysyoucanemit200tonnesFree,thenpay$200/oneafterthatDoemissionschange?No,FirmsstillemitatE=225.Buttaxbilldropstaxbillnow=25x200=5,000Example:Output-basedpricingsystem(OBPS)FederalCarbonTaxonindustry$/EIndustry,i:Firminindustry:denotedby;Eijisdeterminedasfollows:YjxGi=EijFFirmthresholdsT(totalemissionsinindustryi)Parameter=Oi=(totaloutputinindustryi)X09EgoesdownovertimeEOnlyappliestoenergyintensiveEtradeexposedindustriesEijEjETargeting:Efficiencyrequirestaxtobetargetedcorrectly(ieonemissionsthemselves)"Gasguzzlertax">extrachargeoncarsw/largeenginesGarbageDagFees-doesnotaffectdrivingchoicesoncethecarispurchased-leadstobagstuffingslowsdownturnoverofVehiclefleet-leadstolitteringMACIncentivestoinnovateInformationproductiontaxesWorkbetter[FundsFairness:taxrevenucanbeusedtocompensatelow-incomehouseholdsE.EE
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IncentivestoinnovattatesworktisMD=ZEComputeE,EP,t*TAC,TCMAC=1001EE:MAC=O=100-E=@,200=E/EMDEP:MAC=MD==100-E=IE,100:IE,E=40100MALTP:MD=*2x40=8080=T*TAC=x160x80=6400TAxTACTCC:TAC+taxbill=6400+40x80,6400+3200=9600BILLEE*200noPRACTICEQ#1MD=EE,MAL=600EVeriFY=E=600,E*=240,[*=360,TAC=64,000,TCC=151,200MAC,=100-icMAC=300:2FindEandtaxtoreducetotalemissionsto240.-SetMAC,=MAC,=M$/EInvert:MAC,=100-Ec,=Ge,=100M,De,=2002m]300MAI=300 - 22==2=300M,=200 - Em+4=40025M100IfM=0,E=400T60NeedtoSetc,+2=240240:40025M=M=160=M=54160=10E80160200Plugm=60into02c,=2002x60=8072=200360=160/240PRACTICEQ2MAC=250 - 2,FindEiFindataxtoreduceemissionsby50%fromunregulatedlevelMAC=250-VerifyE=750 iT=$125
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Tradableemissionpermits-LikeStandardsbuttradable-InvolvesanoverallcapandtheregulatedFirmscantradeallowances"Cap+trade"/EMACWouldtheytrade?YestheyWorldtradebecauseMAC,MALMAC,OP2PiOEC,ExampleMAC,=120Be,FindEMAC,=4005e,supposewecaptotal&80,give30permitstoFirm1and50tofirm2.ODotheytrad?OMAC,=120 - 3x30=30②Ifsohowmanyareexchanged?MAC=400-5550=150③Whatisequilibriumprice!yestheytrade,MAC,=MAC②SetMAC,=MAC=M0+02=40-m)MAC,=120 - 3e,=3e,=120-M2=po-mE=120Emc,=40EmDMAC=40052c=Jee=400 - M-2=PO-Em②23=40-m=4025=15)=80③E=80⊥=po=M=po15=65/80=120MEm=40==m=40x=75 EPuginto02 GFirm1startedw/30,endedWith15>equilibriumprice=$75FirmIStartedW/50,endedWith65PRACTICEQ#3MAL,=1000-1,Cut(missionsFromEto1400,give700toeachfirmMAC=000-te①Dotheytrade?②Whobuys,whosells?=VERIFY③Whatisequilibriumprice?
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IssuesWithImplementationPhaseoutofCFC'sinUSAMainIssues#OfInitialallocationpermits-TradingRules-Hotspots-MarketPowerotimeInitialAllocationRulesForinitialallocation:actionorgiveaway?Usuallybasedonhistoricaloutputoremissionslevel⊥Ifgiveaway,howmuchtoeach?equilibriumisnotaffectedbytheinitialallocation-Ifpermitsareauctionedthengov'tcollectsrevenueAsWithtaxestherearegood+badoptionsforwhattodoWiththerevenueHotspotsIfpermitsaregivenawaythevalueofthequotasaccivestotheinitialownerValueofthequotasisanassetfortherecipientfirmsonOP0TradingRulesA=southernCall)-IfCertificationrequirementsaretoonerous,themarketmaynotfunctionB=Midwest⊥USSO2allowanceMarket,brokerageFirmsallowedtooverseeC=OhioValley/PotentialhotspotProms-firmshadto"proveup"holdings-OnceperyearAuctionsonceperyear⊥anyonecouldpurchasepermitsMarketPowerWhatifthereisIbigfirmandlotsofsmallfirmsThismaythwartefficiencyInitialallocationneedstoFavorSmallFirms
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IncentivesForinnovation$/EFirmscaninnovatefromSwitchingfromMAC,toMACMAC,MACz⑧o-NetPSupposeFirmholdsE,Permits,Price=P=assumepricePdoesn'tchangeFdbenefitAtE.:TAC=a+bElE.ESwitchtoMAC>emissionsnowatELTAC=b+d;alsocansell(E,-Es)permits,earn(c+a)NetTAC=(b+d)(c+d)=(b-C)ChangeinTAC=(a+b)(bc)=a+CSeeBook2ForThursLecturesameasemissionstaxesClimateChangeLecturesSloganvs.EvidenceThereareafewareasofpublicpolicywheretherelianceonslogansinsteadofrealevidencehasbecomeveryevident-theWorseperpetratorsareoftenpublicofficialswhoshouldhavespecialexpertiseordecision-makingpowerAccordingtogov'texpertsnodiscerniblechangesinratesorflooding,drought,etc.Whatdowemeanbyglobalwarming?⊥TheGreenhouseEffectSunsendsenergytoearth,earthsendsitallbacktospace⊥convectionradiation-causes"Weather"Theproblem:Radiationhasnon-lineartrendsGreenhouseeffectimplieswarming⊥doublingCO2onlyraisestempby10C.=Feedbackprocessesdriveswarming
