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Lecture III: Climate change
-Chapter 11
-Article by Carlsson et al. (2013).
[email protected]
Climate change:
-Doran and Zimmerman (2009) conducted a survey to
experts to determine if there is a scientic consensus
regarding whether climate change really does exist?
”Do you think human activity is a significant contributing
factor in changing mean global temperatures?”
-82% of all experts said YES
-97.4 % of the respondents who were most specialized on
climate change said YES
- Gallup (2008) in U.S. found that 58 % of general public
said YES.
Cont…
Doran and Zimmerman conclude that the challenge is to
communicate the fact that eperts agree on human
influence to policy makers and to public.
The increasing scientific consensus about climate change
is seen in IPCC´s reports:
- IPCC (1995) said that ”it is unlikely that this rise in global
temperatures in entirely due to natural causes”
- IPCC (2001) said that ” there has been a discrenible
human influence on global climate”
- IPCC (2007) said that ”…..very high (greater than 90%)
confidence that the global average net effect of human
activities since 1750 has been one of warming..”
Stern Review (2006):
-The scientific evidence is now overwhelming: climate
change is a serious global threat, and it demands an
urgent global response.
- The Stern Review assessed a wide range of evidence on
the impacts of climate change and on the economic costs,
and used a number of different techniques to assess costs
and risks.
- From all of these perspectives, the evidence gathered by
the Review leads to a simple conclusion: the benefits of
strong and early action far outweigh the economic costs of
not acting.
Stern Review (2006):
Ignoring climate change will eventually damage economic
growth:
- If global average temperature increases by 2-3 degrees
Celsius - the economic costs of climate change is a loss
of 3 % in global GDP. Developing counties will suffer
even higher costs.
- If the global average temperature increases by 5-6
degrees Celsius, the global GDP decreases by 5-10 %.
Poor contries having costs >10%.
Stern Review (2006):
Several prominent economists have criticized Stern report.
They say that Stern results of CBA are too positive; have
too large net benefits (that encourage us to act sooner
than later) since the discount rate he used was so low, 1.4
%.
They recommended 2-4 % since it is less drastic but still
takes acount the uncertainty about impacts of climate
chage.
Stern Review (2006):
Some other wanted to have even higher discount rate,
but..
Climate change harms from today´s emissions occur in the
future due to the lags induced by energy absorbed by the
oceans, and by the relatively long atmospheric life of many
greenhouse gases.
Since the benefits of stabilization are far into the future,
using real market discount rate would result in very small
present value of future avoided harms. And that would
mean strong bias against any preventive action.
Stern Review (2006):
For example , with 3 % discount rate will the present value
of $100 benefit (200 years in future) mean 27 cents today.
This means that according to CBA it is not justified to
spend more than 27 cents today to be able to generate
$100 in climate change benefits (avoid harms that costs
$100) after 200 years.
Economic policy instruments
Economists argue that it is necessary to have price on
emissions that cause climate change problem.
One can either use policy instruments that i) reduces
greenhouse gas emissions or ii) promote renewable
energy and energy efficiency.
Economic policy instruments cont.
i)
Cap and trade, pollution taxes
ii) Subsidies, loans, etc. providing an incentive to
increase to use other energy sources by supporting
R&D, production or consumption of e.g. renewable
energy. (See also table 11.6 in Chapter 11).
Economic policy instruments cont.
While the economic policy instruments are helpful in
developed counties they might not work in developing
countries. They might not be politically feasible to
implement.
BUT main part of the increase in CO2 emissions from 2007
to 2030 are projected to come from lower-income countries.
Failure to reduce CO2 in lower-income countries will limit the
gains made elsewhere. Thus, promoting climate-friendly
technology diffusion to lower-income countries is relevant!
Kyoto Protocol
Another question for this global problem with climate
change is that countries should co-operate. We have Kyoto
Protocol (developed 1997 and entered in force 2005 after
Russian signed it 2004. From start there were only 40
countries included in the protocol).
The Kyoto Protocol is an international agreement linked to
the United Nations Framework Convention on Climate
Change, which commits its parties by setting
internationally binding emission reduction targets.
Kyoto Protocol cont.
