November 23, 2012

The impact of climate change on European Agriculture

A recent paper on the impact of climate change on EU agriculture just came out as FEEM WP.

We use for the first time the Ricardian method at a continental EU scale. Things get bad for Mediterranean countries

Steven Van Passel, Emanuele Massetti, Robert Mendelsohn. 2012. "A Ricardian Analysis of the Impact of Climate Change on European Agriculture." FEEM Note di Lavoro 2012.083, November 2012.


This research estimates the impact of climate on European agriculture using a continental scale Ricardian analysis. Data on climate, soil, geography and regional socio-economic characteristics were matched for 37 612 individual farms across the EU-15. Farmland values across Europe are sensitive to climate. Even with the adaptation captured by the Ricardian technique, farms in Southern Europe are predicted to suffer sizeable losses (8% -13% per degree Celsius) from warming. In contrast, agriculture in the rest of Europe is likely to see only mixed impacts. Increases (decreases) in rain will increase (decrease) average farm values by 3% per centiliter of precipitation. Aggregate impacts by 2100 vary depending on the climate model scenario from a loss of 8% in a mild scenario to a loss of 44% in a harsh scenario.

Green Perspectives: a special issue of Energy Economics

Open access available to the new paper on investments under climate policy: here.

The whole special issue on "green perspectives", edited by Brian Flannery and Richard Tol is open access.

Here is the table of content with links:

Page S1
Brian Flannery

From “Green Growth” to sound policies: An overview Original Research Article
Pages S2-S6
Richard Schmalensee

Energy and technology lessons since Rio
Pages S7-S14
James Edmonds, Katherine Calvin, Leon Clarke, Page Kyle, Marshall Wise

Investments and public finance in a green, low carbon, economy
Pages S15-S28
Carlo Carraro, Alice Favero, Emanuele Massetti

Financing for climate change
Pages S29-S33
Richard N. Cooper

Clean energy: Revisiting the challenges of industrial policy
Pages S34-S42
Adele C. Morris, Pietro S. Nivola, Charles L. Schultze

The elusive and expensive green job
Pages S43-S52
Diana Furchtgott-Roth

The potential role of carbon labeling in a green economy
Pages S53-S63
Mark A. Cohen, Michael P. Vandenbergh

Reducing greenhouse gas emissions through operations and supply chain managementArticle
Pages S64-S74
Erica L. Plambeck

Greening Africa? Technologies, endowments and the latecomer effect
Pages S75-S84
Paul Collier, Anthony J. Venables

Green growth and the efficient use of natural resources
Pages S85-S93
John M. Reilly

October 18, 2012

Trading Woody Biomass and Negative Emissions Under a Climate Mitigation Scenario

On October 1 Alice Favero presented our joint paper on trade of woody biomass at the conference "Power Generation and the Environment, Choices and Economic Trade-offs" organized by the University of Wyoming School of Energy Resources and the Center for Energy Economics and Public Policy at Jackson Hole, WY.

The link to the presentation here.
The link to the video here.

Favero, Alice and Emanuele Massetti. 2012. "Trading Woody Biomass and Negative Emissions Under a Climate Mitigation Scenario." Yale University and FEEM, mimeo.

Bio-energy has the potential to be a key mitigation option if combined with carbon capture and sequestration (BECCS) because it can generate electricity and absorb emissions at the same time. However, biomass is not distributed evenly across the globe and regions with a potentially high demand might be constrained by limited domestic supply. Therefore, climate mitigation policies might create an incentive to trade biomass internationally. This paper evaluates the potential of the trade of woody biomass under three carbon taxes which lead to a stabilization target of 4.6 W/m2, 3.8 W/ m2 and 3.3 W/ m2 radiative forcing by 2100 using the integrated assessment model WITCH. Results show that in all scenarios there is big incentive in trading biomass: more than 50% of biomass consumed globally is from the international market. Regions trade 16-52 EJ in 2050 and 52-84 EJ/yr in 2100. The value of biomass traded is equal to  US$ 1-9 Trillion in 2100. The effect of the biomass trade on the climate polices is significant: it offers an additional abatement of GHGs emissions of 150-340 GtCO2 for the same tax depending on the scenario. Finally, we simulate a cap-and-trade scheme with a stabilization target of 3.8 W/ m2 in 2100 in order to study the implications of biomass trade on the carbon market. We found that biomass trade has a downward effect of 30% on the price of permits by 2100 and reduces the policy cost by 11% for 2010-2050 and by 15% for 2010-2100.

The link to the program and other presentations here.

