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Convenient or Not, the Climate is Changing

Convenient or Not, the Climate is Changing. An Economic Conversation about Global Climate Change. Congrats to Al and the IPCC.

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Convenient or Not, the Climate is Changing

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  1. Convenient or Not, the Climate is Changing An Economic Conversation about Global Climate Change

  2. Congrats to Al and the IPCC "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change"

  3. What can an economist do? • Understand drivers of change • Estimate expected size & distribution of benefits & costs • Policy solutions to increase benefits & decrease costs

  4. IPCC 2007

  5. IPCC 2007

  6. IPCC 2007

  7. Expected benefits? • Longer growing seasons • More rain => more water • Less cold-related deaths • New trade routes as ice melts (Bering Strait) • Swamped by damages?

  8. Expected damages! • Food / water shortages, droughts, floods, hurricanes, wildfires, species extinction, pests, disease, thresholds / tipping points / feedback loops… • Estimates: • 0.26% US GDP Nordhaus (1991) • 2% US GDP Cline (1992) • 5% to 20% of global GDP each year, now & forever (Stern 2006)

  9. What then do we do?Policy prescriptions • Pricing of carbon • Support low-carbon technologies • Remove barriers to energy efficiency

  10. Pricing of carbon: Tax • Want less of something? Tax it! • Response? Raises the price for anyone who: a) drives a car b) uses electricity produced with fossil fuels • Use this tax to reduce others (payroll tax)

  11. Support low-carbon technology • Remove existing market distortions • High subsidies to fossil fuel technologies • Reduces incentive to innovate • Infrastructure • Grid structure high entry barrier • Funding for R & D

  12. Remove barriers to energy efficiency • Regulation policy • Restricting availability of inefficient technologies (CFC’s) • Information policy • Performance labels • Transparent energy bills • “Smart meters” / peak load pricing

  13. Tax over other alternatives • Increased fuel efficiency? • Not free. Passed on to consumers. • Encourages more driving (now cheaper). • Cap and trade ok but no revenue • Developed countries could face a higher tax • Taxes collected in developing countries would stay in country

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