Research Assignments:

1. Write a 5-10 pages report on your research on the economic cost of sea level rise of 8- 12 inches within 30 years (which is the estimated range of sea level rise by 2050 in the IPCC’s 5th assessment report). Make sure you clarify the region (developed/developing countries) and the sector of activity (agriculture/tourism/real estate etc…). You may choose in depth research on one specific region and sector, or a more general evaluation. You must work in groups of minimum 3 and maximum 5 students and return a single report for the whole group.

i. Single page project proposal due Wednesday 24 January in class (only if you want feed-back),

ii. Final draft due Wednesday 14 February in class.

Some resources (but you should also find your own – only use reputable sources): a. Smithsonian page http://ocean.si.edu/sea-level-rise. b. The Global impacts of extreme sea-level rise, by J. Pycroft, J. Abrell and J.-C.

Ciscar, Environmental and Resource Economics (2016), vol. 64, pp. 225-253. c. http://www.climatecost.cc/images/Policy_brief_2_Coastal_10_lowres.pdf. d. The impact of sea level rise on developing countries: a comparative analysis, by

S. Dasgupta, B. Laplante. C. Meisner, D. Wheeler and J Yan, Climatic Change (2009), vol. 93, pp. 379-388.

e. M. Sugiyama MIT Masters Thesis, https://globalchange.mit.edu/sites/default/files/Sugiyama_MS_07_0.pdf.

f. IPCC: http://www.ipcc.ch/ipccreports/tar/wg2/index.php?idp=298 g. Climate Central http://ss6m.climatecentral.org/#11/40.7946/-74.0012

2. Read “a simple climate-Solow model” by Tsigaris and Wood (discussed in class) and answer at least 5 of the 10 questions. Satisfactory answers to additional questions will yield extra credit. You must work in groups of minimum 3 and maximum 5 students and return a single report for the whole group. All the questions are tied together, so you need to work together on all questions.

i. Final report due Wednesday 28 March in class. Resources:

a. A Simple Climate-Solow model for introducing the economics of climate change to undergraduate students, by P. Tsigaris and J. Wood, International Review of Economics Education (2016), vol. 23, pp. 65-81.

b. Nord 3 and 18.

3. Find an example of implementation of an emissions reduction policy instrument (carbon tax, cap-and-trade, regulation, etc…) in a particular country or region. Describe the experiment, its motivation (what it was trying to achieve and why), explain how successful it was and why. The report on your research should be 5-10 pages. You must work in groups of minimum 3 and maximum 5 students and return a single report for the whole group.

i. Single page project proposal due Wednesday 4 April in class (only if you want feed-back),

ii. Final draft due Wednesday 25 April in class. Some resources (you should also find your own – only use reputable sources):

a. World Bank Carbon Pricing Watch: https://openknowledge.worldbank.org/handle/10986/26565

b. Mitigation policies: https://www.coursera.org/learn/sustainable- development/lecture/eEC4x/mitigation-policies.

c. Where carbon is taxed: https://www.carbontax.org/where-carbon-is-taxed/. d. EU climate action: https://ec.europa.eu/clima/policies/ets_en. e. C2ES: https://www.c2es.org/us-states-regions/key-legislation/california-cap-trade. f. Climate Group:

https://www.theclimategroup.org/sites/default/files/archive/files/May-Insight-Briefing- –Carbon-Pricing.pdf.

g. Vox: https://www.vox.com/energy-and- environment/2017/6/15/15796202/map-carbon-pricing-across-the-globe.

h. Australian experiment: http://www.ceem.unsw.edu.au/sites/default/files/event/documents/Betz%20pr esenentation2%20SCORE%20Florence.pdf.

i. Australia’s carbon price, by F. Jotzo, Nature Climate Change (2012), vol 2, pp. 475-476. j. California-China market linkage: http://www.reuters.com/article/us-usa-

climatechange-california-china-ex-idUSKBN18S6NO.

Problem Sets

1. Read “Contingent valuation: a user’s guide,” by Richard Carson, Environmental Science and Technology (2000), vol. 33, pp. 1413-1418, and design a sampling strategy and a questionnaire to evaluate the loss of Antarctic Penguins as a result of climate change. Due Wednesday 7 February in class.