October 1, 2012
Session One: CCS Themes
The Cost of Power Generation with CCS vs. the Alternatives
Howard Herzog, Senior Research Engineer, Massachusetts Institute of Technology Energy Initiative

A Flexible Policy Mechanism to Incentivize "CCS-ready" Without Delaying Replacement of Old Coal-fired Power Plants
Dalia PatiƱo-Echeverri, Gendell Assistant Professor for Energy Systems and Public Policy, Duke University

The Challenges of CCS for an Operating Utility
Ron Harper, Retired CEO of Basin Electric and Cooperative

Keynote Address
A Practitioner's Guide to a Low-carbon Economy: Lessons From the UK
Samuel Fankhauser, Co-Director of the Grantham Research Institute on Climate Change and the Environment and Deputy Director of the Center for Climate Change Economics and Policy

Session Two: Policy
On Designing an Efficient CO2 Emissions Cap and Trade System
Scott Atkinson, Professor, University of Georgia Department of Economics

The Competitiveness Impacts of Climate Change Mitigation Policies
Joseph Aldy, Assistant Professor of Public Policy, Harvard Kennedy School

Environmental Policies on the Grid:  Findings from an Integrated Economic, Engineering, and Environmental Model
Daniel Shawhan, Assistant Professor, Department of Economics, Rensselaer Polytechnic Institute

Session Three: Regulation Analysis Themes
The Impact of CO2, NOx, and SO2 Regulation on Electricity Production
Rolf Fare, Department of Economics and Department of Agriculture and Resource Economics, Oregon State University

Costs and Emissions Reductions from Clean Air Act Regulation of Greenhouse Gases from Coal-Fired Power Plants
Joshua Linn, Fellow, Resources for the Future

Can a Unilateral Carbon Tax Reduce Emissions Elsewhere?
Don Fullerton, University of Illinois, Department of Finance

October 2, 2012
Session Four:  Alternative Resources
Trading Woody Biomass and Negative Emissions Under a Climate Mitigation Scenario
Alice Favero, Visiting Research Assistant, Yale School of Forestry & Environmental Studies

New Cost Estimates for Forest Carbon Sequestration in the United States
Andrew Plantinga, Professor, Department of Agricultural and Resource Economics, Oregon State University

Uranium and Nuclear Power: Past, Present and Future
Charles Mason, UW Department of Economics & Finance; H.A. True Chair in Petroleum and Natural Gas Economics

Session Five: Costs & Pricing
Pricing Carbon in the US: A Model-based Analysis of Power Sector Only Approaches
Adele Morris, Fellow and Policy Director for the Climate and Energy Economics Project, The Brookings Institute

Estimating the Value of Additional Wind and Transmission Capacity in the Rocky Mountain West
Robert Godby, Associate Professor, UW Department of Economics and Finance

Evaluating Climate Policy Portfolios in the Electricity Sector: The Role of Multiple Market Failures
Carolyn Fischer, Resources for Future

Analysis of the Bingaman Clean Energy Standard Proposal
Karen Palmer, Senior Fellow and Research Director, Resources for Future

September 16, 2012

Investments and Public Finance in a Green, Low Carbon Economy

The paper on "Investments and Public Finance in a Green, Low Carbon Economy" joint with Carlo Carraro and Alice Favero is forthcoming on Energy Economics. A pre-print is available here.

I copy here the abstract of the paper:

The paper evaluates the impacts on investments and public finance of a transition to a green, low carbon, economy induced by carbon taxation.  Four global tax scenarios are examined using the integrated assessment model WITCH.  Taxes are levied on all greenhouse gases (GHGs) and lead to global GHG concentrations equal to 680, 560, 500 and 460 ppm CO2-eq in 2100. Investments in the power sector increase with respect to the Reference scenario only with the two highest taxes. Investments in energy-related R&D increase in all tax scenarios, but they are a small fraction of GDP. Investments in oil upstream decline in all scenarios. As a result, total investments decline with respect to the Reference scenario. Carbon tax revenues are high in absolute terms and as share of GDP. With high carbon taxes, tax revenues follow a “carbon Laffer”curve. The model assumes that tax revenues are flawlessly recycled lump-sum into the economy. In all scenarios, the power sector becomes a net recipient of subsidies to support the absorption of GHGs. In some regions, with high carbon taxes, subsidies to GHG removal are higher than tax revenues at the end of the century.

Carraro, C., A. Favero and E. Massetti. 2012. “Investments and Public Finance in a Green, Low Carbon Economy.” Energy Economics, forthcoming.

June 15, 2012

Incentives and stability of international climate coalitions: an integrated assessment

On June 12 2012 I presented the paper "Incentives and stability of international climate coalitions: an integrated assessment" joint with Valentina Bosetti, Carlo Carraro, Enrica De Cian and Massimo Tavoni at the Cowles Foundation Summer Conference on "Macronomics and Climate Change” at Yale University.

 Full presentation in pdf here.

In the paper we show why cooperation among world countries to reduce GHG emissions is possible if targets are not to stringent.

We find that cooperation is possible and profitable but:

  • The 2°C target is not supported by cost-benefit analysis even under extreme assumptions on damages and discounting
  • Even with more modest targets coalitions are not stable
  • International transfers are needed to «bribe in» reluctant countries
Policy implication: be less ambitious when negotiating the post-2020 climate architecture

  • Alternative bargaining rules might deliver different results
  • Much cheaper mitigation costs might induce more cooperation
  • Ethical considerations might be used to assess impacts instead of monetary evaluations of future damages
The paper was recently published as CEPR working paper here and a short-article appeared on here.