Climate Economics
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Publications
SEI Climate Economics Newsletter
Daydreams of Disaster; Report to the California Attorney General 2009
January 2010
Frank Ackerman
This report is an evaluation of the Varshney-Tootelian critiques of AB 32 and other regulations.
Varshney and Tootelian have authored two recent reports on the economic impact of
implementing California’s greenhouse gas law, AB 32, and on the cost of state regulation on
California small businesses. Their studies predict that AB 32 will result in losses as large as 10% of California's output, and that the losses from state regulation overall are
responsible for a loss of one-third of California’s output.
Both studies are unsound and unreliable economic analysis. The losses they project would be serious
economic impacts – if they were real. They are, however, entirely unreal; they should be viewed
merely as daydreams of disaster.
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Op-ed: In Copenhagen, all eyes are on us
December 13, 2009
Frank Ackerman
The Op-ed was published in the following newspapers:
The MetroWest Daily News (Framingham, MA)
The Daily News Tribune (Waltham, MA)
The Wakefield Observer (Wakefield, MA)
The Milford Daily News (Milford, MA)
The Brockton Enterprise (Brockton, MA)
The Crookston Times (Crookston, MN)
The Advocate Tribune (Granite Falls, MN)
The Du Quoin Evening Call (Du Quoin, IL)
The Cheboygan Daily Tribune (Cheboygan, MI)
The Benton Evening News (Benton, IL)
The Shawnee News-Star (Shawnee, OK)
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Comments on EPA and NHTSA “Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards”
November 27, 2009, by Frank Ackerman
Frank Ackermann outlines why the intermim social cost of carbon (SCC) figures used by EPA and NHTSA underestimate the damages resulting from an incremental ton of CO2 emissions. He demonstrates that the methods used to develop these estimates rely on a biased and
incomplete reading of the economic literature on climate change.and concudes that strict tailpipe emission standards for U.S. cars and trucks will undoubtedly be on the leastcost
path to a safe climate standard such as 350 ppm.
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Washington Post Op-Ed: We can afford to save the planet
October 23, 2009
By Eban Goodstein, Frank Ackerman and Kristen Sheeran
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Yale Enviornment 360: The Economic Case for Slashing Carbon Emissions
October 20, 2009
Opinion piece by Frank Ackerman
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The Economics of 350:
The Benefits and Costs of Climate Stabilization
October 6, 2009
America’s largest network of independent climate economists has issued a major new report showing that the more aggressive world leaders are in curbing world carbon emissions, the greater the economic benefits will be. The two lead authors, SEI researchers Frank Ackerman and Elizabeth A. Stanton, co-authored the report with researchers from universities and think-tanks across the country. The report argues that a worldwide effort to lower atmospheric carbon concentrations to 350 parts per million is affordable; it can create more new jobs, spur more innovation and protect businesses, governments and households from the damages caused by the rapid heating of the earth. The report concludes that the estimated cost of reaching a target of 350 parts per million is roughly equivalent to one to three percent of world gross domestic product.
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Financing the Climate Mitigation and Adaptation Measures in Developing Countries; Working Paper US09-10
September 2009
Frank Ackerman
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Did the Stern Review underestimate US and global climate damages?
July 2009
Frank Ackerman, Elizabeth A. Stanton, Chris Hope, Stephane Alberth, Energy Policy 37 (2009) 2717–2721.
This article describes our revisions to the PAGE
estimates, and explains our conclusion that the model runs used in the Stern Review may well
underestimate U.S. and global damages. Stern’s estimates from PAGE2002 implied that mean
business-as-usual damages in 2100 would represent just 0.4 percent of GDP for the United States and
2.2 percent of GDP for the world. Our revisions and reinterpretation of the PAGE model imply that
climate damages in 2100 could reach 2.6 percent of GDP for the United States and 10.8 percent for
the world.
An earlier version of this article appeared as SEI Working Paper 08-02, October 2008.
If you are interested in reading this article please contact anja.kollmuss@sei-us.org
Climate and Development Economics: Balancing Science, Politics, and Equity; Working Paper US09-08
June 19, 2009
Elizabeth A. Stanton, Frank Ackerman
The interaction of climate and development threatens to create a paradox: economic development could accelerate climate change, which in turn could block further development, locking the world into existing patterns of inequality as the natural environment deteriorates. The solution to this paradox is far from obvious. What analytical tools are needed to chart a path that leads toward sustainable, low-carbon economic development? This article reviews the implications for climate policy of the climate economics and development literature, focusing on three key areas of judgments and assumptions that are built into a number of leading climate-economics models: 1) the treatment of climate science, risk, and uncertainty in climate-economics models; 2) questions of abatement technologies and costs, including a focus on the “cost effectiveness” method of economic analysis; and 3) ethical issues surrounding the distribution of the costs of emission reductions and adaptation measures.
