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This paper assesses the potential role of the implementation of the best available technologies to reduce the economic consequences of outdoor air pollution in the coming decades. The paper focuses on market impacts related with additional health expenditures, changes in labour productivity and crop yield losses and also presents results on non-market costs, i.e. welfare losses from avoided premature deaths. The results show that technological improvements can potentially reduce concentrations of air pollutants to levels compatible with the WHO guidelines in most countries. However, technology measures can only reduce part of the economic costs relative with the market impacts. While those are efficient in reducing the direct costs of air pollution, there are still large indirect costs associated with current and remaining pollution levels. Policies that aim directly at avoiding economic impacts need to be implemented to further reduce air pollution damages, especially in the regions where technologies are not sufficient to reduce concentrations or where economic consequences persist despite reduced concentration levels. [ABSTRACT FROM AUTHOR]

This paper presents a new detailed global quantitative assessment of the economic consequences of climate change (i.e. climate damages) to 2060. The analysis is based on an assessment of a wide range of impacts: changes in crop yields, loss of land and capital due to sea level rise, changes in fisheries catches, capital damages from hurricanes, labour productivity changes and changes in health care expenditures from diseases and heat stress, changes in tourism flows, and changes in energy demand for cooling and heating. A multi-region, multi-sector dynamic computable general equilibrium model is used to link different impacts until 2060 directly to specific drivers of economic growth, including labour productivity, capital stocks and land supply, as well as assess the indirect effects these impacts have on the rest of the economy, and on the economies of other countries. It uses a novel production function approach to identify which aspects of economic activity are directly affected by climate change. The model results show that damages are projected to rise twice as fast as global economic activity; global annual Gross Domestic Product losses are projected to be 1.0-3.3% by 2060. Of the impacts that are modelled, impacts on labour productivity and agriculture are projected to have the largest negative economic consequences. Damages from sea level rise grow most rapidly after the middle of the century. Damages to energy and tourism are very small from a global perspective, as benefits in some regions balance damages in others. Climate-induced damages from hurricanes may have significant effects on local communities, but the macroeconomic consequences are projected to be very small. Net economic consequences are projected to be especially large in Africa and Asia, where the regional economies are vulnerable to a range of different climate impacts. For some countries in higher latitudes, economic benefits can arise from gains in tourism, energy and health. The global assessment also shows that countries that are relatively less affected by climate change may reap trade gains. [ABSTRACT FROM AUTHOR]

We report results from a comparison of numerically calibrated game theoretic integrated assessment models that explore the stability and performance of international coalitions for climate change mitigation. We identify robust results concerning the incentives of different nations to commit themselves to a climate agreement and estimate the extent of greenhouse gas mitigation that can be achieved by stable agreements. We also assess the potential of transfers that redistribute the surplus of cooperation to foster the stability of climate coalitions. In contrast to much of the existing analytical game theoretical literature, we find substantial scope for self-enforcing climate coalitions in most models that close much of the abatement and welfare gap between complete absence of cooperation and full cooperation. This more positive message follows from the use of appropriate transfer schemes that are designed to counteract free riding incentives. [ABSTRACT FROM AUTHOR]

This paper examines renegotiations of international climate agreements for carbon abatement. We explore coalition stability under 'optimal transfers' that have been suggested to stabilise international environmental agreements (e.g. McGinty in Oxford Economic Papers 59, 45-62, ). Such transfer schemes need to be refined when agreements are renegotiated. We determine the requirements that transfers between signatories of an international climate agreement must satisfy in order to stabilise the sequence of agreements that performs best in terms of provision of the public good 'carbon abatement'. If these requirements are met, no country wants to change its membership status at any stage. In order to demonstrate the applicability of our result we use the STACO model, a 12-regions global model, to assess the impact of well-designed transfer rules on the stability of an international climate agreement. Although there are strong free-rider incentives, we find a stable grand coalition in the first commitment period in a game with one round of renegotiations if renegotations take place sufficiently early. [ABSTRACT FROM AUTHOR]

This paper uses the OECD's global recursive-dynamic general equilibrium model ENVLinkages to examine the mid-term economic consequences and the optimal energy supply mix adjustments of a simultaneous implementation of i) a progressive fossil fuel subsidy reform in emerging and developing economies and ii) a progressive phase out of nuclear energy, mostly affecting OECD countries, China and Russia. The analysis is then transposed in the context of climate change mitigation to depict the corresponding implications for CO2 emissions, to assess the interactions between the two energy policies, and to derive how the associated costs are affected by the different policies. The phase-out scenario projects a nuclear capacity halved by 2035 as compared to the Baseline, corresponding to $120 billion losses in value-added of the nuclear industry for that year. The nuclear phase-out leaves GDP and real household consumption marginally affected in energy importing countries. A multilateral subsidy reform is more likely to affect international fossil fuel prices and alter patterns of global energy use. The fossil fuel subsidy reform, when implemented together with nuclear phase-out, more than offsets negative consequences on household consumption but still leads to a decrease in global CO2 emissions. The combined policies help save the equivalent of current energy consumption in the Middle East. Combining a climate policy, an effective fossil fuel subsidy reform, even with a lower nuclear share in the power mix, brings about multiple benefits to OECD countries which reduce their energy bill and achieve large climate change mitigation at lower cost. [ABSTRACT FROM AUTHOR]

