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David Keith and Joshua Horton. 4/23/2019. “Multilateral parametric climate risk insurance: a tool to facilitate agreement about deployment of solar geoengineering?” Climate Policy. Publisher's VersionAbstract
horton_and_keith_climate_policy_2019.pdf
States will disagree about deployment of solar geoengineering, technologies that would reflect a small portion of incoming sunlight to reduce risks of climate change, and most disagreements will be grounded in conflicting interests. States that object to deployment will have many options to oppose it, so states favouring deployment will have a powerful incentive to meet their objections. Objections rooted in opposition to the anticipated unequal consequences of deployment may be met through compensation, yet climate policy is inhospitable to compensation via liability. We propose that multilateral parametric climate risk insurance might be a useful tool to facilitate agreement on solar geoengineering deployment. With parametric insurance, predetermined payouts are triggered when climate indices deviate from set ranges. We suggest that states favouring deployment could underwrite reduced-rate parametric climate insurance. This mechanism would be particularly suited to resolving disagreements based on divergent judgments about the outcomes of proposed implementation. This would be especially relevant in cases where disagreements are rooted in varying levels of trust in climate model predictions of solar geoengineering effectiveness and risks. Negotiations over the pricing and terms of a parametric risk pool would make divergent judgments explicit and quantitative. Reduced-rate insurance would provide a way for states that favour implementation to demonstrate their confidence in solar geoengineering by underwriting risk transfer and ensuring compensation without the need for attribution. This would offer a powerful incentive for states opposing implementation to moderate their opposition.
Thomas Stoerk, Gernot Wagner, and Robert ET Ward. 6/4/2018. “Recommendations for Improving the Treatment of Risk and Uncertainty in Economic Estimates of Climate Impacts in the Sixth Intergovernmental Panel on Climate Change Assessment Report.” Review of Environmental Economics and Policy. Publisher's VersionAbstract
Large discrepancies persist between projections of the physical impacts of climate change and economic damage estimates. These discrepancies increase with increasing global average temperature projections. Based on this observation, we recommend that in its Sixth Assessment Report (AR6), the Intergovernmental Panel on Climate Change (IPCC) improve its approach to the management of the uncertainties inherent in climate policy decisions. In particular, we suggest that the IPCC (1) strengthen its focus on applications of decision making under risk, uncertainty, and outright ambiguity and (2) estimate how the uncertainty itself affects its economic and financial cost estimates of climate damage and, ultimately, the optimal price for each ton of carbon dioxide released. Our hope is that by adopting these recommendations, AR6 will be able to resolve some of the documented inconsistencies in estimates of the physical and economic impacts of climate change and more effectively fulfill the IPCC’s mission to provide policymakers with a robust and rigorous approach for assessing the potential future risks of climate change.
Sebastian D. Eastham, Debra K. Weisenstein, David W. Keith, and Steven R. H. Barrett. 5/25/2018. “Quantifying the impact of sulfate geoengineering on mortality from air quality and UV-B exposure.” Atmospheric Environment. Publisher's VersionAbstract
eastham_et_al._-_2018_-_quantifying_the_impact_of_sulfate_geoengineering_o.pdf
