International and Area Studies
Department of Agricultural and Resource Economics
University of California at Berkeley

 

IAS 175
Maximilian Auffhammer
Anthony Fisher
Spring Semester, 2006

 

 
International and Area Studies 175: The Economics of
Global Climate Change

 

Maximilian Auffhammer

Office: 321 Giannini Hall

E-mail: auffhammer@berkeley.edu

Phone: (510) 643-5472

 

Anthony Fisher

Office: 232 Giannini Hall
E-mail: fisher@are.berkeley.edu
Phone: (510) 642-7555

 

Lectures: Tuesday and Thursday, 11:00 a.m.-12:30 p.m.

Office Hours: TBA

Class Website: http://are.berkeley.edu/courses/IAS175/Spring2006/

 

 
Readings

Textbook (required): Microeconomics, 5^th Edition. R.S. Pindyck and D.L. Rubinfeld. Upper Saddle River: Prentice-Hall, Inc., 2001.

Reader (required): Climate Change Economics and Policy: An RFF Anthology. Toman, M.A. (ed.). Washington, D.C.: Resources for the Future, 2001.

Online Course Reader

 
 

Description of the Course

Climate change is arguably the most important global environmental issue we shall have to deal with over this century. Rising temperatures are likely to redistribute agricultural production toward the poles; change the hydrological cycle; and, in many parts of the world, amplify pressures on already-scarce land, water, and forest resources. Since the main contributor to human-induced climate change is the large increase in the combustion of fossil fuels since the beginning of the industrial revolution, the economic framework is particularly useful in analyzing the sources and consequences of climate change and attempts to modify it.

 

The course will start with a brief introduction to and evaluation of the scientific basis of climate change to provide students with an understanding of the scientific certainties and uncertainties as well as the likely and less-likely impacts. Economic models will be developed to evaluate the impacts of climate change on the economy and on key sectors, such as agriculture, and to analyze the strengths and weaknesses of alternative policy instruments for controlling emissions of greenhouse gases and mitigating impacts. The second part of the course considers topics of special relevance to climate change: international aspects, such as treaty formation and enforcement; dynamic aspects, such as the role of discounting and investment criteria in formulating policies to deal with long-lasting or irreversible impacts; and how to factor in major scientific and economic uncertainties in assessing the prospects for climate change and policy alternatives. The emphasis throughout will be on the development of economic concepts and models that can aid in understanding these topics and issues.

 
 

Grades and Attendance Policies
 

Your course grade will be based on two midterms (25% each), one final exam (40%), and four pop quizzes (10%).

 

 

Reading List

1.    Genesis of Climate Change

2.    Impacts of Climate Change: General

 

3.    Comparative Regional Impacts on Temperature and Water Resources

 

         a.     Impacts on California

 

               D. Cayan et al. Possible Scenarios of Climate Change in California:  Summary and Recommendations.  Draft.  Report from the California Climate Change Center, December, 2005.

 

         b.    Impacts on China/India

 

                  M. Lal, H. Harasawa, and D. Murdiyarso. “Asia.” In J.J. McCarthy et al. (eds.) Climate Change 2001: Impacts, Adaptation, and Vulnerability. Cambridge: Cambridge University Press, 2001, Chapter 11, pp. 534-590.

 

                  Ramanathan, V. et al. “Atmospheric Brown Clouds: Impacts on South Asian Climate and Hydrological Cycle.” Proceedings of the National Academy of Sciences of the United States of America, Vol. 102, No. 15 (2005), pp. 5326-5333.

 

 

4.    Economic Evaluation of Impacts

 

         a.     Introduction to Statistical Estimation

 

                  Pindyck and Rubinfeld, Appendix: The Basics of Regression.

 

         b.    Agriculture

 

                  R. Mendelsohn, W.D. Nordhaus, and D. Shaw. “The Impact of Global Warming on Agriculture: A Ricardian Analysis.” American Economic Review, Vol. 84 (September, 1994), pp. 753-771.

                  W. Schlenker, W.M. Hanemann, and A.C. Fisher. “The Impact of Global Warming on U.S. Agriculture: An Econometric Analysis of Optimal Growing Conditions.” Review of Economics and Statistics, 2006.

