Teaching Plan Information

Presentation

Climate change is arguably the most complex and pressing environmental problem the world has ever faced. This course attacks the problem of climate change from the perspective of economics, combining positive and normative analysis. We will start in Section I with the basics of climate change science and a general description of the current situation. In Section II we will focus on the choice of a ‘socially optimal’ mitigation path, studying mitigation costs, social benefits of mitigation, and different social objectives. This section introduces Integrated Assessment Models and the normative analysis of the economics of climate change. Finally, in Section III we will study different policies to attain the desired paths of mitigation. The course aims at providing a broad understanding of the relevant economic issues on climate change and the existing debates. Hopefully, it will expand your view of economics and of climate change.

Sustainable Development Goals

The course focuses on the aims of SDG 13 (climate action), but also addresses issues of SDGs 7 (affordable and clean energy), 8 (decent work and economic growth), and 10 (reduced inequalities).

Prerequisites

This is an advanced upper division course for students with a background in economics and builds on your knowledge of microeconomic theory, macroeconomic theory, and game theory. It is important to have coursed at least one year of micro and macroeconomic theory and have taken a course on game theory. Although not indispensable, familiarity with growth models and public economics analysis (public goods, externalities, taxation, social welfare ...) is highly recommended.

Contents

*Main source

**Advanced reading

1. Introduction. The economics of climate change.

Ref: *Nordhaus, William (2019) “Climate Change: The Ultimate Challenge for Economics.” American Economic Review 109(6): 1991–2014.

Wert, (2003). The discovery of climate change.

Klein, Grady and Yoram Bauman (2014). Cartoon Introduction to Climate Change. Chapters 1-7.

PART I: Climate Change

2. The science of climate change for economists.

Ref: *IPCC (2021) “Climate Change 2021. The Physical Science Basis.” Summary for policymakers. Sixth Assessment Report (AR6) WGI. https://www.ipcc.ch/report/ar6/wg1/#SPM

 **Hsiang, S., & Kopp, R. E. (2018). “An economist’s guide to climate change science,” Journal of Economic Perspectives, 32(4), 3–32. Doi: 10.1257/jep.32.4.3

3. Projected paths of emissions and concentrations: RCPs and SSPs.

Ref: *Böttinger, Michael and Dieter Kasang. The SSP Scenarios. Accessed at https://www.dkrz.de/en/communication/climate-simulations/cmip6-en/the-ssp-scenarios [online resource].

 *IPCC (2021) “Climate Change 2021. The Physical Science Basis.” Summary for
policymakers. Sixth Assessment Report (AR6) WGI. https://www.ipcc.ch/report/ar6/wg1/#SPM

 **van Vuuren, D. P. et al. (2011) “The representative concentration pathways: An overview.” Climatic Change 109, 5–31.

4. Climate Change impacts, adaptation, and vulnerabilities.

Ref: *IPCC (2022) “Climate Change 2022. Impacts, Adaptation and Vulnerabilities.” Summary for policymakers. Sixth Assessment Report (AR6) WGII. https://www.ipcc.ch/report/ar6/wg1/#SPM*

Climate Impact Lab https://impactlab.org/

PESETA program https://joint-research-centre.ec.europa.eu/peseta-projects_en

PART II: Climate Change Economics

5. Mitigation costs and social benefits of mitigation.
Marginal Abatement Costs - Integrated Assessment Models (IAMs) - Social Cost of Carbon

6. Social Welfare: Choosing a path of emissions.
Inter-generational inequality - The discount rate dilemma - Intra-generational inequality –Wellbeing - Sustainability

Ref: *Llavador, H., J.E. Roemer and J. Silvestre. (2015) Sustainability for a Warming Planet. Harvard University Press.

*Nordhaus, William (2019) “Climate Change: The Ultimate Challenge for Economics.” American Economic Review 109 (6): 1991–2014

Stern, N. (2008). “The Economics of Climate Change.” Am. Econ. Rev. 98, 1–37

Tol, Richard (2019) Climate Economics.

**Llavador, H., J.E Roemer. & J. Silvestre (2013). “Should we sustain? And if so, sustain what? Consumption or the quality of life?” in Handbook on Energy and Climate Change (ed. Fouquet, R.) 639–665. Palgrave

PART III: Climate change policy

7. Policy instruments: regulation, subsidies, taxes, and permits.

Ref: *Baranzini, A., J. C.J.M. van den Bergh, S. Carattini, R. B. Howarth, E. Padilla, J. Roca. (2017). “Carbon Pricing in Climate Policy: Seven Reasons, Complementary Instruments, and Political Economy Considerations.” Wiley Interdisciplinary Reviews: Climate Change 8(4). https://doi.org/10.1002/wcc.462.

Tol, Richard (2019) Climate Economics. Chapters 3, 4 (except 4.6 and 4.11) & 8.