Sulfate geoengineering is a proposed method to partially counteract the global radiative forcing from accumulated greenhouse gases, potentially mitigating some impacts of climate change. While likely to be effective in slowing increases in average temperatures and extreme precipitation, there are known side-effects and potential unintended consequences which have not been quantified. One such consequence is the direct human health impact. Given the significant uncertainties, we take a sensitivity approach to explore the mechanisms and range of potential impacts. Using a chemistry-transport model, we quantify the steady-state response of three public health risks to 1 °C global mean surface cooling. We separate impacts into those which are “radiative forcing-driven”, associated with climate change “reversal” through modification of global radiative forcing, and those “direct impacts” associated uniquely with using sulfate geoengineering to achieve this. We find that the direct (non-radiative forcing driven) impact is a decrease in global mortality of ∼13,000 annually. Here the benefits of reduced ozone exposure exceed increases in mortality due to UV and particulate matter, as each unit of injected sulfur incurs 1/25th the particulate matter exposure of a unit of sulfur emitted from surface sources. This reduction is exceeded by radiative forcing-driven health impacts resulting from using sulfate geoengineering to offset 1 °C of surface temperature rise. Increased particulate matter formation at these lower temperatures results in ∼39,000 mortalities which would have been avoided at higher temperatures. As such we estimate that sulfate geoengineering in 2040 would cause ∼26,000 (95% interval: −30,000 to +79,000) early deaths annually relative to the same year without geoengineering, largely due to the loss of health benefits associated with CO2-induced warming. These results account only for impacts due to changes in air quality and UV-B flux. They do not account for non-mortality impacts or changes in atmospheric dynamics, and must be considered in the wider context of other climate change impacts such as heatwave frequency and sea level rise.
Gernot Wagner and Martin L. Weitzman. 7/2018. “Potentially large equilibrium climate sensitivity tail uncertainty.” Economics Letters, 168, Pp. 144-6. Publisher's VersionAbstract
Equilibrium climate sensitivity (ECS), the link between concentrations of greenhouse gases in the atmosphere and eventual global average temperatures, has been persistently and perhaps deeply uncertain. Its ‘likely’ range has been approximately between 1.5 and 4.5 degrees Centigrade for almost 40 years (Wagner and Weitzman, 2015). Moreover, Roe and Baker (2007), Weitzman (2009), and others have argued that its right-hand tail may be long, ‘fat’ even. Enter Cox et al. (2018), who use an ’emergent constraint’ approach to characterize the probability distribution of ECS as having a central or best estimate of 2.8℃ with a 66% confidence interval of 2.2-3.4℃. This implies, by their calculations, that the probability of ECS exceeding 4.5℃ is less than 1%. They characterize such kind of result as “renewing hope that we may yet be able to avoid global warming exceeding 2[℃]”. We share the desire for less uncertainty around ECS (Weitzman, 2011; Wagner and Weitzman, 2015). However, we are afraid that the upper-tail emergent constraint on ECS is largely a function of the assumed normal error terms in the regression analysis. We do not attempt to evaluate Cox et al. (2018)’s physical modeling (aside from the normality assumption), leaving that task to physical scientists. We take Cox et al. (2018)’s 66% confidence interval as given and explore the implications of applying alternative probability distributions. We find, for example, that moving from a normal to a log-normal distribution, while giving identical probabilities for being in the 2.2-3.4℃ range, increases the probability of exceeding 4.5℃ by over five times. Using instead a fat-tailed Pareto distribution, an admittedly extreme case, increases the probability by over forty times.
Sebastian D. Eastham, David W. Keith, and Steven R. H. Barrett. 3/9/2018. “Mortality tradeoff between air quality and skin cancer from changes in stratospheric ozone.” Environmental Research Letters, 13, 3. Publisher's VersionAbstract
eastham_2018_environ._res._letters.pdf