International climate negotiations take place in a setting where uncertainties regarding the impacts of climate change are very large. In this paper, we examine the influence of increasing the probability and impact of large climate change damages, also known as the 'fat tail', on the formation of an international mitigation agreement. We systematically vary the shape and location of the distribution of climate change damages using the stochastic version of the applied game-theoretical STACO model. Our aim is to identify how changes to the distributional form affect the stability of coalitions and their performance. We find that fatter upper tails increase the likelihood that more ambitious coalitions are stable as well as the performance of these stable coalitions. Fatter tails thus imply more successful, or 'fatter', international climate agreements. [ABSTRACT FROM AUTHOR]

International climate policies are being shaped in a process of ongoing negotiations. This paper develops a sequential game framework to explore the stability of international climate agreements allowing for multiple renegotiations. We analyse how the incentives to reach an international climate agreement in the first period will be impacted by the prospect of further negotiations in later periods and by the punishment options related to renegotiations. For this purpose we introduce a dynamic model of coalition formation with twelve world regions that captures the key features of the climate-economy impacts of greenhouse gas emissions. For a model with one round of renegotiations we find that a coalition of China and the United States is the unique renegotiation proof equilibrium. In a game with more frequent renegotiations we find that the possibility to punish defecting players helps to stabilise larger coalitions in early stages of the game. Consequently, several renegotiation proof equilibria emerge that outperform the coalition of China and USA in terms of abatement levels and global payoff. The Grand Coalition, however, is unstable. [ABSTRACT FROM AUTHOR]

Integrated Assessment Models (IAMS) have helped us over the past decade to understand the interactions between the environment and the economy in the context of climate change. Although it has also long been recognized that adaptation is a powerful and necessary tool to combat the adverse effects of climate change, most IAMS have not explicitly included the option of adaptation in combating climate change. This paper adds to the IAM and climate change literature by explicitly including adaptation in an IAM, thereby making the trade-offs between adaptation and mitigation visible. Specifically, a theoretical framework is created and used to implement adaptation as a decision variable into the DICE model. We use our new AD-DICE model to derive the adaptation cost functions implicit in the DICE model. In our set-up, adaptation and mitigation decisions are separable and AD-DICE can mimic DICE when adaptation is optimal. We find that our specification of the adaptation costs is robust with respect to the mitigation policy scenarios and parameter values. Our numerical results show that adaptation is a powerful option to combat climate change, as it reduces most of the potential costs of climate change in earlier periods, while mitigation does so in later periods. [ABSTRACT FROM AUTHOR]

Cooperation in international environmental agreements appears difficult to attain because of strong free-rider incentives. This paper explores how different technology spillover mechanisms among regions can influence the incentives to join and stabilise an international agreement. We use an applied modelling framework (STACO) that enables us to investigate the stability of partial climate coalitions. Several theories on the impact of technology spillovers are evaluated by simulating a range of alternative specifications. We find that spillovers are a good instrument to increase the abatement efforts of coalitions and reduce the associated costs. In our setting, however, they cannot overcome the strong free-rider incentives that are present in larger coalitions, i.e. technology spillovers do not substantially increase the success of international environmental agreements. This conclusion is robust with respect to the specification of technology spillovers. [ABSTRACT FROM AUTHOR]

This article discusses an approach for identification and evaluation of short-term greenhouse gas (GHG) emission reduction options in firms. The approach is based on lessons learnt from a project using Participatory Integrated Assessment (PIA) and builds on the idea that effective public climate policy for firms requires options that have support from stakeholders and are practically feasible. Scenarios are used to provide a link with short-term policy developments and a model assists to communicate quantitative effects of options to participating stakeholders. Our approach can be seen as a first step towards a framework that meets the need for more systematic approaches to PIAs identifying effective public policies for short-term GHG emission reduction options in firms. In order to identify effective options for non-carbon dioxide GHG emission reductions, our approach has been applied to Dutch dairy farms, after which it has been refined. The case study suggests that our approach can provide balance between practical, context specific issues and scientific-theoretical aspects, thereby avoiding common pitfalls of participatory research projects to focus too much on either theory or practical issues. [ABSTRACT FROM AUTHOR]

Results derived from empirical analyses on the stability of climate coalitions are usually very sensitive to the large uncertainties associated with the benefits and costs of climate policies. This paper provides the methodology of Stability Likelihood (SL) that links uncertainties about benefits and costs of climate change to the stability of coalitions. We show that the concept of SL improves upon the robustness and interpretation of stability analyses. Moreover, our numerical application qualifies conclusions from a recent strand of literature based on stylised models with ex-ante symmetric players that learning has a negative impact on the success of coalition formation in context of uncertainty. [ABSTRACT FROM AUTHOR]

This paper analyses the formation and stability of coalitions to form international environmental agreements. We present and apply the Stability of coalitions model to assess the internal and external stability of all possible coalition structures in a cartel formation game; first under the assumption that no transfers take place and second for a transfer scheme. One important novelty of this paper is the analysis of the incentive structure of twelve regions for all possible combinations of (cartel) coalitions in an empirical setting with asymmetric regions. We show that stable coalitions can emerge only if benefits from global abatement are sufficiently high or if an appropriate transfer scheme is introduced. [ABSTRACT FROM AUTHOR]