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The Paris Agreement has set stringent temperature targets to limit global warming to 2°C above preindustrial level, with efforts to stay well below 2°C. At the same time, its bottom-up approach with voluntary national contributions makes the implementation of these ambitious targets particularly challenging. Climate engineering – both through carbon dioxide removal (CDR) and solar radiation management (SRM) – is currently discussed to potentially complement mitigation and adaptation. Results from integrated assessment models already suggest a significant role for some forms of climate engineering in achieving stringent climate objectives1. However, these estimates and their underlying assumptions are uncertain and currently heavily debated2–4. By reviewing the existing literature and reporting the views of experts, we identify research gaps and priorities for improving the integrated assessment of climate engineering. Results point to differentiated roles of CDR and SRM as complementary strategies to the traditional ones, as well as diverse challenges for an adequate representation in integrated assessment models. We identify potential synergies for model development which can help better represent mitigation and adaptation challenges, as well as climate engineering.

Degradation of ecosystem services may be a major component of climate change damage, and incorporation of this factor could significantly alter the significance of uncertainty in climate-economy modeling. However, this aspect has been little investigated by economic analyses of climate change and uncertainty. We apply standardized numerical techniques of stochastic optimization to this research question. The model results show that the effects of uncertainty are different with different levels of agent’s risk aversion. Also, uncertainty exhibits different effects on mitigation policy and capital investment according to the availability of ecosystem services. Importantly, both the risk aversion and the availability of ecosystem services can change the effects of uncertainty on mitigation not only in level but also in sign. In other words, mitigation could both increase and decrease with climatic uncertainty. The model would provide hints for policymaking in finding a balance between economic growth, climate protection, and the conservation of ecosystems.

We study the North-South diffusion of technologies embodied in internationally mobile capital in a framework of intertemporal global welfare maximization. Convergence of the growth rates of technical change in the North and South always occurs in the long-run. However, the degree to which the North-South technology gap can be narrowed depends crucially on the level of the absorptive capacity (human capital, infrastructure, legal framework, etc.) in the South. Performing own innovations in the South narrows the technology gap only in the short-run. An optimal development policy requires more capital to be allocated to the South in earlier stages of development. Allowing for optimal investment into the absorptive capacity, the absorptive capacity rises steadily with the aim to close the technology gap completely. Our results show that an optimal development policy requires FDI to be matched by investment into the absorptive capacity.

The major goal of this thesis is to contribute answering the question how changes in economic actions affect the climate and at the same time, how do changes in the climate affect the economy. This thesis consists of three parts. In the first part (Chapter 2) we stress the role of the oceans as a sink for atmospheric carbon by developing a dynamic global carbon cycle model with two reservoirs containing atmosphere and two ocean layers. We consider a special form of carbon capture and storage: The capture of carbon and its sequestration into the deep ocean reservoir. Adding a non-renewable resource stock we study the socially optimal extraction and carbon capture and storage decision rules. We show that carbon capture and storage accelerates the slow natural flux within the carbon cycle, and because of its temporary abatement character it dampens the overshooting of the atmospheric reservoir. After studying the decentralized economy we show that the optimal carbon tax has an inverted u-shape. Depending on the initial sizes of the reservoirs and the speed of carbon fluxes between the reservoirs carbon taxes can also be increasing, decreasing or u-shaped. Our model is the first of its kind which can generate this result. Furthermore, we conclude that the level of the carbon tax should be positively adjusted to account for (i) damage uncertainty and (ii) the declining ability of the deep ocean to absorb atmospheric carbon. In the second part of the thesis (Chapter 3) we apply standardized numerical techniques of stochastic optimization to the climate change issue. We ask the question how the optimal mitigation of climate change evolves if intrinsic uncertainty about damage is inherent to the model. In particular, we are interested in how the effect of uncertainty on climate change mitigation changes with different levels of risk aversion. A major finding is that the effects of stochasticity differ even in sign as to emission control with varying parameters: introduction of stochasticity may increase or decrease emission control depending on the specific parameter setting. Our analysis covers a large range of the parameter space, in particular the degree of risk aversion and the level of uncertainty. We identify regions of the state space for which higher levels of uncertainty or risk aversion result in different policy rules for emission control. Similarly, given a certain state of the world we conclude that the effect of uncertainty on emission control changes (in level and sign) with the degree of risk aversion. In other words, uncertainties in climatic trends may induce people's precautionary emission reduction but also may drive away money from abatement. In the third part of the thesis (Chapter 4) we are interested in how a capital stock which is linked to a polluting technology is maintained, accumulated and utilized optimally. In order to analyze the inter- and intra-sectoral tradeoffs between capacity building and capacity using which guide the economy's transition process towards a balanced growth equilibrium we develop a model with two production sectors that generate a homogenous consumption good. The production processes in these two sectors differ with respect to the technology which is used. While in one sector the process is clean, generating output in the other sector also creates environmental damage. The technologies are completely embedded in the corresponding stock of physical capital. Hence, the application of one technology can only be intensified by investing more in the associated capital stock or utilizing it more intensively. Our findings show that the combination of heterogeneous capital, endogenous depreciation and capital intensity is essential for extracting qualitative and quantitative implications for policy makers about the easiness of a technology switch. If the economic environment requires a change in the energy portfolio, an economy driven by our model structure can not react without severe time lags, due to the ex post clay nature of investment. Installation of the desired capital stock simply takes time if we do not want to abstain from smooth consumption patterns. In a next step we introduce a stock of carbon which is subject to uncertainty. With this modification we can investigate how uncertainty about damage resulting from climate change influences the optimal interplay between capacity building and capacity utilization in a more realistic environment. We conclude that increasing uncertainty intensifies the need for a rapid build-up of the clean capital stock. It also reduces the demand for effective capital services associated with the polluting technology.