Skin cancer mortality resulting from stratospheric ozone depletion has been widely studied. Similarly, there is a deep body of literature on surface ozone and its health impacts, with modeling and observational studies demonstrating that surface ozone concentrations can be increased when stratospheric air mixes to the Earth's surface. We offer the first quantitative estimate of the trade-off between these two effects, comparing surface air quality benefits and UV-related harms from stratospheric ozone depletion. Applying an idealized ozone loss term in the stratosphere of a chemistry-transport model for modern-day conditions, we find that each Dobson unit of stratospheric ozone depletion results in a net decrease in the global annual mortality rate of ~40 premature deaths per billion population (d/bn/DU). The impacts are spatially heterogeneous in sign and magnitude, composed of a reduction in premature mortality rate due to ozone exposure of ~80 d/bn/DU concentrated in Southeast Asia, and an increase in skin cancer mortality rate of ~40 d/bn/DU, mostly in Western Europe. This is the first study to quantify air quality benefits of stratospheric ozone depletion, and the first to find that marginal decreases in stratospheric ozone around modern-day values could result in a net reduction in global mortality due to competing health impact pathways. This result, which is subject to significant methodological uncertainty, highlights the need to understand the health and environmental trade-offs involved in policy decisions regarding anthropogenic influences on ozone chemistry over the 21st century.
Kristina Mohlin, Jonathan R. Camuzeaux, Adrian Muller, Marius Schneider, and Gernot Wagner. 2/12/2018. “Factoring in the forgotten role of renewables in CO2 emission trends using decomposition analysis.” Energy Policy, 116, Pp. 290–296. Publisher's VersionAbstract
This paper introduces an approach for separately quantifying the contributions from renewables in decomposition analysis. So far, decomposition analyses of the drivers of national CO2 emissions have typically considered the combined energy mix as an explanatory factor without an explicit consideration or separation of renewables. As the cost of renewables continues to decrease, it becomes increasingly relevant to track their role in CO2 emission trends. Index decomposition analysis, in particular, provides a simple approach for doing so using publicly available data. We look to the U.S. as a case study, highlighting differences with the more detailed but also more complex structural decomposition analysis. Between 2007 and 2013, U.S. CO2 emissions decreased by around 10%—a decline not seen since the oil crisis of 1979. Prior analyses have identified the shale gas boom and the economic recession as the main explanatory factors. However, by decomposing the fuel mix effect, we conclude that renewables played an equally important role as natural gas in reducing CO2 emissions between 2007 and 2013: renewables decreased total emissions by 2.3–3.3%, roughly matching the 2.5–3.6% contribution from the shift to natural gas, compared with 0.6–1.5% for nuclear energy.
J. Paul Kelleher and Gernot Wagner. 2/2018. “Ramsey discounting calls for subtracting climate damages from economic growth rates.” Applied Economics Letters. Publisher's VersionAbstract
The Ramsey equation ties the utility discount rate and the elasticity of marginal utility of consumption together with per capita consumption growth rates to calculate consumption discount rates. For many applications, per capita consumption growth rates can be approximated with per capita output growth rates. That approximation does not work for climate change, which drives an ever-increasing and increasingly uncertain wedge between output and consumption growth. NAS (2017), in a central recommendation and illustrative example, conflates the two. The correct, consumption-based discounting method generally decreases consumption discount rates and, thus, increases the resulting Social Cost of Carbon Dioxide (SC-CO2).
Paul Bodnar, Caroline Ott, Rupert Edwards, Stephan Hoch, Emily F. McGlynn, and Gernot Wagner. 12/4/2017. “Underwriting 1.5°C: competitive approaches to financing accelerated climate change mitigation.” Climate Policy. Publisher's VersionAbstract