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Carbon Embedded in China’s Trade; Working Paper US09-06
June 16, 2009
Frank Ackerman
A large fraction of China's greenhouse gas emissions are incurred in order to satisfy final demand of consumers in other countries; in effect, carbon emissions are embedded in China's exports. This paper explores the economic context and policy implications of carbon embedded in China's trade. China is a net exporter of embedded carbon because its entire economy is carbon-intensive; if China had its current trade patterns but U.S. carbon intensities in every sector, its net export of embedded carbon would disappear. China's success in trade is based on labor costs, not carbon emissions; there is literally no correlation between carbon intensity and revealed comparative advantage within the Chinese economy today.
In terms of policy, developed countries have discussed border tax adjustments on imports from countries with lower carbon prices. However, since China's comparative advantage is not based on carbon intensity, a border tax adjustment on carbon-intensive goods would do little harm to China, and would have little benefit for developed countries. A globally harmonized carbon price, often assumed to be crucial to successful climate policies, is not strictly necessary in theory, and may not be introduced for some time in practice. When and if it occurs, a harmonized carbon price will raise costs for China's carbon-intensive industries, but will also create an opportunity for China to “leapfrog” beyond the technologies developed in high-income countries and take the lead in creating the technological basis for a sustainable future.
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Fat Tails, Exponents, and Extreme Uncertainty: Simulating Catastrophe in DICE: Working Paper WP-US-0901
February 10, 2009; updated May 11, 2009
Frank Ackerman, Elizabeth A. Stanton, and Ramón Bueno
The problem of low-probability, catastrophic risk is increasingly central to discussion of climate science and policy. But the integrated assessment models (IAMs) of climate economics rarely incorporate this possibility. What modifications are needed to analyze catastrophic economic risks in an IAM? We explore this question using DICE, a well-known IAM. We examine the implications of a fat-tailed probability distribution for the climate sensitivity parameter, a focus of recent work by Martin Weitzman, and the shape of the damage function, one of the issues raised by the Stern Review. Forecasts of disastrous economic outcomes in DICE are easily produced by the interaction of these two innovations, but not by either one alone.
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Negishi Welfare Weights: The Mathematics of Global Inequality; Working Paper US09-02
May 2009
Elizabeth A. Stanton
In a global climate policy debate fraught with differing understandings of right and wrong, the importance of making transparent the ethical assumptions used in climate-economics models cannot be overestimated. Negishi weighting is a key ethical assumption at work in climate-economics models, but one that is virtually unknown to most model users. Negishi weights freeze the current distribution of income between world regions; without this constraint, IAMs that maximize global welfare would recommend an equalization of income across regions as part of their policy advice. With Negishi weights in place, these models instead recommend a course of action that would be optimal only in a world in which global income redistribution cannot and will not take place. This article describes the Negishi procedure and its origin in theoretical and applied welfare economics, and discusses the policy implications of the presentation and use of Negishi-weighted model results, as well as some alternatives to Negishi weighting in climate-economics models.
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Greenhouse Gases and the American Lifestyle: Understanding Interstate Differences in Emissions
May 2009
Elizabeth A. Stanton and Frank Ackerman are co-authors, along with Kristen Sheeran, Director of Economics for Equity and the Environment (E3 Network), of a report on interstate differences in per capita GHGs.
It explains why some states have much lower emissions than others and helps clarify the potential regional impacts of policies, such as cap-and-trade, which will impose a price on energy-related carbon dioxide emissions.
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Nature Reports: Climate Change
April 9, 2009
Frank Ackerman's review of Nicholas Stern’s newly released book, “A Blueprint for a Safer Planet,” was published on line on at nature.com.
Greenhouse Gases and Human Well-Being: China in a Global Perspective; Working Paper US09-07
March 31, 2009
Elizabeth A. Stanton
Most pollution is an unequivocal social bad – a negative externality – but the relationship between greenhouse gas emissions and human well-being is unusually complex. In the long-run, there is a strong scientific consensus that greenhouse gas emissions will result in higher temperatures and sea levels, and a disruption of historical weather patterns. In the short-run, greenhouse gas emissions, and the activities that produce these emissions, result in a mixed set of consequences. Industrialized countries have higher emissions, but also more revenue from the sale of industrial products. China and a few other rapidly industrializing countries stand in the middle. On one side are poorer, less industrialized countries with little responsibility for the emissions that cause climate change and few resources with which to combat its effects. On the other side are richer, more industrialized countries with enormous culpability – both past and present – for the problem of climate change and ample funds for adaptation measures to protect human well-being. This paper takes China as a case study to examine the relationship between greenhouse gas emissions and human well-being.
