Exam questions Flashcards
Why can Economics be helpful in addressing climate change?
Taking a step back: the cause of climate change is homo sapience. In the Anthropocene, the current geological era we live in, one single species, was able to singlehandedly impact almost all aspects of the Earth system. We need economics in this time of crisis because economics is a behavioral science that helps addressing how humans make choices, and therefore hopefully guiding those choices in a more sustainable direction.
–> useful for the management of natural resources and for situations of scarcity.
–> scarcity = tradeoff = efficient allocation
–> Economics can for instance calculate the marginal costs and benefits of exploitation of the environment and compare them to find an equilibrium.
What are some examples of global changes?
A global change refers to planetary-scale changes that are connected to the rapid increase of human activities.
Humans drivers -> global change -> negative impacts
Humans use and overexploit a resource such as water, land, biodiversity, causing global changes such as changes in water cycling, climate change, biodiversity loss. In turn, there are negative impacts like: loss of ecosystem services and resilience, migration and conflicts, diseases, water and food insecurity.
In 1987 the International Geosphere and Biosphere programme was the first effort to coordinate research on a global change.
Define the Anthropocene and the theories of its onsets.
In the year 2000 in the IGBP meeting P. Crutzen claimed that we are no longer in the Holocene but in the Anthropocene. It is called the Anthropocene to highlight how the Earth may have entered a new human-dominated geological epoch. An era characterized by an enormous acceleration in human activity and their enormous impact on the planet. This era is different because for the first time a species (homo sapiens) has become a geological force able to model and shape the environment.
To choose the onset geologists must look for specific geological markers, a moment when a clear shift has occurred (must look for rapid changes across all the planet). These markers are defined as GSSP (Global Stratotype Section and Point) and can be found collecting data from ice-core or sediments… There must be a clear correlation between them and changes in human activities. Among the many theories the main two candidates for the onset are:
-> the Columbian exchange with a dip in global Co2 level in 1610 (people died for diseases after this first global exchange, drop in agriculture, drop in deforestation, drop in Co2)
-> The Great Acceleration and the bomb spike in 1964 (increase in radioactivity)
-> Other theories are the beginning of agricultural activities or the industrial revolution. There are political implications in choosing one date over the other.
What are the Planetary Boundaries?
The concept was formulated in 2009 by a group of 28 scientists collaborating with the Stockholm Resilience Center.
They are 9 fundamental processes that regulate the stability and resilience of the Earth system. Living within these quantitative planetary boundaries, humans can continue to develop and thrive for generations to come.
Crossing these boundaries increases the risk of generating large-scale abrupt or irreversible environmental changes and ultimately to reach a new state of the Earth system.
Examples of planetary boundaries include: climate change, ocean acidification, ozone layer depletion, biodiversity loss, freshwater procurement and so on. Climate change and biosphere integrity are core boundaries: significantly altering either of these core boundaries could drive the Earth System into a new state.
The green zone is the safe operating space, the yellow represents the zone of uncertainty (increasing risk), and the red is a high-risk zone.
Unfortunately, 5 of the 9 planetary boundaries have now been crossed as a result of human activity: biodiversity integrity, biogeochemical flows of nitrogen and phosphorus, environmental pollutants and other novel entities like plastic, climate change, and land-system change.
What is the relationship between the Anthropocene and the planetary boundaries?
The Anthropocene and the Planetary Boundaries are closely related, as human activity is the main driver of the current destabilization of the Earth’s environment and climate. It is essential that humans reduce their emissions and take other actions to stay within the Planetary Boundaries in order to mitigate the worst potential effects of the Anthropocene.
Why is climate change so difficult to address?
Climate change is difficult to address in economic terms because it is a global problem, and so the costs and benefits of any solution must be shared across countries. This requires international cooperation, which can be difficult to achieve given divergent interests and priorities.
Additionally, climate change is largely an externality, meaning that the costs of emissions are not taken into account in the decision-making process. This means that the true cost of climate change is not reflected in the market and so it can be difficult to make the economic case for addressing climate change.