                     _______.  “Implications of Climate Change for Farmland Value:  Preliminary Estimates for California.”  Third World Congress of Environmental and Resource Economists, Kyoto, Japan, July 3-7, 2006.

 

         c.     Forestry

 

                  Toman, Chapter 7.

 5.    Market Failure and Climate Change

 

         a.     Externalities and Public Goods

 

                  Pindyck and Rubinfeld, Chapter 18.

 

         b.    Policy Instruments (Taxes, Permits, Other)

 

                  Toman, Chapters 9-12.

 

                  W.J. McKibbin and P.J. Wilcoxen. “The Role of Economics in Climate Change Policy.” Journal of Economic Perspectives, Vol. 16, No. 2 (Spring, 2002), 107-129.

 

                  S. Nathan. “Environment: Market Forces.” LexisNexis™ Academic, Process Engineering, Centaur Communications Ltd., May 31, 2005, p. 13.

 

Midterm 1

 

6.    Dynamics

 

         a.     Discounting and Investment Criteria

 

                  Pindyck and Rubinfeld, Chapter 15.

 

         b.    Irreversible Impacts

 

                  J.V. Krutilla.  “Conservation Reconsidered.” American Economic Review, No. 47 (1967), pp. 777-786.

 

                  Fisher notes.

 

         c.     Optimal Depletion of Exhaustible Resources

 

                  Pindyck and Rubinfeld, Chapter 15.

 

                  Fisher notes.

7.    Uncertainty

 

         a.     General Introduction to Decision Making Under Uncertainty

 

                  Pindyck and Rubinfeld, Chapter 5.

 

         b.    Extreme Events and Application to Climate Change

 

                  T. Roughgarden and S.H. Schneider. “Climate Change Policy: Quantifying Uncertainties for Damages and Optimal Carbon Taxes.” Energy Policy, Vol. 27 (1999), pp. 415-429.

 

                  S.H. Schneider and C. Azar. “Are Uncertainties in Climate and Energy Systems a Justification for Stronger Near-term Mitigation Policies?” In Final Proceedings of the Pew Center Workshop on the Timing of Climate Change Policies, 2001, pp. 85-136.

 

                  A.C. Fisher. “Uncertainty, Irreversibility, and the Timing of Climate Policy.” In Final Proceedings of the Pew Center Workshop on the Timing of Climate Change Policies, 2001, pp. 161-197.

 

 

Midterm 2

 
 

8.    International Aspects

 

         a.     Negotiations and Treaty Formation

 

                  M.K. Tolba and I. Rummel-Bulska. Global Environmental Diplomacy: Negotiating Environment Agreements for the World, 1973-1992. Cambridge: MIT Press, 1998, Chapters 1, 2, and 6.  (Search NetLibrary for "Tolba.")

 

         b.    Game Theory

 

                  Pindyck and Rubinfeld, Chapter 13.

 

         c.     Enforcement

 

                  S. Barrett. Environment and Statecraft: The Strategy of Environmental Treaty-Making. Oxford and New York: Oxford University Press, 2003, Chapters 7 and 10.

 

         d.    Success and Failures

 

                  Tolba and Rummel-Bulska, Chapter 9.  (Search NetLibrary for "Tolba.")

 

 

9.    Climate and the Economy: Policy and Outlook

 

         a.     Optimal Control of Greenhouse Gas Emissions

 

                  W.D. Nordhaus. “Rolling the ‘Dice’: An Optimal Transition Path for Controlling Greenhouse Gases.” Resource and Energy Economics, Vol. 15 (1993), pp. 27-50.

 

                  D. Chapman, V. Surie, and S. Hall. “Rolling DICE for the Future of the Planet.” Contemporary Economic Policy, Vol. XIII (1995), pp. 1-9.

 

                  W.D. Nordhaus. “Global Warming Economics.” Science, Vol. 294, No. 5545 (2001), pp. 1283-1284.

 

         b.    Outlook for the Future

 

                  Resources for the Future. Where Do We Go From Here?

 

 

10. Final Review