Course 705: Environment and Development



University of Delhi

Delhi School of Economics

M.A. Economics

Winter semester 2013

Course 705: Environment and Development Shreekant Gupta

Tues, Thurs 10:25-11:35 am sgupta@

Topic II. The Economics of Climate Change

We will look at the following broad areas. To this end, we will read journal articles, IPCC reports and the Stern Review.

(1) Modeling—IAMs

(2) Stern Review

(3) Impacts (esp. on agriculture)

(4) Adaptation

(5) Mitigation (emissions trading)

(6) Weitzman’s dismal theorem

II.0 Overview

Shreekant Gupta: “Climate Change Overview: Science, Politics, Economics & Policy” (Powerpoint slides)

II.1 Modeling of climate change (Integrated Assessment Models)

Slides and lecture notes on IAMs by Professor Surender Kumar.

Nordhaus, William D. (2008). A Question of Balance. Yale University Press.

Nordhaus, William D. (2010). “Economic aspects of global warming in a post-Copenhagen environment,” PNAS (Proceedings of National Academy of Sciences), 107(26):11721-11726, June 29 (and Supporting Information).

Ackerman and Munitz (A&M) (2012). “Climate damages in the FUND model: A disaggregated analysis,” Ecological Economics

Anthoff and Tol (comment on A&M) and reply by A&M.

Ackerman, F.,· S.J. DeCanio, R.B. Howarth, and· K. Sheeran (2009). “Limitations of integrated assessment models of climate change,” Climatic Change.

Ackerman, F., S. J. DeCanio, R. B. Howarth, and K. Sheeran (2010). “The Need for a Fresh Approach to Climate Change Economics.” In Assessing the Benefits of Avoided Climate Change: CostBenefit Analysis and Beyond. Gulledge, J., L. J. Richardson, L. Adkins, and S. Seidel (eds.), Proceedings of Workshop on Assessing the Benefits of Avoided Climate Change, March 16–17, 2009. Pew Center on Global Climate Change: Arlington, VA. p. 159–181. Available at: .

Kumar and Managi (2009). “Energy price-induced and exogenous technological change: Assessing the economic and environmental outcomes,” Resource and Energy Economics.

Popp, David (2002). “Induced innovation and energy prices,” American Economic Review.

II.2 Stern Review and its critique

Lecture slides (two sets—one PDF (Arun Malik’s) and one Powerpoint)

Stern Review (The Economics of Climate Change) (2007). Introduction, Summary of Conclusions, Executive Summary, Chapters: 1 (extra credit), 2, 2A, 6, 8, 9, 10, 13.5 (pp. 329-334), 14, 15, 22.

Stern, Nicholas (2008). “The economics of climate change” (Richard T. Ely Lecture), American Economic Review 98(2):1-37.

Nordhaus, William D. (2007). “A review of the Stern Review on the economics of climate change,” Journal of Economic Literature 45(3):686-702.

Weitzman, Martin L. (2007). “A review of the Stern Review on the economics of climate change,” Journal of Economic Literature 45(3):703-724.

Conceicao, Zhang, Bandura (August 2007). “Brief on discounting in the context of climate change economics” UNDP.

Anthoff and Tol (2009). “The impact of climate change on the balanced growth equivalent,” ERE.

Tol and Yohe (2009). “The Stern Review: a deconstruction” Energy Policy.

II.3 Impacts (esp. on developing countries and on agriculture)

Mendelsohn, Dinar, Williams (2006). “The distributional impact of climate change on rich and poor countries,” EDE.

Gupta, Sen, Srinivasan (2012)

II.4 Adaptation

II.5 Mitigation (emissions trading)

Bertram, I. Geoffrey (1996). “Tradable Emission Quotas, Technical Progress and Climate Change”, Environment and Development Economics 1(4), 465-87.

European Union Emission Trading Scheme (Wikipedia entry).

EU ETS factsheet (2013)

Ellerman, A.Denny and Barbara Boucher. 2007. “The European Union Emissions Trading Scheme: Origins, Allocation, and Early Results,” Review of Environmental Economics and Policy (REEP) 1(1): 66-87.

Convery, Frank J. and Luke Redmond. 2007. “Market and Price Developments in the European Union Emissions Trading Scheme,” REEP 1(1): 88-111.

Kruger, Joseph, W.E. Oates and W.A. Pizer. 2007. “Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy,” REEP 1(1): 112-133.

II.6 Fat tails and Weitzman’s dismal theorem

Fat tailed distribution (Wikipedia)

John A. Robb (2008). Fat tail distribution; Financial fat tail distribution.

Bailey: “Wagging the “Fat Tail” of Climate Catastrophe”

Leiss: “Fat Tails and Climate Change: Catastrophic Failures in Risk Management”

[These two are not really readings but very short introductions to the issue]

REEP Symposium on “Fat Tails and the Economics of Climate Change” (also see abstracts):

Nordhaus: “The Economics of Tail Events with an Application to Climate Change”

Pindyck: “Fat Tails, Thin Tails, and Climate Change Policy”

Weitzman: “Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change”

Nordahus (2012). “Economic policy in the face of severe tail events,” JPET.

II:7 Sustainable Development and Global Warming

Llavador, Roemer, Silvestre: “Sustainability in the presence of global warming: theory & empirics” [skip section 6-8, p. 13-24].

Llavador, Roemer, Silvestre: “The Ethics of Intertemporal Distribution in aWarming Planet” [only sections 1-5]

In addition to these readings students are responsible for handouts and material covered in class lectures.

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