Global Climate Change

Econ 2277

Prof. Richard L. Sweeney

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Overview of next two weeks

  • Intro
    • science and options
    • challenges
  • Putting a price on CO2
    • IAMs
    • discounting
  • International agreements
    • leakage
    • free riding/ co-operation
  • National / sub-national issues
    • taxes vs subsidies
    • over-lapping instruments

Climate change is happening


Global combined land and ocean surface temperature anomalies relative to the average from 1986 to 2005. (IPCC 2014)

Climate change is happening


Annually and globally averaged sea level change relative to the average from 1986 to 2005. (Source: IPCC Synthesis Report 2014)

Trend concurrent with dramatic increase in CO2


Well known physical relationship



Humans are causing it


Things are going to get worse if we don't act


Things are going to get worse if we don't act


Current CO2 equiv. concentrations $\approx$450 ppm

Recent IPCC report predicts dire consequences



NOAA: "a sea level rise of 2 feet would more than triple the frequency of coastal flooding across the Northeast, without any change in storms."

What are we doing about it?


Emissions path under to 2030 under COP21 Commitments
Source: IEA WEO Special Report 2015

Recent IPCC report concludes drastic action needed

Basic outline of a solution is well known

  • Reduce / revers rate of deforestation

  • Change industrial production processes (example: cement production)

  • Switch as much as we can to electric power

    • heating
    • transportation (!)
  • Decarbonize electricity production

    • shut down coal plants [carbon capture and storage]
    • switch to wind and (mainly) solar
  • Increase energy efficiency of durables (ACs, water heaters, etc)

Good news


Bad news: Non-hyro renewables less than 5% of global consumption

Challenge #1: Timing and Intermittency


Challenge #2: Renewables low energy-density

  • Apple recently built a 20MW solar farm in data
  • Takes up 100 acres
  • Typical coal plant 10-20 times more output...

Costs of avoiding 450 ppm is manageable (but not trivial)


  • IPCC says 450 target can be achieved with a .06 percent reduction in economic growth
  • Growth compounds though, and this translates into a 5% reduction in total consumption
  • These projections assume optimal timing and implementation/ ie cost effectiveness
  • Do you think market based instruments will be important here?

The main challenges are political, not technical

  • Global climate change ``the ultimate commons problem''
  • Unparalleled challenges along spatial and temporal dimensions.

Challenge #1: CO2 is a uniformly mixing pollutant

  • This means that the impact on climate is independent of where emissions occurs

  • Implication: Cooperation is essential

    • no country (or region) can solve problem alone
    • US + China almost 50% of global emissions
  • Free rider problem

    • If all other countries act, one country's deviations aren't a big deal
    • Large returns to shirking


Challenge #2: CO2 is a stock pollutant

  • Even if we cut emissions to zero today, warming would persist
  • Problem: costs occur today but the benefits are far in the future
    • Politically and individually challenging

Economic implication:
"Solving climate change is a like marathon, not a sprint"

  • Optimal policy likely involves a gradual tightening of standards
  • Cheaper to make new capital efficient
  • Can invest in new technologies that make solving the problem cheaper in the future
  • But this commitment has to be serious and credible!

Challenge #3: Outcomes and damages are uncertain

  • But costs occur earlier, with certainty

  • Suggests powerful temptation to wait

  • What happens if we do?


Climate sensitivity parameter = average surface warming resulting from a doubling of CO2, in equilibrium

Source: Heal and Miller 2014


  • CO2 removal (direct air capture, ocean fertilization, etc.)

    • stir the oceans to suck up more CO2
  • Solar radiation management

    • put reflective material in the sky
  • great New Yorker article

Proof of concept: 1991 Mt. Pinatubo eruption (Phillipines)

  • 20 MM tons of SO2 mixed created a kind of gaseous mirror
  • In 1992 sunlight reaching earth's surface dropped by 10%
    • Estimated decline in temp was .75 degrees Celsius


  • Relocation

  • New resilient infrastructure

  • New crops

  • Emergency resonse

  • Climate control