8. Energy transition.

Ref: *Fabra, N. (2021) “The Energy Transition: An Industrial Economics Perspective.” International Journal of Industrial Organization, Volume 79, 2021, 102734. Doi: 10.1016/j.ijindorg.2021.102734.

Demand and supply of electricity: www.eisos.ree.es

Wholesale electricity market: www.omie.es

9. International agreements: Theory and application.

Ref: Climate Action Tracker: https://climateactiontracker.org/

**Barrett, S. (2016) “Coordination vs. voluntarism and enforcement in sustaining international environmental cooperation.” Proceedings of the National. Academy of Science. 113, 14515–14522. Doi: 10.1073/pnas.1604989113

**Caparrós, A. (2016) “Bargaining and International Environmental Agreements.” Environmental and Resource Economics 65(1): 5–31. Doi: 10.1007/s10640-016- 9999-0

10. Tipping points and uncertainty.

Ref: *Dietz, S., Rising, J., Stoerk, T. & Wagner, G. Economic impacts of tipping points in the climate system. Proc. Natl. Acad. Sci. 118, e2103081118 (2021).

**Lenton, T.M., H. Held, Er. Kriegler, J.W. Hall, W. Lucht, S. Rahmstorf, and H.J. Schellnhuber. 2008. “Tipping Elements in the Earth’s Climate System.” Proc. Natl. Acad. Sci 105 (6): 1786–93. Doi: 10.1073/pnas.0705414105.

Teaching Methods

The course combines lectures and seminars. There is no textbook, but a list of readings and assignments to guide you in discovering the concepts, facts and reasonings related to the economics of climate change. Readings will include journal articles and book chapters drawn from the academic literature, policy-oriented publications, and government reports. The reading list and assignments will be announced during the quarter, so please check Aula Global regularly. During seminars we will work on the assignments and discuss specific trending topics, like the European Green Deal, the subsidies to fossil fuels, the green growth vs. degrowth debate... You are expected to participate actively during both lectures and seminars.

Evaluation

• 30%: Tasks and activities: pi
• 10%: Attendance and participation: ai
• 60%: Final exam. gi Following the directives of the Dean “students will take the exam (statement and answers) exclusively in English.”

A minimum grade of 4 out of 10 in the final exam is required to obtain a passing grade. If gi≤4 the final qualification of the course will show qi = min{4, 0.4pi+0.1ai+0.5gi}.

Resit. Students who fail can resit only the final exam. The other 40% of the grade remains the same. The requirement of a minimum grade in the exam still holds.

Bibliography and information resources

For bibliography references, see the contents of the course.

Teaching Plan Information

Presentation

Climate change is arguably the most complex and pressing environmental problem the world has ever faced. This course attacks the problem of climate change from the perspective of economics, combining positive and normative analysis. We will start in Section I with the basics of climate change science and a general description of the current situation. In Section II we will focus on the choice of a ‘socially optimal’ mitigation path, studying mitigation costs, social benefits of mitigation, and different social objectives. This section introduces Integrated Assessment Models and the normative analysis of the economics of climate change. Finally, in Section III we will study different policies to attain the desired paths of mitigation. The course aims at providing a broad understanding of the relevant economic issues on climate change and the existing debates. Hopefully, it will expand your view of economics and of climate change.

Sustainable Development Goals

The course focuses on the aims of SDG 13 (climate action), but also addresses issues of SDGs 7 (affordable and clean energy), 8 (decent work and economic growth), and 10 (reduced inequalities).

Prerequisites

This is an advanced upper division course for students with a background in economics and builds on your knowledge of microeconomic theory, macroeconomic theory, and game theory. It is important to have coursed at least one year of micro and macroeconomic theory and have taken a course on game theory. Although not indispensable, familiarity with growth models and public economics analysis (public goods, externalities, taxation, social welfare ...) is highly recommended.

Contents

*Main source

**Advanced reading

1. Introduction. The economics of climate change.

Ref: *Nordhaus, William (2019) “Climate Change: The Ultimate Challenge for Economics.” American Economic Review 109(6): 1991–2014.

Wert, (2003). The discovery of climate change.

Klein, Grady and Yoram Bauman (2014). Cartoon Introduction to Climate Change. Chapters 1-7.

PART I: Climate Change

2. The science of climate change for economists.

Ref: *IPCC (2021) “Climate Change 2021. The Physical Science Basis.” Summary for policymakers. Sixth Assessment Report (AR6) WGI. https://www.ipcc.ch/report/ar6/wg1/#SPM

 **Hsiang, S., & Kopp, R. E. (2018). “An economist’s guide to climate change science,” Journal of Economic Perspectives, 32(4), 3–32. Doi: 10.1257/jep.32.4.3

3. Projected paths of emissions and concentrations: RCPs and SSPs.

Ref: *Böttinger, Michael and Dieter Kasang. The SSP Scenarios. Accessed at https://www.dkrz.de/en/communication/climate-simulations/cmip6-en/the-ssp-scenarios [online resource].

