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A new website has been launched to address the economics of climate change. The Real Climate Economics website:

... offers a reader’s guide to the real economics of climate change, an emerging body of scholarship that is consistent with the urgency of the problem as seen from a climate science perspective.

As the climate policy debate intensifies, economic analysis is playing an increasingly central role. The case for inaction is no longer argued on the grounds of skepticism about the science; instead, some have claimed that it will be too expensive to take more than token initiatives. There is now extensive economic analysis that challenges and refutes this idea. The peer-reviewed literature demonstrates that there is rigorous economic support for immediate, large-scale policy responses to the climate crisis.

This is a real resource for rebutting those who claim that addressing climate change is not economically feasible. Extensive economic analysis indicates immediate action to reduce carbon emissions is needed. The website was created by, a project of Economics for Equity and the Environment Network(E3) and Ecotrust, with a grant from The Energy Foundation.

Topics included in the discussion:

  1. General perspectives

How should we frame the problem of climate change in economic terms? What principles of economics need to be changed or emphasized to comprehend and analyze the current crisis?

  1. Reviews of models

What are the strengths and limitations of the models used in climate economics? How do the assumptions used in economic models shape their policy recommendations? Are there critical assumptions and relationships that should be added to standard models?

  1. Discounting and intergenerational ethics

Climate policy generally involves near-term costs with very long-term benefits; those who stand to gain the most from actions today have not yet been born. What do economics and ethics have to say about our relationship to future generations — and about the resulting implications for discount rates?

  1. Uncertainty and worst-case risks

Climate change entails relatively predictable, reasonably bad expected or average outcomes – and catastrophically worse outcomes that are unlikely but not impossible. How should economics incorporate uncertainty about catastrophic worst-case risks?

  1. Benefits/damage valuation

Economists have tried to assign dollar values to expected climate damages; early estimates often projected surprisingly small economic impacts. Which damages can be evaluated in monetary terms? Are newer estimates of expected damages growing larger?

  1. Costs of mitigation

The big question for public policy: how expensive will it be to do something about the problem? This complex topic has several subtopics, including:

No-regrets options: How much can be done for zero net cost? Why hasn’t it been done already?

Job creation: How do the jobs created by climate policy compare to the jobs lost, in numbers, skill levels, and locations?

Endogenous technology and path dependence: How do the costs of new low-carbon technologies change as we spend money on them and gain experience? What does this imply for long-term cost predictions?

  1. Adaptation costs

Some amount of climate change is inescapable, and adaptation measures will be required. What are the costs of adaptation? How does adaptation relate to mitigation, as part of a policy response?

  1. Equity and global distribution

Climate protection is a pure public good; emission reductions anywhere benefit people everywhere. What international arrangements are needed to coordinate reductions worldwide and overcome the free-rider problem? What is the appropriate standard of equity in allocating the costs of global policies to nations and individuals?

  1. Policy mechanisms

What policy mechanisms are available to address the climate problem? Major options include:

-Taxes and allowance trading: Either a tax or an allowance trading scheme puts a price on carbon emissions. How high should it be? How should it be designed? How should the tax revenues or the value of the allowances be allocated?

-Public investment: What other government initiatives are needed? How can the public sector effectively intervene to reduce emissions and stimulate new research and development?

Some of the authors include:

Frank Ackerman, Director of Research and Public Policy at the Tufts University and a founding member of the Economics for Equity and the Environment Network (E3) organization.

Terry Barker, Director of the Cambridge Centre for Climate Change Mitigation Research, University of Cambridge and a contributor to the Intergovernmental Panel on Climate Control (IPCC).

Stephen J. DeCanio, Professor of Economics at the University of California, Santa Barbara and a contributor to the Intergovernmental Panel on Climate Control (IPCC).

Martin L. Weitzman, Professor of Economics at Harvard University.

:: ::

One of the partner organizations supporting Real Climate Economics (E3 Network) recently published a report that might also be of interest to some readers. Greenhouse Gases and the American Lifestyle: Understanding Interstate Differences in Emissions (pdf file) includes "reported emissions data for interstate electricity sales," as well as the "fraction of each state's emissions that come from residential heating, electricity, and personal transportation." Statistical analysis of those emissions is used to identify "portions of interstate variation that can be attributed to objective factors such as climate and population density."

The report compiles and measures "state emissions as the total of energy-related carbon dioxide emissions, consisting of industrial, commercial, transportation, residential direct fuel use, and residential electricity emissions." One result of the analysis is that "some states generate much more electricity than they use, while others import from them."

In particular, three states with relatively small populations, Wyoming, West Virginia and North Dakota, export large amounts of electricity to other states; the resulting emissions look enormous on a per capita basis. Overall, 10 percent of all U.S. electricity is exported out of state; electricity exported from Wyoming, West Virginia, and North Dakota accounts for 26 percent of all electricity crossing state lines.

The results indicate that, on average across the United States, "39 percent of all greenhouse emissions are industrial or commercial, 27 percent are from transportation, 5 percent from residential fuel use, and 12 percent from residential electricity." A substantial part of the report examines transportation and residential emissions because they are:

... the emissions for which each state’s residents bear the most direct responsibility. Transportation and residential emissions can be addressed by public policy and private households’ actions alike, and any state by state differences in the consequences of a carbon tax or permit system will be easier to identify by excluding industrial, commercial, and government emissions that impact the nation as a whole.

:: ::

There is a lot of good information in these two sources. Some of it may be too detailed for the casual reader, but I think more than a few people at Daily Kos would like to at least know about it.

Originally posted to FWIW on Fri Jun 05, 2009 at 09:51 PM PDT.

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