C 175 The Economics of Climate Change

Course Outline and Slides

This is an overview of my first Economics of Climate Change class taught in the Spring 09 before introducing the limited access bSpace system on campus. Please feel free to contact me for more recent material.

Part 1: Introduction to Climate Change

1.	Greenhouse Effect & Related Stuff            (radiative forcing, feedback, aerosols, climate sensitivity, global warming potential)	1-29
2.	The Carbon Cycle                                       (stocks & flows, sinks & sources, ‘missing carbon’)	30-42
3.	Basic Facts on Emissions                          (global, US)	43-66
4.	Climate Change Observation                     (Temperature, Ice, Precipitation, Attribution)	67-92
5.	Climate Change Predictions                       (Models, Scenarios, Time Scale)	93-111
6.	Climate Change Impacts                            (general, California; reasons for concern; first visit)	112-131

Part 2: Efficiency, Public Goods, Externalities

1.	A Brief Micro Review: From Preferences to Efficiency (preferences, utility, rates of substitution, efficiency, equilibrium, welfare theorems)	1-25
2.	Market Failure Public Goods & Externalities           (public goods, Samuelson Rule, Lindahl market, Externalities)	26-52

Part 3: Environmental Policy Instruments

1.	Introduction on Instrument Choice (instruments, choice criteria)	1-9
2.	Bargaining (Coase) (property rights as ‘instrument’)	10-17
3.	Standards and Taxes	18-37
4.	Cap and Trade	38-50
5.	Cap and Trade vs Taxes	51-58
6.	Cap and Trade in Application: EU ETS	59-74
7.	Cap and Trade in Application: US	75-83

Part 4: Discounting

1.	Part I (cost benefit analysis, market vs social discount rate, determinants)	1-20
2.	Part II (determinants, normative vs descriptive, sustainability, hyperbolic discounting, heterogeneity)	21-42

Part 5: Risk and Uncertainty

1.	Risk, Expected Value, Risk Aversion (certainty equivalent, risk premium)	1-17
2.	Classifications of Uncertainty	18-23
3.	Willingness to Pay for a Risk Reduction	24-38
4.	Learning (option value, optimal mitigation levels under anticipated learning, Precautionary Principle)	39-73
5.	Uncertainty and Discounting	74-77
6.	Various Review Slides	78-85

Part 6: Integrated Assessment

1.	Integrated Assessment of Climate Change and DICE (why integrated assessment, building blocks of IAMs, damage representation in DICE)	1-16
2.	Assessing Climate Policies with DICE (baseline, ‘optimal’, temperature or concentration constraints, Kyoto, Stern, Gore, parameter uncertainty)	17-28
3.	Critiques of the DICE model (Uncertainty, Discounting, Aggregation, Damages)	29-37

Part 7 International Cooperation and Climate Policy

1.	A Game Theoretic Perspective	1-21
2.	To Kyoto and Beyond	22-45