A Theory of Saving the Climate: Policy Lessons 90 years after Ramsey
I sketch some historical developments that are fundamental to contemporary thinking about optimal climate policy. The conceptual roots trace back to Ramsey’s (1928) seminal paper on optimal capital investment. The next step is the incorporation of macro-economic growth in the Cass (1965) and Koopmans (1965) neo-classical models. The combined framework of growth and dynamic optimal savings enabled Cass-Koopmans to introduce the concept of optimal economic growth. Nordhaus (1993) then embedded climate change into the macro growth model, and this gave a well-defined concept of optimal climate policy. I label this conceptual framework the Ramsey-Cass-Koopmans-Nordhaus (RCKN) model.
I then briefly present a series of recent papers that build and analyze formally tractable Climate-Economy Growth RCKN Models. I first discuss the carbon pricing rule derived in Golosov et al. (2014), improved by Gerlagh and Liski (2018ab), and extended and tested in vdBijgaart et al. (2016) and Rezai and van der Ploeg (2016).
Finally, I critically confront the RCKN framework with some substantial policy questions to differentiate between robust policy lessons and those more fragile. Policy questions include: How much income are we willing to give up for reducing climate change? How should we distribute the costs of mitigation between the present and the future generations? How should we distribute the costs internationally? Should we wait with deep cuts for cheap emission reduction options to arrive, or should we induce clean innovations by upfront polices? Do we need to adapt our policy recommendations to observed and expected demographic change? Is family planning part of optimal climate policy?
The Paris Agreement was acclaimed as a milestone for climate negotiations. It has also been criticized – as too soft by environmentalists and too constraining by the current U.S. administration, which has decided to leave. The election of President Trump was itself widely interpreted as unexpected, good news for the fossil industry (and less good for the climate). We seek to evaluate the impact of global climate policy making by studying its effect on the stock market value of energy sector firms. In particular, we study the signing of the Paris Agreement and the latest U.S. presidential election. Using event study and impulse indicator saturation methods, we show that both events had only moderate effects.
How current end-user tariffs incentivize investments in decentralized generation
We have modelled the effect of Nordic end-user tariffs on investments in generation (PV) and storage (batteries), and how they affect the behavior and dispatch of end-users. We find that today’s energy tariffs (even without a capacity tariff), incentivize investments in batteries and PV. This could have severe price implications for prices in the Nordic countries, affecting both average prices, daily price shapes, and seasonal variations.
Deployment of new energy technologies and the need for local learning
Several studies have illustrated and analysed learning processes and the cost dynamics of various new energy technologies, e.g. wind turbines, photovoltaic modules and bioenergy technologies. The studies most often focus on the cost reductions related to the development and production of technology hardware itself; products that today are more or less standardized and traded internationally. Less focus has been on cost dynamics related to the deployment process of new energy technologies at the local level. To improve our understanding of the cost dynamics of emerging energy technologies we need to broaden and deepen the assessments of learning and cost reductions.
Sweden MEETX AB is the conference bureau handling the conference secretariat for the IEW 2018 Conference.
February 1st, 2018 – Deadline for paper submission.
Early february- Registration opens
Early march- Notifications of acceptance/rejection
April 15th- Early Bird fee deadline
The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.