The cost of delaying climate action has been studied extensively. This column discusses new findings based on a meta-analysis of published model runs. A one-decade delay in addressing climate change would lead to about a 40% increase in the net present value cost of addressing climate change. If anything, the methodology used in this analysis could understate the cost of delay. Uncertainty and the possibility of tipping points provide a motivation for more action as a form of insurance against worse outcomes.
Jason Furman, Ron Shadbegian, Jim Stock, 25 February 2015
Laura Grigolon, Mathias Reynaert, Frank Verboven, 10 January 2015
Using a rich dataset for the European car markets, this column shows that consumers moderately undervalue future fuel costs. This investment inefficiency is too small to justify upfront car taxes to promote fuel efficient cars. A car tax results in a more fuel efficient vehicle fleet than a fuel tax, but fails to induce high-mileage consumers to substitute to more fuel efficient cars. Once we take this targeting effect into account, fuel taxes turn out to be more effective.
Valentina Bosetti, Jeffrey Frankel Frankel, 24 November 2014
Many countries have announced emissions targets for 2020. To evaluate which countries are doing their fair share, this column proposes a ‘scorecard’ approach based on three principles of fairness in climate change mitigation: latecomer catch-up, progressivity, and cost. The authors find that most countries’ targets, including those of China and the US, are in line with what such a scorecard would suggest.
Radek Stefanski, 30 May 2014
No comprehensive database of directly measured fossil-fuel subsidies exists at the international or the sub-national level, yet subsidies may be crucial drivers of global carbon emissions. This column describes a novel method for inferring carbon subsidies by examining country-specific patterns in carbon emission-to-output ratios, known as emission intensities. Calculations for 170 nations from 1980-2010 reveal that fossil-fuel price distortions are enormous, increasing, and often hidden. These subsidies contributed importantly to increasing emissions and lower growth.
Richard Tol, 25 April 2014
The IPCC’s Fifth Assessment Report estimates lower costs of climate change and higher costs of abatement than the Stern Review. However, current UN negotiations focus on stabilising atmospheric concentrations of greenhouse gases at even lower levels than recommended by Stern. This column argues that, given realistic estimates of the rate at which people discount the future, the UN’s target is probably too stringent. Moreover, since real-world climate policy is far from the ideal of a uniform carbon price, the costs of emission reduction are likely to be much higher than the IPCC’s estimates.