Aldy, J. E., Pizer, W., Tavoni, M., Reis, L. A., Akimoto, K., Blanford, G., Carraro, C., et al. (2016).
Economic Tools to Promote Transparency and Comparability in the Paris Agreement.
Nature Climate Change.
AbstractThe Paris Agreement culminates a six-year transition toward an international climate policy architecture based on parties submitting national pledges every five years. An important policy task will be to assess and compare these contributions. We use four integrated assessment models to produce metrics of Paris Agreement pledges, and show differentiated effort across countries: wealthier countries pledge to undertake greater emission reductions with higher costs. The pledges fall in the lower end of the distributions of the social cost of carbon (SCC) and the cost-minimizing path to limiting warming to 2⁰C, suggesting insufficient global ambition in light of leaders’ climate goals. Countries’ marginal abatement costs vary by two orders of magnitude, illustrating that large efficiency gains are available through joint mitigation efforts and/or carbon price coordination. Marginal costs rise almost proportionally with income, but full policy costs reveal more complex regional patterns due to terms of trade effects.
Full Paper.pdf Aldy, J. E., & Pizer, W. A. (2016).
Alternative Metrics for Comparing Domestic Climate Change Mitigation Efforts and the Emerging International Climate Policy Architecture.
Review of Environmental Economics and Policy ,
10 (1), 3-24.
AbstractThe availability of practical mechansims for comparing domestic efforts aimed at mitigating global climate change are important for the stability, equity, and efficiency of international climate agreements. We examine a variety of metrics that could be used to compare countries’ climate change mitigation efforts and illustrate their potential application to large developed and developing countries. Because there is no single comprehensive, measurable metric that could be applied to all countries, we suggest using a set of indicators to characterize and compare mitigation effort, akin to using a set of economic statistics to indicate the health of the macroeconomy. Given the iterative pledge and review approach that is emerging in the current climate change negotiations, participation, commitment, and compliance could be enhanced if this set of indicators is able to show that all parties are doing their “fair share,” both prospectively and retrospectively. The latter, in particular, highlights the need for a well-functioning policy surveillance regime.
Full Paper.pdf Aldy, J. E., Pizer, W. A., & Akimoto, K. (2016).
Comparing Emissions Mitigation Efforts across Countries.
Climate Policy.
AbstractA natural outcome of the emerging pledge and review approach to international climate change policy is the interest in comparing mitigation efforts among countries. Domestic publics and stakeholders will have an interest in knowing if peer countries are undertaking (or planning to undertake) comparable efforts in mitigating their greenhouse gas emissions. Moreover, if the aggregate efforts are considered inadequate in addressing the risks posed by climate change, then this will likely prompt a broader interest in identifying those countries where greater efforts are arguably warranted based on comparison with their peers. Both assessments require metrics of efforts and comparisons among countries. We propose a framework for such an exercise, drawing from a set of principles for designing and implementing informative metrics. We present a template for organizing metrics on mitigation efforts, for both ex ante and ex post review. We also provide preliminary assessments of efforts along emissions, price, and cost metrics for post-2020 climate policy contributions by China, the European Union, Russia, and the United States. We close with a discussion of the role of academics and civil society in promoting transparency and facilitating the evaluation and comparison of efforts.
Full Paper.pdf Aldy, J. E. (2016).
Mobilizing Political Action on Behalf of Future Generations: The Case of Climate Change Policy.
The Future of Children, Issue on Climate Change ,
26 (1).
AbstractBy nearly any perspective, insufficient effort has been undertaken to address the risks posed by global climate change. This failure to mobilize sufficient effort to combat climate change reflects the difficult political economy that characterizes the problem. To grossly simplify the problem, the challenge is that future, unborn generations will enjoy the benefits of climate policy while the current generation, and in particular those reaping substantial returns from a status quo that fails to address climate change, will bear the costs. In this paper, I describe the returns to narrowlydefined business capital and a broad concept of capital – physical capital, human capital, environmental capital, social capital, etc. – to illustrate differences in investment incentives and hence political economy considerations for those engaged in climate policy debates. While the standard economist’s prescription to price the externality could align private and societal investment incentives and ensure that future generations have the opportunities to enjoy a standard of living at least as good as the current generation, it must confront the political economy that the costs of changing prices are borne primarily by the current generation and concentrated among incumbent firms and the benefits are enjoyed disproportionately by future generations and emerging insurgent firms that aim to bring new technologies to market and capture the incumbents’ market share. Tailoring the design of climate policy to mollify the incumbents in opposition and to leverage the potential of the insurgents to build broad political support will be necessary to mobilize successful political action to combat climate change.
Full Paper.pdf