The Introduction establishes the motivation and intent behind the Handbook as being to evolve economic thinking to meet the challenge of climate change as it emerges as the defining topic of our time. It discusses each chapter within, all of which contain ideas to support and accelerate that evolution, and provides an overview of the book’s division into three sections, each covering critical new areas and ideas about economics and climate change. The first section, The Political Economy of Climate Change and Climate Policy, explores the impediments and potentials of climate policy in correcting distributional inequities of climate change via market forces. In the second section, Integrated Assessment Modelling, connections between individual elements of the climate and the economy are analyzed using integrated assessment modelling. Prominent models are improved and expanded upon with the aim of helping researchers and policymakers to better understand climate change and the efficacy of policy addressing it. The final section combines Climate Change and Sustainability. Sustainability is contextualized historically and through previous environmental disasters, while equity is considered through regional developmental and intergenerational approaches. A summary of each individual chapter is included.
Graciela Chichilnisky and Armon Rezai
Edited by Graciela Chichilnisky and Armon Rezai
Armon Rezai, Frederick van der Ploeg and Cees Withagen
In a calibrated integrated assessment model of Ramsey growth and climate change in the global economy we investigate the differential impact of additive and multiplicative global warming damages for both a socially optimal and business-as-usual scenario. Fossil fuel is available at a cost which rises as reserves diminish and a carbon-free backstop is supplied at decreasing cost. If damages are not proportional to aggregate production and the economy is along a development path, the optimal carbon tax is smaller than with multiplicative damages. The economy switches later from fossil fuel to the carbon-free backstop and leaves less fossil fuel in situ. By adjusting climate policy in this way there is very little difference on the paths for global consumption, output and capital, and thus very little difference for social welfare despite the higher temperatures. For all specifications the optimal carbon tax is not a fixed proportion of world GDP but must follow a hump shape.
Lance Taylor, Armon Rezai, Rishabh Kumar, Nelson Barbosa and Laura Carvalho
This paper is based on a social accounting matrix (SAM) which incorporates the size distribution of income based on data from the BEA national accounts, the widely discussed 2012 CBO distribution study, and BLS consumer surveys. Sources and uses of incomes are disaggregated by household groups including the top 1 percent. Their importance (including saving rates) differs markedly across households. The SAM reveals two transfer flows exceeding 10 percent of GDP via fiscal (broadly progressive) and financial (regressive) channels. A third major flow over time has been a ten percentage point increase in the GDP share of the top 1 percent. A simulation model is used to illustrate how ‘feasible’ modifications to tax/transfer programs and increasing low wages cannot offset the historical redistribution toward the well-to-do.