2. The construction of a hydroelectric plant in a wilderness valley is under consideration. It is known that the valley contains an insect species found nowhere else, and the project includes relocating the insects. It is not known whether they can be successfully located. The pay-off matrix is:

F: favorable U: unfavorable H: Hydroelectric +70 -20 C: Coal-fired +20 +20

where F and U stand for favorable and unfavorable, H is the decision to go ahead with the hydroelectric plant, C is the decision to proceed instead with a coal fired plant, and the cell entries are Net Present Value millions of $s. Favorable is the state of nature where species relocation is successful, unfavorable is where it is not. Ascertain the decisions following from adopting:

(a) the principle of insufficient reason, (b) the maximin rule, (c) the maximax rule.

Derive the regret matrix and ascertain the implications of the minimax regret rule, and compare the outcome with that arising from the safe minimum standard approach. Due Wednesday 21 February in class.

3. The world consists of two countries, X which is poor and Y which is rich. The total benefits (B) and total costs (C) of emissions abatement (A) are given by the functions BX = 8(AX + AY), BY = 5(AX + AY), CX = 10 + 2AX + 0.5AX2 and CY = 10 + 2AY + 0.5AY2, where the subscripts are used to denote the country in which the abatement takes place.

(a) Obtain the non-cooperative equilibrium levels of abatement for X and Y. (b) Obtain the cooperative equilibrium levels of abatement for X and Y. (c) Calculate the utility levels enjoyed by X and by Y in the non-cooperative and

cooperative solutions. Does the cooperative solution deliver Pareto improvements for each country, or would one have to give a side-payment to the other to obtain Pareto improvements for each with cooperation?

(d) Obtain the privately optimizing level of abatement for X, given that Y decides to emit at the level of emissions that Y would emit in the cooperative equilibrium. (You should find that the answer to d) above is that X does the same amount of

abatement that she would have done in the non-cooperative case. What property or properties of the cost and benefit function used in this example cause this particular result?)

(e) Suppose that Y acts as a ‘swing abater’, doing whatever (non-negative) amount of abatement is required to make the combined world abatement equal to the combined total under a full cooperative solution. How much abatement is undertaken in the two countries?

Due Wednesday 21 March in class.

4. Suppose that under the terms of an international agreement, U.S. CO2 emissions are to be reduced by 200 million tons and those of Brazil by 50 million tons. Here are the policy options that the United States and Brazil have to reduce their emissions: Due Monday 9 April in class.

a. Which policies are most efficient for each country in meeting their reduction targets? How much will be reduced using each option, at what cost, if the two countries must operate independently? Assume that any of the policy options can be partially implemented at a constant marginal cost. For example, the United States could choose to reduce carbon emissions with efficient machinery by 10 million tons at a cost of $2 billion. (Hint: start by calculating the average cost of carbon reduction in dollars per ton for each of the six policies).

b. Suppose a market of transferable permits allows the United States and Brazil to trade permits to emit CO2. Who has an interest in buying permits? Who has an

interest in selling permits? What agreement can be reached between the United States and Brazil so that they can meet the overall emissions reduction target of 250 million tons at the least cost? Can you estimate a range for the price of a permit to emit one ton of carbon? (Hint: use your average cost calculations from the first part of the question.)

5. List at least 10 emissions mitigation technologies, describe the way they can reduce CO2

emissions, and classify them in the following categories: a. Mature and deployed, b. Mature but relatively under deployed, c. Experimental.

What economic policy instruments can be used to move these technologies from category c to b and from category b to a? Due Wednesday 25 April in class.

Calendar of due dates: Wednesday 24 January Research 1 Draft Proposal

Wednesday 7 February Problem Set 1

Wednesday 14 February Research 1 Final

Wednesday 21 February Problem Set 2

Monday 28 February Mid Term 1

Wednesday 21 March Problem Set 3

Wednesday 28 March Research 2 Final

Wednesday 4 April Research 3 Draft Proposal

Monday 9 April Problem Set 4

Wednesday 16 April Mid Term 2

Wednesday 25 April Research 3 and Problem Set 5 Final