Suchergebnisse

The economic analysis of the natural environment and of economic development encompasses most complex topics and issues. Accordingly, many contributions in the field are either cross-disciplinary or very detailed and broad in perspective. The core methodology of economics is different, however. Economic models are generally used to drastically reduce complexity and to look at a low number of analytical relationships. This allows for analysis of the basic mechanics of the problems in a concise manner and for the derivation of closed-form model solutions. There are of course seminal contributions using the procedure, e.g., Hotelling (1931) and Dasgupta and Heal (1974). But for the crucial issue of climate change the profession appears to be somewhat reluctant to push strongly for constructing a stringent analytical framework; the field is still dominated by relatively complex integrated assessment models. These yield many important insights but, in certain cases, provide contradicting results and sometimes lack intuition. Hence, climate economic models providing closed-form solutions on future growth and optimum climate policy appear to be warranted.

AbstractThe paper argues that negotiation costs can prevent the international community from finding a new international climate agreement. To define a feasible way of facilitating the negotiation process, I analyze basic equity principles and their relationship to climate policy and economic development. Based on the most relevant principles, I propose a general synthetic rule for burden sharing in international climate policy. The rule avoids complexity and comprises both egalitarian and cost-sharing aspects, which appears to be crucial for achieving a climate agreement. Carbon budgets for the different countries are calculated under different parameter assumptions.

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analyzed mechanism includes two different steps and considers the critical points of both the theoretical and empirical studies in this field. In particular, the estimation problems of omitted variables and parameter heterogeneity are addressed. Using panel data for a sample of 12 OECD countries in the time period 1967-1996, it is shown that the theoretical predictions can be corroborated by empirical results.

This paper presents different substitution mechanisms which determine, in a theoretical framework, the conditions for long-term sustainable development. In a one-sector approach and in two versions of a multi-sector endogenous growth model, the accumulation and the substitution of man-made inputs for natural resources are analysed. Assuming man-made capital to be an output of a specific sector of the economy, the elasticities of substitution between the different inputs play a more complex role than suggested by the one-sector approach. According to the multi-sector models, the prediction of growth becoming sustainable emerges as realistic, provided that the sectoral adjustment costs in the economy are not too high.

The belief that stringent climate policies are very costly is widespread among political decision-makers and the public. The cost argument is often used by governments as a motivation for sluggish policy making. However, such judgements ignore the economic benefits of policy changes and implicitly build on a misguided decomposition of environmental impact into separate population, income, and technology effects. The paper shows that this method predicts policy-induced income losses that are systematically and significantly biased. I extend the decomposition analysis by introducing input substitution, which drastically lowers policy costs. By additionally incorporating a production approach, causal relationships between the drivers of resource use, and a framework for endogenous technology development I develop a new structural equation to assess climate policy effects. For a given decarbonization path, I calculate the projected income development at the global and country level. The use of the structural approach instead of agnostic decomposition suggests that the costs of a stringent climate policy are much lower than normally expected, which supports deep decarbonization. © 2021 Elsevier B.V. ; ISSN:0921-8009

The chapters in the book cover a broad range of aspects regarding the relationship between natural resource use and long-term economic development. The book surveys existing literature as well as adds to frontier research. In particular, the following topics are studied: incentives for adoption and diffusion of clean technology, resource scarcity and limits to growth, international convergence of energy intensity, and the social norms shaping resource depletion.

AbstractStandard climate economics considers damages of climate change to utility, total factor productivity, and capital. Highlighting that air pollution and climate change affect human health and labor productivity significantly, we complement this literature by including human health in a theoretical climate economic framework. Our macroeconomic approach incorporates a separate health sector and provides closed-form analytical solutions for the main model variables. Economic growth is endogenously driven by innovations, which depend on labor availability and productivity. These aspects of the labor force are directly linked to human health, which is harmed by burning fossil fuels. We calculate growth in the decentralized equilibrium and derive optimal climate policy. Calibrating the model by taking standard parameter values we show the economic growth rate to be higher for the planner solution compared to the market outcome. For an optimal climate policy, we find that 44% of total resource stock should be extracted when considering damages to capital, but only 1% of the stock should be extracted in an "all inclusive" approach where health damages are included. The health perspective requires optimal environmental policies that are much more stringent than those normally advocated in climate economics, since harm to human health has negative effects on economic growth, which makes the overall impact of climate change very large.

AbstractWe consider a growing economy which is subject to recurring, random, uninsurable, and potentially large and long-lasting climate shocks leading to destruction of infrastructure, land degradation, collapse of ecosystems or similar loss of productive capacity. The associated damages and the hazard rate are endogenously driven by the stock of greenhouse gases. We highlight the important role of the relative risk aversion and provide analytical solutions for the optimal climate policy, the growth rate and the saving propensity of the economy. We stress the importance of jointly determining these variables, especially if the objective is to formulate meaningful policy prescriptions. If, for example, the growth rate or the saving rate are assumed to be exogenous, and thus independent of the characteristics of climate shocks and economic fundamentals, then future economic developments in the face of climate change and, consequently, the future mitigation efforts will deviate from the optimal paths. In a quantitative assessment we show that with log-utility and under favorable technological and climatic conditions the abatement expenditure represents only 0.5% of output, equivalent to $37 per ton carbon. Under less favorable conditions, coupled with a relative risk aversion which exceeds unity, the abatement propensity increases to 2.9%, equivalent to $212 per ton carbon, and it jumps to a striking 16% in the pessimistic scenario involving severe shocks and low efficiency of abatement technology.

AbstractThe paper considers stochastic environmental policy and its effects on the environment, portfolio composition, and economic growth. Capital accumulation causes pollution which is reduced by private green services and public abatement. The government subsidizes green services and taxes dirty capital albeit at a rate which may become random, causing unexpected capital write-offs. Tax jumps depend on natural degradation and environmental activism. We derive how uncertainty and political activism affect the risk premia for investors. We analyze the incentives for firms to increase the greenness of production in order to reduce political uncertainty. Stochastic taxation is shown to act as a substitute for green subsidies when uncertainty decreases in the ratio of green services to capital and agents use their green activities strategically. Tax uncertainty may trigger precautionary savings, causing additional growth and enhanced environmental deterioration.

AbstractEconomic and ecological systems are closely interlinked at a global and a regional level, offering a broad variety of important research topics in environmental and resource economics. The successful identification of key challenges for current and future research supports development of novel theories, empirical applications, and appropriate policy designs. It allows establishing a future-oriented research agenda whose ultimate goal is an efficient, equitable, and sustainable use of natural resources. Based on a normative foundation, the paper aims to identify fundamental topics, current trends, and major research gaps to motivate further development of academic work in the field.

AbstractEnvironmental economics models are often too complex to be communicated in an illustrative manner. For this reason, this paper develops the Basic Climate Economic (BCE) model that features core elements of macroeconomic and climate economic modelling, while allowing for an illustrative examination of the development path. The BCE model incorporates fossil stock depletion, pollution stock accumulation, endogenous growth, and climate-induced capital depreciation. We first use graphical analysis to show the effects of climate change and climate policy on economic development. Intuition for the different model mechanisms, the functional forms, and the effects of different climate policies is provided. We then show the model equations in mathematical terms to derive closed-form solutions and to run model simulations relating to the graphical part. Finally, we compare our setup to other models of climate economics.