Delivering emission reductions consistent with a 1.5°C trajectory will require innovative public financial instruments designed to mobilize trillions of dollars of low-carbon private investment. Traditional public subsidy instruments such as grants and concessional loans, while critical to supporting nascent technologies or high-capital-cost projects, do not provide the price signals required to shift private investments towards low-carbon alternatives at a scale. Programmes that underwrite the value of emission reductions using auctioned price floors provide price certainty over long time horizons, thus improving the cost-effectiveness of limited public funds while also catalysing private investment.

Taking lessons from the World Bank’s Pilot Auction Facility, which supports methane and nitrous oxide mitigation projects, and the United Kingdom’s Contracts for Difference programme, which supports renewable energy deployment, we show that auctioned price floors can be applied to a variety of sectors with greater efficiency and scalability than traditional subsidy instruments. We explore how this new class of instrument can enhance the cost-effectiveness of carbon pricing and complementary policies needed to achieve a 1.5°C outcome, including through large-scale adoption by the Green Climate Fund and other international and domestic climate finance vehicles.

Key policy insights

  • Traditional public climate finance interventions such as grants and concessional loans have not mobilized private capital at the scale needed to decarbonize the world economy consistent with the 2°C target, much less 1.5°C, and will likely face ongoing constraints in the future.
  • Auctioned price floors – subsidies that offer a guaranteed price for future emission reductions – maximize climate impact per public dollar while incentivizing private investment in low-carbon technologies.
  • This new subsidy instrument, if applied at scale via the Green Climate Fund and other domestic and international climate finance vehicles, can promote private sector competition to bring down technology costs and drive innovation, thereby supporting a longer term transition to regulation and sector- or economy-wide carbon markets.
  • To facilitate the transition from public subsidy to the market-based support of climate mitigation, auctioned price floors should work in tandem with carbon pricing and complementary policies, using the same accounting and monitoring, reporting and verification toolkits.
Jonas Meckling, Thomas Sterner, and Gernot Wagner. 11/13/2017. “Policy sequencing toward decarbonization.” Nature Energy. Publisher's VersionAbstract
Many economists have long held that carbon pricing—either through a carbon tax or cap-and-trade—is the most cost-effective way to decarbonize energy systems, along with subsidies for basic research and development. Meanwhile, green innovation and industrial policies aimed at fostering low-carbon energy technologies have proliferated widely. Most of these predate direct carbon pricing. Low-carbon leaders such as California and the European Union (EU) have followed a distinct policy sequence that helps overcome some of the political challenges facing low-carbon policy by building economic interest groups in support of decarbonization and reducing the cost of technologies required for emissions reductions. However, while politically effective, this policy pathway faces significant challenges to environmental and cost effectiveness, including excess rent capture and lock-in. Here we discuss options for addressing these challenges under political constraints. As countries move toward deeper emissions cuts, combining and sequencing policies will prove critical to avoid environmental, economic, and political dead-ends in decarbonizing energy systems.
Jeremy Proville, Daniel Zavala-Araiza, and Gernot Wagner. 3/27/2017. “Night-time lights: A global, long term look at links to socio-economic trends.” PLoS ONE, 12, 3. Publisher's VersionAbstract
night_time_lights.pdf
We use a parallelized spatial analytics platform to process the twenty-one year totality of the longest-running time series of night-time lights data—the Defense Meteorological Satellite Program (DMSP) dataset—surpassing the narrower scope of prior studies to assess changes in area lit of countries globally. Doing so allows a retrospective look at the global, long-term relationships between night-time lights and a series of socio-economic indicators. We find the strongest correlations with electricity consumption, CO2 emissions, and GDP, followed by population, CH4 emissions, N2O emissions, poverty (inverse) and F-gas emissions. Relating area lit to electricity consumption shows that while a basic linear model provides a good statistical fit, regional and temporal trends are found to have a significant impact.
Ilissa B. Ocko, Steven P. Hamburg, Daniel J. Jacob, David W. Keith, Nathaniel O. Keohane, Michael Oppenheimer, Joseph D. Roy-Mayhew, Daniel P. Schrag, and Stephen W. Pacala. 5/5/2017. “Unmask temporal trade-offs in climate policy debates.” Science, 356, 6337, Pp. 492-493. Publisher's VersionAbstract
science.pdf

Global warming potentials (GWPs) have become an essential element of climate policy and are built into legal structures that regulate greenhouse gas emissions. This is in spite of a well-known shortcoming: GWP hides trade-offs between short- and long-term policy objectives inside a single time scale of 100 or 20 years (1). The most common form, GWP100, focuses on the climate impact of a pulse emission over 100 years, diluting near-term effects and misleadingly implying that short-lived climate pollutants exert forcings in the long-term, long after they are removed from the atmosphere (2). Meanwhile, GWP20 ignores climate effects after 20 years. We propose that these time scales be ubiquitously reported as an inseparable pair, much like systolic-diastolic blood pressure and city-highway vehicle fuel economy, to make the climate effect of using one or the other time scale explicit. Policy-makers often treat a GWP as a value-neutral measure, but the time-scale choice is central to achieving specific objectives (2–4).

Robert E. Kopp, Rachael Shwom, Gernot Wagner, and Jiacan Yuan. 7/2016. “Tipping elements and climate-economic shocks: Pathways toward integrated assessment.” Earth's Future. Publisher's VersionAbstract

The literature on the costs of climate change often draws a link between climatic ‘tipping points’ and large economic shocks, frequently called ‘catastrophes’. The phrase ‘tipping points’ in this context can be misleading. In popular and social scientific discourse, ‘tipping points’ involve abrupt state changes. For some climatic ‘tipping points,’ the commitment to a state change may occur abruptly, but the change itself may be rate-limited and take centuries or longer to realize. Additionally, the connection between climatic ‘tipping points’ and economic losses is tenuous, though emerging empirical and process-model-based tools provide pathways for investigating it. We propose terminology to clarify the distinction between ‘tipping points’ in the popular sense, the critical thresholds exhibited by climatic and social ‘tipping elements,’ and ‘economic shocks’. The last may be associated with tipping elements, gradual climate change, or non-climatic triggers. We illustrate our proposed distinctions by surveying the literature on climatic tipping elements, climatically sensitive social tipping elements, and climate-economic shocks, and we propose a research agenda to advance the integrated assessment of all three.

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