More specifically, Annex I countries (meaning most of the
world´s industrial countries) should reduce their overall
greenhouse gas emissions by at least 5% below 1990
levels until 2012.
Its first commitment period started in 2008 and ended in
2012.
The second commitment period is from 1 January 2013 to
31 December 2020.
Kyoto Protocol cont.
Recognizing that developed countries are principally
responsible for the current high levels of greenhouse gas
emissions in the atmosphere as a result of more than 150
years of industrial activity, the Protocol places a heavier
burden on developed nations under the principle of
"common but differentiated responsibilities."
Kyoto Protocol cont.
There are also global climate change meetings.
Latest meeting was in December 2015 in Paris (COP21).
The meeting ended up with an agreement between all
countries (196) that the global temperatur increase should
be below 2 degrees with a goal at 1,5 degrees.
Let´s look at a study about how the burden of decrease
CO2 could be shared between countries……..
A Fair Share: Burden-Sharing
Preferences in the US and China
Fredrik Carlsson, Mitesh Kataria, Alan
Krupnick, Elina Lampi, Åsa Löfgren, Thomas
Sterner, Ping Qin, and Susie Chung
Objective
To investigate preferences for distributing the economic
burden of decreasing CO2 emissions among countries.
This is done by letting ordinary citizens living both in the
US and China answer identical choice experiments (CE)
about four different burden-sharing rules to reduce CO2.
Investigate differences in willingness to pay (WTP) and
ranking of the rules between different groups of
respondents in both countries.
Background
Countries have had difficulties in agreeing on
binding climate targets.
Part of the explanation might be that different
burden-sharing rules have different economic
impacts on individual countries and the
negotiations are sensitive to domestic public
opinion.
What is new in our study......
Between country comparison.
Identical CE in both countries.
The first study that investigates preferences of
ordinary citizens (not students) in two countries.
Why just the US and China?
The US and China are world´s largest CO2 emitting
countries and are thus important for the outcome of
any negotiation regarding emission reductions.
The four burden-sharing rules to
be investigated….
(i) Historical emissions (burden-sharing based on
historic responsibility)
(ii) Income (burden-sharing based on capacity to
pay)
(iii) Equal right to emit (Burden-sharing based on
need)
(iv) Current emissions level (burden-sharing
based on current responsibility)
Design of the survey I
We conducted two identical CEs, one to a random sample of
US citizens and one to a random sample of Chinese citizens.
The survey consisted of 4 sections:
1. Attitudes about climate change
2. We provided information on the effects of climate change
from the IPCC fourth assessment report. We also asked
the respondents WTP for different levels of CO2 reduction.
3. CE about the burden-sharing rules (focus of this paper!)
4. Socio-economic charasteristics
Design of the survey II
To avoid confounding preferences for the different rules with
preferences for different levels of reductions we gave the
following instructions:
“Reducing CO2 emissions is costly, and an important question is how costs should
be shared among countries. Suppose that countries have reached an international
agreement that global reductions of CO2 emissions should be 60 %. We will now
present four alternative rules for distributing the costs among countries to achieve
this reduction. All four rules would result in same cost to the world economy, but
different costs to different countries”
Design of the survey III
We had 4 choice sets and each choice set had 2
alternatives.
The burden-sharing-rule attribute had 4 possible levels
(historic emissions, ability to pay, equal right to emit (need),
and current emissions).
Cost attribute was a monthly household cost until 2050 and
it had 4 levels. The payment vehicle was increased energy
and gasoline prices.
Design of the survey IV
10 focus group studies across the 2 countries.
The survey was self-administrated web-survey.
In China the respondents were invited to special rooms and in
the US the respondents took the survey online whereever
they were when connected to the internet.
909 responses in the US and 1,264 responses in China.
An example of a choice set
Alternative 1
Alternative 2
Share of the world
income
Equal emissions per
person
Countries with high
income and very high
emissions, for example
US and Canada
47%
55%
Countries with high
income and high
emissions, for example
Sweden and France
16%
7%
Countries with low
income and medium
emissions, for example
China and South Africa
29%
38%
Countries with low
income and low
emissions, for example
Ethiopia and India
8%
0%
$ 336 (28)
$ 168 (14)
Distribution of cost
according to:
Yearly (monthly) cost
for your household until
2050:
Annual mean WTP in PPP-adjusted dollars.