The intertemporal problem of climate change in economics is the challenge of addressing climate change in the present while considering the impacts of our decisions on future generations. This is because any measures taken now to mitigate climate change will have the most benefit in the long term, while the costs of those measures are likely to be borne in the present. Thus, there is a tension between the short-term costs of addressing climate change and the long-term benefits.
What has been the development of climate science?
Climate science is relatively recent: the first models to simulate Earth’s climatic conditions were developed in the 60s and first movement for conservation awareness started in these years as well (Rachel Carson)
1956: Actual measurement of CO2 started with Charles Keeling in Mauna Loa in Hawaii giving rise to the famous Keeling curve: a daily record of global atmospheric carbon dioxide concentration.
What is the purpose of the IPCC and how is it organized?
In 1988 the UN established the IPCC (Intergovernmental Panel on Climate Change) to provide policymakers with regular scientific assessment of climate change. Every 5 years the IPCC prepares comprehensive Assessment Reports on climate change, its impacts and future risks, and adaptation/mitigation options. These data are useful to develop climate policies and are helpful in international negotiations on climate change.
The first report was in 1990 (FAR) the last one in 2020-2021 (AR6) which claims that GHG concentrations are unequivocally caused by humans (strong confidence).
The IPCC is organized in 3 working groups and 1 task force. The 3 working groups focus on different aspects of climate change (science, impacts, mitigation) and they review existing papers (do not add new info).
In a final meeting all governments participate and they go line by line asking questions (a long process) until everything is approved.
What are the Challenges in mitigating climate change?
→ The first challenge of mitigating climate change is that CO2 is a global pollutant: whether I release a ton of CO2 in Cambridge, Massachusetts, or in London, it does the same damage to the globe. It is therefore hard to regulate and manage.
→ Also, people who stand to be harmed by climate change are not born yet, it is a “future problem”, therefore there is less incentive to reduce greenhouse gas emissions in the present.
→ Developing countries contribute to a large share of pollution, yet since they have other priorities (food and water security, for example), we cannot ask them to focus on climate change policies.
→ Modern living is hard to abandon: electricity, transportation, and air conditioning contribute to climate change, and remedies potentially involve significant sacrifice and lifestyle change.
How can we measure climate change?
Climate change can be measured in many ways, including through changes in temperature, precipitation, sea level, and extreme weather events. In economic terms, climate change can be measured in two primary ways:
→ analyzing the economic impacts of climate change
→ measuring the costs of climate change mitigation and adaptation.
The economic impacts of climate change can be seen in changes to industries and natural systems and in the costs associated with those changes. For example, changes in weather patterns can lead to changes in crop yields and the costs associated with those changes, such as the costs of fertilizer, pesticides, and labor.
The costs of climate change mitigation and adaptation can also be measured in economic terms. Mitigation efforts such as renewable energy investments, energy efficiency initiatives, and carbon pricing can be measured in terms of their direct costs and their benefits, such as job creation and improved air quality. Adaptation efforts, such as coastal protection and infrastructure upgrades, can also be measured in terms of their direct costs and their benefits, such as increased economic activity and flood prevention.
What are some examples of mitigation strategies?
Some mitigation strategies to climate change include renewable energy investments, energy efficiency initiatives, carbon pricing, land and ocean conservation, and reforestation. Renewable energy investments involve investing in renewable energy sources such as wind, solar, and geothermal energy. Energy efficiency initiatives involve improving the efficiency of existing energy systems and using renewable energy sources. Carbon pricing involves setting a price on carbon emissions to incentivize the reduction of emissions. Land and ocean conservation involve protecting natural habitats and ecosystems from destruction and degradation. Reforestation involves planting trees to increase carbon sequestration and to improve air quality.
What level of environmental abatement should we adopt?
Climate change can be addressed with abatement policies which aim (as the word says) to abate, to limit environmental damage. But it is important to keep in mind the relationship between abatement costs and potential. Certain policies have costs depending on the technologies we use for instance, and they have either a high or low level of abatement. In the last decades there have been more affordable mitigation options like the reduction in price of photovoltaics and onshore wind. We can use the Marginal Abatement Cost to estimate how much abatement we get for any level of expenditure. We should start with cheap but effective measures (like land management and conservation policies) and only when exhausted we use the ones with higher costs.
