Climate Change: Policy & Negotiations

Question 1

2 approaches to reduce CO2 emissions

Answer 1

Focus on social cost of carbon (SCC)

Focus on achieving a CO2 emission target

Question 2

Focus on social cost of carbon (SCC) , essential information required and which country has that

Answer 2

Set carbon tax at level of SCC e.g like US

Essential information: social cost of carbon

Question 3

CO2 emission target, essential information required and which country has that

Answer 3

Set carbon tax consistent with the emission target. E.g like the UK

Essential information: price elasticity of CO2 emissions

Question 4

Carbon tax

Answer 4

A tax on fuel in proportion to the carbon content of the fuel.

I.e coal has the largest carbon content per unit

Question 5

Market price for carbon equation

Answer 5

P=MPC+MEC=MSC

(External cost MEC is internalised in the market price P)

Question 6

Carbon tax externality diagram

Answer 6

MSC steeper than MPC
MB constant (horizontal)

Question 7

Benefits of climate policies

Answer 7

Mitigate future CC damages following the fall in greenhouse gases (GHG)

Question 8

SVGW

Question 9

How do they estimate the SCC

Answer 9

Integrated assessment models

Question 10

Integrated assessment model

Answer 10

Combine scientific and economic models to evaluate impacts of carbon emission

Question 11

Integrated assessment model main modules… (4)

Answer 11

Socioeconomic modules- socioeconomic and emission trajectories

Climate module- relationship between emissions and climate change

Damage module- translate climate change into economic damages.

Discounting modules- calculate present value of future damages

Question 12

Level of tax, and SCC

Answer 12

Should be set in accordance with MEC (external cost) of emissions.

SCC is the marginal costs of emitting one extra tonne of GHG

Question 13

Identifying the MEC: different views on social costs between different presidents in US

Answer 13

Obama- $42-62
Trump- $1-7
Biden- $51-152

So uncertainty and difficulties estimating SCC

Question 14

Why was Trumps low? (2)

Answer 14

Focused solely on damages from CC that would occur in borders of US

Also had a higher discount rate of 7% compared to 3% for the others.

Question 15

Target consistent approach

Answer 15

Identify target, then set level of tax to achieve the target at the least cost.

Essential information- Price elasticity

Question 16

How to know how different tax levels would effect emission levels

Answer 16

PED and XED

Question 17

What is PED for energy

Answer 17

Relatively inelastic

Question 18

XED for energy

Answer 18

Relatively elastic. E.g a price increase in gas may shift to use of fuel. Which then has consequences (pos/neg) depending on choice (remember coal had the most carbon content per unit, most harmful for carbon emissions)

Question 19

Pros cons of SCC

Answer 19

Measures benefits of reducing CO2 emissions, (net benefits to society)

Cons
Hard to set- Wide range of SCC- Limited practical assistance in setting the specific tax (trumps was low compared to others)

Political considerations can distort estimates of SCC e.g discount rate and scope of GHG emissions (trump used7% and only considered within US borders

Question 20

Target-consistent approach

Answer 20

Pros
Avoid uncertainty in estimates of climate damages and long term decarbonisation costs

Cons
Based on cost estimate of carbon that doesn’t consider benefits

Replaces scientific assessments of climate damages with subjective judgements about policy targets and choices

Question 21

Paris agreement 2015

Answer 21

Aim to strengthen global response to CC.

Aim to hold the increase in global average temperature well below 2 degrees above pre-industrial levels.

Question 22

Why 2 degrees? (Nordhaus)

Answer 22

Above would take climate outside range of observations which have been made

Question 23

UN report 2015

Answer 23

2 degrees is not enough for avoiding some of the mos severe impacts of climate change, so set a new target of 1.5 degrees

Question 24

Nationally determined contributions (NDCs)

Answer 24

Commitments on national efforts individual countries plan to take to meet objectives of Paris agreements (2-1.5degrees)

(JUST INDIVIDUAL COUNTRY ATTEMPTS TO PARIS AGREEMENT)

Question 25

2 types of NDC

Answer 25

Unconditional NDC: Target to be reached without outside support

Conditional NDC: targets to be reached on conditions of
Financial/technical support
Climate policies implemented by other counties

Question 26

UK pledges 2021

Answer 26

Reduce methane emissions by 30% by 2030
Halt and reverse deforestation by 2030
Stop public financing for MOST fossil fuel projects by end of 2022
Guarantee vehicles are zero-emissions by 2035 in leading markets and 2040 globallly

Question 27

Nordhaus findings on SCC

Answer 27

Using SCC would find in mid 2100 a temperature of 4C, far outside bounds of Paris agreement (a catastrophic increase)

So SCC is not that reliable… pushing for use of a target-consistent approach instead in US

Question 28

Target consistent approach findings

Answer 28

A lower elasticity previous assumptions -0.18

This means carbon taxes at current levels are unlikely to achieve emission reductions at speed necessary to meet Paris agreement objectives (so we need to change prices)

Need a price greater than $250 to be on target which isi outside political feasibility

Question 29

Current carbon prices show $250 is unfeasible

Answer 29

US: $51 per tonne of CO2
UK: $76.86
Sweden: $137 (highest)

Question 30

Delaying policy actions only increase effort required in future to limit warming (below 2 degree by 2100).

Consider different times from 2000 2020 and 2020 where emission peak, and their required % reduction required to limit warming below 2degree by 2100.

Answer 30

I.e later emissions peak, harder to limit warming below 2 degree target.

2000 peak: needs a 1-2% annual reduction
2020 peak: needs a 4-5% annual reduction
2030 peak: needs a 7% annual reduction

To reduce warming below 2 degree by 2100