Burden-sharing rule
USA
China
Historic emissions
(US 67%, China 18%)
-9.10**
(3.9)
141.37***
(21.6)
Need
(US 55%, China 38%)
-22.20***
(4.4)
-77.53***
(14.7)
Ability to pay
(US 47%, China 29%)
9.4**
(4.4)
90.26***
(15.6)
Current emissions
(US 42%, China 40%)
21.90***
(4.3)
-154.11***
(26.6)
The results for WTP I
Large differences in the level of WTP between the U.S. and
China.
The ranking of the burden-sharing rules are almost opposite.
For China, the ranking of rules follows the costs for the
country: Strongest preferences for the historical emissions
rule (lowest costs) and the current emissions rule is the least
preferred one (most expensive).
The two most preferred rules in US sample (current
emissions rule and ability to pay rule) have lowest costs,
while the least preferred rule (need) is less costly than
second least preferred rule.
The results for WTP II
Our major interest is however not in the absolute level of
WTP, but the preferences for the burden-sharing rules and
the comparison between countries with respect of ranking of
the rules.
Moreover, the relative differences between the WTP
estimates are about the same in both countries: The WTP for
the most preferred rule is about twice as big as for the least
preferred rule, and the rule ranked as the second best rule
has a WTP about half of the size that for the highest ranked
rule.
The results for WTP III
Rules
Male
Historic emissions
Need
Ability to Pay
Current emissions
Historic emissions
Need
Ability to Pay
Current emissions
Historic emissions
Need
Ability to Pay
Current emissions
U.S.
Female
-10.9*
-7.4
***
-24.8
-19.8***
10.0
8.8
***
25.7
18.4**
No university
University
-4.9
-18.4***
-21.2***
-24.4***
9.8*
8.6
***
16.3
34.3***
Temperature has increased
Do not agree
Agree
-8.6
-9.2***
-40.6***
-16.6***
15.8
7.5
***
33.5
18.4***
t-test:
p-value
0.659
0.540
0.888
0.380
0.092
0.804
0.859
0.048
0.952
0.026
0.471
0.180
Male
China
Female
112.7***
174.6***
-58.7***
-99.4***
91.7***
88.6***
-145.7***
-163.9***
No university
University
***
138.3
153.8***
-86.3***
-42.3***
96.7***
64.6***
-148.6***
-176.2***
Temperature has increased
Do not agree
Agree
**
143.8
141.3***
-98.3*
-76.6***
173.3**
86.3***
-228.8**
-151.1***
t-test:
p-value
0.025
0.087
0.898
0.631
0.570
0.066
0.199
0.472
0.969
0.713
0.181
0.495
The results for WTP IV
No differences between any of the respondent groups with
respect to ranking of the rules in the US sample.
However, differences in the magnitudes of the WTPs across
the groups. For example, university educated respondents
have significantly higher WTP for the current emissions rule
and significantly lower WTP for the historical emissions rule.
Those who do not agree that the temperature has increased
globally have significantly lower WTP for the need rule, a
rule that favors several EU countries, India and countries in
Africa.
The results for WTP V
Females living in China have significantly higher WTP for the
historic emisssions rule and significantly lower WTP for the
need rule compared to male respondents.
We also estimated additional models where the burdensharing attribute coefficients were interacted with political
preferences of the respondents.
The results for WTP VI
Apart from the Green party supporters, the Americans seem
to have very strong and homogenous preferences for the
current emissions rule.
Preferences of those who are Independent are more similar to
Republicans than to Democrats.
For the Chinese sample we did not find any significant
differences in WTPs between members and non-members of
the communist party.
Conclusions
Respondents from both countries prefer the rule that gives
their country most economic advantage.
Chinese clearly care more about how the CO2 reductions
should be shared across the countries.
The fact that the Chinese and the US respondents have the
ability to pay rule in second place may, perhaps, give some
faint hope and direction for coming climate negotiations…..