Public Policy

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
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.
Masahiro Sugiyama, Shinichiro Asayama, Atsushi Ishii, Takanobu Kosugi, John C. Moore, Jolene Lin, Penehuro F. Lefale, Wil Burns, Masatomo Fujiwara, Arunabha Ghosh, Joshua Horton, Atsushi Kurosawa, Andy Parker, Michael Thompson, Pak-Hang Wong, and Lili Xia. 7/4/2017. “The Asia-Pacific’s role in the emerging solar geoengineering debate.” Climatic Change. Publisher's VersionAbstract
Increasing interest in climate engineering in recent years has led to calls by the international research community for international research collaboration as well as global public engagement. But making such collaboration a reality is challenging. Here, we report the summary of a 2016 workshop on the significance and challenges of international collaboration on climate engineering research with a focus on the Asia-Pacific region. Because of the region’s interest in benefits and risks of climate engineering, there is a potential synergy between impact research on anthropogenic global warming and that on solar radiation management. Local researchers in the region can help make progress toward better understanding of impacts of solar radiation management. These activities can be guided by an ad hoc Asia-Pacific working group on climate engineering, a voluntary expert network. The working group can foster regional conversations in a sustained manner while contributing to capacity building. An important theme in the regional conversation is to develop effective practices of dialogues in light of local backgrounds such as cultural traditions and past experiences of large-scale technology development. Our recommendation merely portrays one of several possible ways forward, and it is our hope to stimulate the debate in the region.
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

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.

Joshua Horton and Jesse Reynolds. 3/18/2016. “The International Politics of Climate Engineering: A Review and Prospectus for International Relations.” The Oxford University Press. Publisher's VersionAbstract

Proposed large-scale intentional interventions in natural systems in order to counter climate change, typically called “climate engineering” or “geoengineering,” stand to dramatically alter the international politics of climate change and potentially much more. There is currently a significant and growing literature on the international politics of climate engineering. However, it has been produced primarily by scholars from outside the discipline of International Relations (IR). We are concerned that IR scholars are missing a critical opportunity to offer insights into, and perhaps help shape, the emerging international politics of climate engineering. To that end, the primary goal of this paper is to call the attention of the IR community to these developments. Thus, we offer here an overview of the existing literature on the international politics of climate engineering and a preliminary assessment of its strengths and lacunae. We trace several key themes in this corpus, including problem structure, the concern that climate engineering could undermine emissions cuts, the potentially “slippery slope” of research and development, unilateral implementation, interstate conflict, militarization, rising tensions between industrialized and developing countries, and governance challenges and opportunities. The international politics of climate engineering is then considered through the lenses of the leading IR theories (Realism, Institutionalism, Liberalism, and Constructivism), exploring both what they have contributed and possible lines of future inquiry. Disciplinary IR scholars should have much to say on a number of topics related to climate engineering, including its power and transformational potentials, the possibility of counter-climate engineering, issues of institutional design, international law, and emergent practices. We believe that it is incumbent on the IR community, whose defining focus is international relations, to turn its attention to these unprecedented technologies and to the full scope of possible ramifications they might have for the international system.