20422 - CLIMATE CHANGE ECONOMICS

Climate change is by and large an economic problem. It is a global, intertemporal externality and it represents a major challenge for economists. This course examines the key role of economic activities as a driver of climate change and how economic tools can be used to investigate this problem and to design climate policies. In order to deal with the problem of climate change the student has to rethink some key economic concepts like efficiency, externality, intertemporal decision making under uncertainty and welfare aggregation, from a new and more applied perspective.

The student also familiarizes with key tools for climate change and long term energy policy making: integrated assessment models. The general mechanism of these tools is learned through applications like the role of innovation in the energy sector, game theory and the (in)stability of international climate agreements, and how the inclusion of uncertainty affects optimal policies and investment decisions.

• Introduction to the Climate Change challenge
• Integrated Assessment models
• Making Decisions about the Environment (Cost Benefit and Cost Effective Analysis)
• Who is the social planner? (Inter-temporal and social aggregation issues)
• Modeling Technological Change (The Innovation Externality and Assessing the Costs)
• Valuation Methods (Valuing the Market and non-Market Benefits)
• Decision Making Under Risk and Uncertainty (positive and normative models)
• Game Theory and International Environmental Agreements
• Cooperation Under Uncertainty

Voluntary Assignment 1 (Short Memo) 40%

Voluntary Assignment 2 (Video) 30%

Final exam 30 %. 

Or  

Final exam 100%.

Class Active Participation Prize (1 point) to the top 5 Students

The Final Exam is written.

All above requirements expire within the Academic year. If you do the voluntary assignments you have to stick to that option throughout.

• Optional: Video and Memo Assignments
  

• S.R. WEART,  The Discovery of Global Warming (Harvard University Press, Harvard, MA, USA).See also www.aip.org/history/climate/co2.htm & http://www.aip.org/history/climate/20ctrend.htm. 2003
• J. HANSEN, L. NAZARENKO, R. RUEDY et al., Earth's Energy Imbalance: Confirmation and Implications, Science308, 1431-1435. 2005
• W. NORDHAUS  Why the Global Warming Skeptics Are Wrong, The New York Review of Books from the March 22, 2012 issue
• D. FULLERTON, R.N. STAVINS. How Economists see the Environment. Nature 395:433-434. 1998
• W. NORDHAUS,  Integrated Economic and Climate Modeling. 2011
• T. SCHELLING "Intergenerational discounting", Energy Policy 23, 395-401. 1995
• R.S.J. TOL ,  The Damage Costs of Climate Change Toward More Comprehensive Calculations, Environmental and Resource Economics 5, 353-374. 1995
• N. STERN  The economics of climate change The Stern Review, Cambridge University Press, Cambridge. 2007
• D. POPP, Induced innovation and energy prices, American Economic Review 92, 160-180. 2002
• V. BOSETTI,  C. CARRARO, E.MASETTI and M. TAVONI, International energy R&D spillovers and the economics of greenhouse gas atmospheric stabilization, Energy Economics 30: 2912-2929. 2008
• M.L. WEITZMAN, . Fat-tailed uncertainty in the economics of catastrophic climate change. Review of Environmental Economics and Policy, 5(2), pagg.275292. 2011
• G. HEAL & B.KRISTROM,  Uncertainty and climate change. Environmental and Resource Economics, 22(1), pagg.339. 2002
• A.P. KIRMAN,  "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-36, Spring. 1992
• S. BARRETT Self-Enforcing International Environmental Agreements, Oxford Economic Papers, Vol. 46, pp. 878-894. 1994