What is Green Premium?
A Green Premium is a financial incentive offered to consumers to encourage them to purchase green products and services. A Green Premium can take the form of a tax credit, a direct subsidy, or a rebate. It is intended to offset the difference in cost between green and non-green products or services, making green products more attractive to consumers. Green Premiums can be implemented on a national, regional, or local level, depending on the context.
How is cost Benefit Analysis used for mitigation action?
CBA can be useful to understand the costs (of mitigation): like the ones needed to reduce GHGs and the benefits: the avoided impacts (already happened) or the risks (expected in the future).
This can be done because CBA uses monetary terms to measure things allowing to compare the costs with the benefits, remembering that there are always uncertainties. Since it uses monetary terms we must allocate a price both for the costs and the benefits.
–> To determine the price of the costs we can look at the technologies needed for mitigation actions (photovoltaics, nuclear…) keeping in mind that the more we increase abatement efforts the more our costs go up; we can use the marginal cost curve to look at the costs of production of any good keeping in mind that the final price is set by the most expensive technology.
–> To determine the price of the benefits ( which is more challenging) we can look at the benefits associated with the consumption curve related to the demand curve which corresponds to the willingness to pay (WTP).
Briefly describe the cost-benefit approach and risk-based approach.
The cost-benefit approach to climate change is an economic analysis which evaluates the costs and benefits of different strategies in addressing climate change. This approach attempts to quantify both the costs of potential solutions, such as the cost of implementing renewable energy infrastructure, and the benefits associated with those solutions, such as reduced air pollution.
The risk-based approach to climate change is an analysis which evaluates the risks posed by climate change and the potential strategies for mitigating those risks. This approach takes into account not only the costs and benefits of different strategies, but also the probability of different outcomes occurring. This approach is particularly useful in dealing with uncertain and long-term risks such as climate change.
What are the approaches to the economic evaluation of public goods?
The public good attribute of environmental quality requires that different approaches to those customarily employed in market-goods studies be adopted. Two basic approaches have been usually employed:
–> Indirect methods such as hedonic price models. In principle these infer the implicit value of a public good from the observable demand for some private good associated with it.
–> direct methods, principally the contingent valuation method (CVM). These elicit directly from individuals the value they would attribute to the public good in a market-like environment → uses people’s economic behavior (not their statements) on related markets to reveal their preferences.
CBA in USA and social cost of carbon (Obama VS Trump)
CBA is used by the US government in the environmental sphere to make political decisions and regulations. The CBA on climate change regulation uses the social cost of carbon (SCC) which is an estimate of the economic costs, or damages, of emitting one additional ton of carbon dioxide into the atmosphere, and thus indicates the benefits obtained with the reduction of GHGs. The administration of US President Barack Obama has used this metric to estimate the costs and the benefits of a wide variety of government decisions that affect greenhouse-gas emissions, including climate regulations targeted at the fossil-fuel industry. It is interesting to notice that the social cost of carbon for the Obama administration was 50 and for Trump 10, why is this? In this kind of research assumptions need to be made and they will determine the final outcome; for instance we need to make assumptions on future problems, and usually we give less weight to those due to levels of uncertainty (so we can have different discount factors). Trump for instance used very different discount factors, probably he gave no importance to future risk and as a consequence the SCC resulted lower.
What is the Social cost of carbon (SCC) and how do we calculate it ?
The SCC is an estimate of the economic costs, or damages, of emitting one additional ton of carbon dioxide into the atmosphere, and thus indicates the benefits obtained with the reduction of GHGs.
To calculate it we use the Integrated Assessment Models: how much is an additional ton of Co2 in $? The model can use the damage function to translate damages of temperature into damages in $. If we increase Co2 by 1 unit in the model then we can estimate possible costs in the future. Some people do not like this approach because it is too complicated and has levels of uncertainty.