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Can We Afford the Future? The Economics of a Warming World
January 2009
Frank Ackerman's new book offers a refreshing look at the economics of climate change, explaining how the arbitrary assumptions of conventional theories get in the way of understanding this urgent problem. The benefits of climate protection are vital but priceless, and hence often devalued in cost-benefit calculations. Preparation for the most predictable outcomes of global warming is less important than protection against the growing risk of catastrophic change; massive investment in new, low carbon technologies and industries should be thought of as life insurance for the planet.
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Climate Economics in Four Easy Pieces
December 2008
Frank Ackerman, Development, 2008, 51, (325–331)
If you are interested in reading this article please contact anja.kollmuss@sei-us.org
Out of the Shadows: What’s Behind DEFRA’s New Approach to the Price of Carbon
July 2008
Elizabeth A. Stanton and Frank Ackerman
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Generated User Benefits and the Heathrow Expansion: Understanding Consumer Surplus
July 2008
Elizabeth A. Stanton and Frank Ackerman
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The Caribbean and Climate Change: The Costs of Inaction
May 2008
Ramón Bueno, Cornelia Herzfeld, Elizabeth A. Stanton, and Frank Ackerman
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The Cost of Climate Change: What We’ll Pay if Global Warming Continues Unchecked
May 2008
Frank Ackerman and Elizabeth A. Stanton
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Inside the Integrated Assessment Models: Four Issues in Climate Economics; Working Paper US08-01
2008
Elizabeth A. Stanton, Frank Ackerman,Sivan Kartha
Good climate policy requires the best possible understanding of how climatic change will impact on
human lives and livelihoods in both industrialized and developing counties. Our review of recent
contributions to the climate-economics literature assesses 30 existing integrated assessment models in
terms of four key aspects of the nexus of climate and the economy: the connection between the model
structure and the type of results produced; uncertainty in climate outcomes and the projection of future
damages; equity across time and space; and abatement costs and the endogeneity of technological
change. Differences in treatment of these issues are substantial, and directly affect model results and
their implied policy prescriptions. Much can be learned about climate economics and modeling
technique from the best practices in these areas; there is unfortunately no existing model that
incorporates the best practices on all or most of the questions we examine.
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Florida and Climate Change: The Costs of Inaction
November 2007
Elizabeth A. Stanton and Frank Ackerman; report commissioned by Environmental Defense.
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"Hot, It’s Not: Reflections on Cool It!, by Bjorn Lomborg,"
August 2008
Frank Ackerman, Climatic Change, volume 89, numbers 3-4.
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"Debating Climate Economics: The Stern Review vs. Its Critics,"
July 2007
Frank Ackerman
Report to Friends of the Earth-England, Wales and Northern Ireland.
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Publication available from GDAE (prior work of the SEI Climate Economics researchers)
"Law and Economics for a Warming World," by Lisa Heinzerling and Frank Ackerman; Harvard Law and Policy Review volume 1, no. 2, pp.331-362.
"The Carbon Content of Japan-US Trade," by Frank Ackerman, Masanobu Ishikawa, and Mikio Suga; Energy Policy, volume 35 no. 9, September 2007, pp.4455-4462.
"The Economics of Inaction on Climate Change: A Sensitivity Analysis," by Frank Ackerman and Ian Finlayson; Climate Policy, volume 6 no. 5 (2006), pp.509-526. An earlier version of this article appeared as GDAE Working Paper 06-07. October, 2006.
"Climate Change - The Costs of Inaction," by Frank Ackerman and Elizabeth Stanton; report released with Friends of the Earth England, Wales and Northern Ireland, October 2006.
"Can Climate Change Save Lives? A comment on ‘Economy-wide estimates of the implications of climate change: Human health’,” by Frank Ackerman and Elizabeth A. Stanton; Ecological Economics, volume 66 (2008), pp. 8-13. An earlier version of this article appeared as GDAE Working Paper 06-05. September, 2006.
“Greenhouse Emissions from Waste Management. A survey of data reported to UNFCCC by Annex I countries,” by Frank Ackerman, William Moomaw, and Robin Taylor, May 20, 2003.