We apply standardized numerical techniques of stochastic optimization (Judd [1998]) to the climate change issue. The model captures the feature that the effects of uncertainty are different with different levels of agent's risk aversion. A major finding is that the effects of stochasticity differ even in sign as to emission control with varying parameters: introduction of stochasticity may increase or decrease emission control depending on parameter settings, in other words, uncertainties of climatic trends may induce people's precautionary emission reduction but also may drive away money from abatement.

In the presence of rising carbon concentrations more attention should be given to the role of the oceans as a sink for atmospheric carbon. We do so by setting up a simple dynamic global carbon cycle model with two reservoirs containing atmosphere and two ocean layers. The net flux between these reservoirs is determined by the relative reservoir size and therefore constitutes a more appropriate description of the carbon cycle than a proportional decay assumption. We exploit the specific feature of our model, the mixing of the carbon reservoirs, by allowing for a special form of carbon capture and storage: The capture of CO2 from the air and the sequestration of CO2 into the deep ocean reservoir. We study the socially optimal anthropogenic intervention of the global carbon cycle using a non-renewable resource stock. We find that this kind of carbon capture and storage facilitates achieving strict stabilization targets for the atmospheric carbon content. It accelerates the slow natural flux within the carbon cycle, and because of its temporary abatement character it dampens the overshooting of the atmospheric reservoir. Furthermore, we analyze the optimal paths of the carbon tax. The carbon tax shows to be inverted u-shaped but depending on the initial sizes of the reservoirs and the speed of carbon fluxes between the reservoirs we also find the optimal tax to be increasing, decreasing or u-shaped. Finally, we suggest to link the level of the carbon tax to the declining ability of the deep ocean to absorb atmospheric carbon.

This paper deals with the problem of tackling the adverse effect of output growth on environmental quality. For this purpose we use an intermediate sector that builds putty-practically-clay capital consisting of an amalgam of energy and raw capital used for final goods production. The putty-practically-clay model is a strongly simplified version of a full putty-clay model, that mimics all the relevant behaviour of a full putty-clay model, but that does not entail the administrative complications of a full putty-clay model. In addition, we introduce an R&D sector that develops renewable and conventional energy-related technologies. The allocation of R&D activities over these two uses of R&D gives rise to an induced bias in technical change in line with Kennedy (1964). In the context of our model, this implies that technological progress is primarily driven by the desire to counteract the upward pressure on production cost implied by a continuing price increase of conventional energy resources. By means of illustrative model simulations we study the effects of energy policy on the dynamics of the model for alternative policy options aimed at achieving Greenhouse Gas emission reductions. We identify the conditions under which energy policy might partly backfire and present some non-standard policy implications.

Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2019; Aachen : RWTH Aachen University 1 Online-Ressource (207 Seiten) : Illustrationen, Diagramme, Karten (2019). = Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2019, This thesis studies the effectiveness of governmental and market-based instruments inreducing ecological and social deterioration, which could be linked to the productionand extraction of primary products. By using a theoretical approach as well as quasi-experimental empirical techniques, the three essays of this dissertation shed light one ffectiveness of various policy instruments and take a special focus on their robustness inperiods of high commodity prices.The first essay provides a theoretical model which studies two unilateral policy optionsof manufacturing countries that source minerals from a resource-abundant country witha weak institutional background. The research is motivated by demands for more transparency in global supply chains and increasing possibilities in tracking and tracing alongthe value chain in order to identify legally extracted minerals. It aims to deepen theunderstanding of the welfare effects of trade policies which ban an entire region or, alter-natively, ban only those mines which are not proven to operate legally. The results suggest that an embargo against conflict-affected country leads to a declinein rent-seeking but also reduces prices for minerals and thus, also the income for legally operating actors. In the case of a targeted sanction in the form of the auditing and labeling of legal mines, it can be shown that the policy-implementing country sources fromverified mines in the conflict country. Resource prices for legal minerals increase, whilethe price for illegal resources further declines, making rent-seeking less attractive. This makes the ban of single mines superior to a ban of the entire region since both sides ofthe supply chain benefit from higher transparency of the primary production process.The second essay empirically investigates the effects of governmental and consumer-drivenstandards in the tropical timber sector. The study is motivated by a lack of evidenceon the effectiveness of market-driven sustainable forestry compared to governmentallyimplemented sustainable forest projects. The research gives evidence on the creditability of environmental-friendly labeled forest products and disentangles the factors which are decisive for the impact of these policies on deforestation. For this purpose, the essay considers a novel dataset of 70 sustainable-use zones which are distributed over the Brazilian Amazon in a period over 13 years from 2002-2015. For the empirical examination, a difference-in-difference estimator is employed to detect discontinuities in thedeforestation trend around the implementation of the zone in a spatial and in a temporal dimension. Moreover, the essay studies the geographical characteristics of a zone'slocation and economic incentives which increase or decrease the opportunity costs of de-forestation. The results imply that deforestation rates rather increase than decrease afterthe implementation of both mandatory and voluntary sustainable-use policies, especiallyif certain micro- and macroeconomic determinants are not considered. In the third essay, the impact of booming agricultural commodity prices on deforestation in Brazil is empirically analyzed and it is shown how different policy instruments affect this impact. These policies are: blacklisting (monitoring of and sanctions against themunicipalities with the highest deforestation rates), conservation zones (protected areaswhich receive legal management and monitoring to achieve long-term conservation of natural assets) and the Soy Moratorium (a voluntary agreement of the soy industry to stopclearing the forest for new soy plantation). International commodity prices are interactedwith the three policies to study the latter’s potential to decrease the price pressure onthe forest and also to study potential channel of leakage. The results indicate that aboom in commodity prices increases deforestation in our period of observation by about20,682 km2. With respect to the policies, the results show that within-municipality leak-age make policies targeting specific areas (conservation zones) ineffective in reducing thepressure from international agriculture commodity prices. The effectiveness of a policytargeting one crop (Soy Moratorium) is limited by the compensation farmers could createby planting other crops on recently deforested land. In contrast, a policy of blacklistingentire municipalities, irrespective of the source of deforestation, leads to a reduction indeforestation related to agricultural prices., Published by RWTH Aachen University, Aachen

RWTH Aachen University, Diss., 2017; Aachen, 1 Online-Ressource (116 Seiten) : Illustrationen, Karte(2017). = RWTH Aachen University, Diss., 2017, Environmental consequences of the high standard of living in developed nations or of the economic engagement of companies based in industrialized countries are often born by the developing countries of the world. In three essays two different aspects of environmental consequences of North-South Economic Relations are analyzed. The first two essays jointly enhance the existing literature on the impact of resource extraction, conducted by the North, on the local environment of the South. With the help of a theoretical model the first essay determines South’s local environmental quality in the context of a resource extraction contract in dependence of the democratic institutions in the host country. The quality of South’s democratic institutions indicate the risk of expropriation as well as the degree to which the South internalizes environmental harm in the model. Meanwhile, the quality extraction technology provided by the North varies in marginal resource extraction costs as well as marginal pollution. Combining these various effects, the theoretical model cannot determine a unique impact of an improvement in democracy on the environment. The consecutive numerical simulation of three distinct cases suggests, however, that despite these contradicting forces environmental quality always benefits from improvements in democracy. The empirical investigation of the second paper supports this finding by showing that the level of the host country’s democracy determines the extent of deforestation associated with oil drilling in a global cross-country comparison. The study reveals vast differences across countries in the amount of forest clearance due to oil drilling in the closest vicinity to oil wells. Making use of a quasi-natural experiment, difference-in-difference regressions identify the level of democracy as determining factor for the degree of deforestation due to oil drilling. While the discovery of oil in countries with high democracy scores is associated with clearance of 35% of the immediate vicinity of an oil well within ten years, the clearance of the forests is twice as high in countries with low democracy scores. Interestingly, the level of forest clearance does neither differ systematically with the type of the operating company nor with the democracy score of the operating company's home country. Furthermore, income per capita in the oil country does not seem to be the driving force behind the cross-country variance. In the third essay, trade flows of second-hand electronic goods directed from the North to the South are detected and the consequential energy consumption is estimated. The essay provides descriptive statistics which make the case of industrialized countries exporting lower valued electronic goods to developing countries. Supported by anecdotal evidence, this suggests that second-hand electronic goods are exported to the global South. Applying two-stage-least squares regressions with a gravity equation instrumenting for trade volumes in the first stage, a subsequent increase in the consumer group is found to be statistically significant for African countries leading to an overall increase in worldwide energy consumption., Published by Aachen