Climate Change

Question 1

Kyoto Protocol:

Answer 1

1997 agreement to create a global cap-and-trade system
– U.S. withdrew during the Bush administration ⇒ ineffective

Question 2

IPCC

Answer 2

U.N. panel that summarizes research and outlines pathws to decarb

Question 3

2015 Paris Agreement

Answer 3

countries promised to keep warming < 2◦C
⇒ In the near term, most regulations likely to occur w/in countries

Question 4

The Social Cost of Carbon (SCC)

Answer 4

the marginal damage from an additional ton of carbon, given the current amount of carbon in the atmosphere

Question 5

Efficient amount of reduction

Answer 5

where the SMC of ↓ pollution by one unit is equal to the MD of that unit of pollution

Question 6

Researchers care about the SCC for two reasons

Answer 6

1. Important theoretical parameter: Key input in using externality theory to decide how much remaining CO2 we should emit
2. Useful from a communication standpoint:
   – A simple way of conveying the magnitude of damage
   → Reveals the harm to the world from emitting one more ton, given all emissions that have come before

Question 7

the SCC increases over time

Answer 7

1) The MD curve is ↑ in the amount of carbon in the atmosphere
2) Over time, there will be more carbon in the atmosphere
⇒ The marginal damage from an additional ton will be larger

Question 8

The SCC incorporates both contemporary and future damages

Answer 8

1) Carbon stays in the atmosphere for at least 300 years
2_ The SCC is a measure of external damage on all third parties, including future generations
⇒ when calculating the SCC, must account for future damages

Question 9

5 steps to calculating SCC

Answer 9

1. Measure the effect of carbon emissions on the climate, using Global Climate Models from climate scientists (Large, computable models)
2. Measure how changes in climate affect economic & social outcomes
   – Use quasi-experiments and causal econometric strategies
   – Study effects on health, mortality, productivity, conflict, growth, etc…
3. Monetize the social and economic harms
4. Choose a discount rate and discount the harms by year
   – A value that captures how much we care about the future v. the present
   – Low discount rate (e.g., 2%): place sim. weight on future v. present
   – High discount rate (e.g., 7%): place low weight on the future
5. Finally, take all the discounted harms in each year and add them

Question 10

Discount Rate

Answer 10

captures how we care about the future v. present

Question 11

Present Value

Answer 11

value today of receiving a dollar in the future

Question 12

Obama Administration Task Force

Answer 12

– Relied on Integrated Assessment Models (IAM)
– Used multiple IAMs, with different discount rates
– Found that the SCC is moderately high:
→ 2020: $42 per ton; 2030: $50 per ton; 2050: $69 per ton
16 / 34

Question 13

IAMs jointly calculate the effects of

Answer 13

1. Carbon on climate change
2. Climate change on social & economic outcomes

Question 14

Uncertainty in Climate Change

Answer 14

1. Effects of carbon on the climate
   — feedback loops or threshold effects may accelerate warming
2. Effects of changes in the climate on social wellbeing
   — large-scale migrations may lead to extremist governments

Question 15

Distributional effects

Answer 15

1. The particular design of the policies
2. How the revenue is spent

Question 15

Salience

Answer 15

how prominent a policy is

Question 16

Researchers think a ______ is more salient than cap and trade

Answer 16

carbon tax

Question 17

Researchers believe ______ has more potential for decarbonization

Answer 17

cap & trade