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Highdegreeofconsensus?JournalismaboutClimatechangeisMisleadingandthereisgenuinedisagreementWhathavepeopleagreedon?Disagreements:CO2isagreenhousegas(infraredabsorbingfeedbacksandamplificationtechniquesCO,concentrationhasgoneupduetoFossilfulls-weathernaturalvariabilityexplainssomeormostofthemodernclimatechangesWorldhaswarmedSincethe1800s.isitharmfulornot?Long-termscale/context-Climatenaturallyvariesonshortlongtimescales-CO2levelsvarytooModernWarminginContextAsbothpolesareglacializedwerestillinaniceageWaterVaporinjectedintotheatmosphereisaleadingcauseofwarmingIsthereaproblem?ChangesandincreasedhumanactivityhavecausedtemptoincreaseAmplificationMechanisms-WaterVaporFeedback->Morevapormoreheat,4intempIce-albedoFeedback>lessice,Oceanabsorbsmoreheat,↑intempFeedback-drivenwarmingMostrapidWarmingisexpected:-tropicaltropospherePolarsurfacesIPCCprojects15450WarmingFeedbacksaminorchangemaycausebigissues(model-runsimulationsTropicalTroposphere-basicallycoveredinWaternotmuchwarmingtheredespiteCo,rising18%SinceTa
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ECS(equilibriumclimatesensitivity)-amountofwarmingafterdoublingCO2emissionsandrunninguntilnewequilibriumisreached-EmpiricalECSestimatesarelowerModelrange(ofWarming):15-450w/muchhighertopendConclusions-Widescientificagreementthathumanscan,andlikelydo,influencetheClimatesystembyraisingtheatmosphericCO2Fraction⊥WhetherthiswillbeaproblemdependsonFeedbacks,WhicharestudiedusingcomputermodelsoftheClimatesystem-AlotofcrediblescientistsbelievetheFeedbacksarelargeenoughtoposeproblemsintheyearsaheadDiscrepanciesbetweenmodels&ObservationsSuggestFeedbacksmaybeoverstatedinthemodelsThisdebatehaslargepolicyimplicationsandneedstoberesolvedEconomicaspectsTheClimatechangeissueseemstohavebeenstalledfordecades⊥VERYdifficulttogetpastsloganstoUnderstandWhattheREALpolicyChallengesareWhatmakesthissodifficult?①Unlikeotherpollutants,CO2emissionsmixglobally,sounilateralactionisuselessFreeriderKakageproblems②CO2concentrationsonlychangeveryslowlyinresponsetoemissionscuts,sobenefitsaresmallFarinthefuture③CO2emissionsarecloselytiedtoFossilFuelusewhichisessentialforecongrowthdevelopment④Abatementoptionsareverylimited⑤Damagesarehighlyuncertainmaynotappearfordecades①Everyone(Country)isresponsibleforabit/Ofemissions)"TragedyoftheCommons"Example:CarbonLeakageKeyProblemsᶓᶏPoliciesneedtobeimplementedonamassivescaleBothemit100units,areaAcotsemissions,corpsinareaAmoretoareaB,PolicieshavebeentoosmalltohaveaneffectandcuttingemissionsinAbutsubsequentlyraisingB.toocostlytoimplement↑thescaleofpoliciesPushesthecostsupFasterthanthebenefits
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③EmissionsaretiedtoincomethehighestemissiongrowthPathSolvesEVERYdevelopmentproblemknowntohumanity,butalsoinvolveswarming④AbatementeitherVERYexpensiveorNOTPOSSIBLESO2>couldusescrubbersorSwitchtoacleanerversionforalowcost-CO2-Wouldhavetoswitchtoanalternatefuelorreduceconsumptionataveryhighcost⑤CO2isNOTaregularairpollutant⊥NaturalPtofatmosphererespiration⊥goodforplants⊥notregbeforenowConcernnowiseffectonClimate⊥However"Climate"isacatch-allterm⊥PPItrytolinkANYDadWeathereventtoCO2emissionsSmallUNCERTAINbenefits(ofreducing)andhighandvisiblecosts(thatareapparenttoday)CombinedMakeitVERYdifficulttomotivateincurringcoststoreduceCOmissionsIntegratedAssessmentModel(IAM)combinesestimateddamages(duetoWarming) sCostsofabatementCommon)Result:CO2imposeseconomiccosts,butnotmuchabatementcanbejustifiedBestStrategy:AdaptisadjusttothechangesKeepemitting
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