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Equitable CBA of Climate Change Policies

Equitable CBA of Climate Change Policies. Richard S.J Tol Ecological Economics (2001) 36: 71-85. Amy McNally Econ 539 April 25, 2007. Research Questions. How can we introduce equity into the analysis of how much emission abatement is desirable?

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Equitable CBA of Climate Change Policies

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  1. Equitable CBA of Climate Change Policies Richard S.J Tol Ecological Economics (2001) 36: 71-85 Amy McNally Econ 539 April 25, 2007

  2. Research Questions • How can we introduce equity into the analysis of how much emission abatement is desirable? • How can welfare maximization be extended to consider justice?

  3. Three Methods to Consider Equity • Kant & Rawls: Max. present net welfare, cost are evenly distributed • No-Envy: Overall decrease of emissions until Costs and of Climate Change = Cost of Emission Reduction • Non-Linear Aggregation of Welfare: International cooperation and aversion to inequity

  4. Methods • The Climate Framework for Uncertainty, Negotiation and Distribution (FUND) • It links population, technology, economic activity, emissions, concentrations, climate, sea level, impacts

  5. Data Used • Model runs from 1950 to 2200, for 9 major world regions *fwd thinking not for policy • Emissions scenarios from Intergovernmental Panel on Climate Change (IPCC) • Population- World Resource Database • Value of life = $250,000 + 175* per capita income

  6. Data and Assumptions • Costs of CO2 emissions - IPCC (1996) and Rose and Steven (1993) • Cost of climate change – Tol (1995,1996) • Cost of Emission Reduction < Cost of Climate Change, thus restrict analysis to Cost of CC

  7. Results • Kant and Rawls scenario: emissions are not substantially reduced i.e. Europe can easily absorb Africa’s costs • No-Envy scenario: emissions are significantly reduced but maintain current inequities • Welfare Aggregation: emissions are reduced depending on how equitable rich countries chose to be

  8. Policy Implications • Emissions need to be reduced • Governments would have to make a commitment to cooperate and reduce inequity. • There are different market approaches to handle the effects of climate change and its inequitable distribution.

  9. Decrease vulnerability or decrease threat? • Tol (2002) conducted a CBA that hypothesized that development aid to poor countries is more beneficial than spending that money on emission controls. The results were location dependant.

  10. Questions?

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