 *IPCC (2021) “Climate Change 2021. The Physical Science Basis.” Summary for
policymakers. Sixth Assessment Report (AR6) WGI. https://www.ipcc.ch/report/ar6/wg1/#SPM

 **van Vuuren, D. P. et al. (2011) “The representative concentration pathways: An overview.” Climatic Change 109, 5–31.

4. Climate Change impacts, adaptation, and vulnerabilities.

Ref: *IPCC (2022) “Climate Change 2022. Impacts, Adaptation and Vulnerabilities.” Summary for policymakers. Sixth Assessment Report (AR6) WGII. https://www.ipcc.ch/report/ar6/wg1/#SPM*

Climate Impact Lab https://impactlab.org/

PESETA program https://joint-research-centre.ec.europa.eu/peseta-projects_en

PART II: Climate Change Economics

5. Mitigation costs and social benefits of mitigation.
Marginal Abatement Costs - Integrated Assessment Models (IAMs) - Social Cost of Carbon

6. Social Welfare: Choosing a path of emissions.
Inter-generational inequality - The discount rate dilemma - Intra-generational inequality –Wellbeing - Sustainability

Ref: *Llavador, H., J.E. Roemer and J. Silvestre. (2015) Sustainability for a Warming Planet. Harvard University Press.

*Nordhaus, William (2019) “Climate Change: The Ultimate Challenge for Economics.” American Economic Review 109 (6): 1991–2014

Stern, N. (2008). “The Economics of Climate Change.” Am. Econ. Rev. 98, 1–37

Tol, Richard (2019) Climate Economics.

**Llavador, H., J.E Roemer. & J. Silvestre (2013). “Should we sustain? And if so, sustain what? Consumption or the quality of life?” in Handbook on Energy and Climate Change (ed. Fouquet, R.) 639–665. Palgrave

PART III: Climate change policy

7. Policy instruments: regulation, subsidies, taxes, and permits.

Ref: *Baranzini, A., J. C.J.M. van den Bergh, S. Carattini, R. B. Howarth, E. Padilla, J. Roca. (2017). “Carbon Pricing in Climate Policy: Seven Reasons, Complementary Instruments, and Political Economy Considerations.” Wiley Interdisciplinary Reviews: Climate Change 8(4). https://doi.org/10.1002/wcc.462.

Tol, Richard (2019) Climate Economics. Chapters 3, 4 (except 4.6 and 4.11) & 8.

8. Energy transition.

Ref: *Fabra, N. (2021) “The Energy Transition: An Industrial Economics Perspective.” International Journal of Industrial Organization, Volume 79, 2021, 102734. Doi: 10.1016/j.ijindorg.2021.102734.

Demand and supply of electricity: www.eisos.ree.es

Wholesale electricity market: www.omie.es

9. International agreements: Theory and application.

Ref: Climate Action Tracker: https://climateactiontracker.org/

**Barrett, S. (2016) “Coordination vs. voluntarism and enforcement in sustaining international environmental cooperation.” Proceedings of the National. Academy of Science. 113, 14515–14522. Doi: 10.1073/pnas.1604989113

**Caparrós, A. (2016) “Bargaining and International Environmental Agreements.” Environmental and Resource Economics 65(1): 5–31. Doi: 10.1007/s10640-016- 9999-0

10. Tipping points and uncertainty.

Ref: *Dietz, S., Rising, J., Stoerk, T. & Wagner, G. Economic impacts of tipping points in the climate system. Proc. Natl. Acad. Sci. 118, e2103081118 (2021).

**Lenton, T.M., H. Held, Er. Kriegler, J.W. Hall, W. Lucht, S. Rahmstorf, and H.J. Schellnhuber. 2008. “Tipping Elements in the Earth’s Climate System.” Proc. Natl. Acad. Sci 105 (6): 1786–93. Doi: 10.1073/pnas.0705414105.

Teaching Methods

The course combines lectures and seminars. There is no textbook, but a list of readings and assignments to guide you in discovering the concepts, facts and reasonings related to the economics of climate change. Readings will include journal articles and book chapters drawn from the academic literature, policy-oriented publications, and government reports. The reading list and assignments will be announced during the quarter, so please check Aula Global regularly. During seminars we will work on the assignments and discuss specific trending topics, like the European Green Deal, the subsidies to fossil fuels, the green growth vs. degrowth debate... You are expected to participate actively during both lectures and seminars.

Evaluation

• 30%: Tasks and activities: pi
• 10%: Attendance and participation: ai
• 60%: Final exam. gi Following the directives of the Dean “students will take the exam (statement and answers) exclusively in English.”

A minimum grade of 4 out of 10 in the final exam is required to obtain a passing grade. If gi≤4 the final qualification of the course will show qi = min{4, 0.4pi+0.1ai+0.5gi}.

Resit. Students who fail can resit only the final exam. The other 40% of the grade remains the same. The requirement of a minimum grade in the exam still holds.

Bibliography and information resources

For bibliography references, see the contents of the course.