Global, national and sectoral risks and opportunities 2400-ZEWW1047
The course introduces the economic analysis of climate change and of the policies designed to address it, with emphasis on the quantitative tools used in policy advice. It moves from the framing of the problem (externalities, common-pool resources, the distribution of the burden between regions and between emitters and victims), through the models that produce the numbers used in public debate, to the construction of such a model by the students themselves.
Most meetings open with a moderated discussion of a contested question – who should pay for the transition, who should decide on climate policy, whether degrowth is necessary, whether the transition creates jobs, what competitiveness means here – which prepares the technical block that follows. The technical part covers the logit model of technology choice, the structure of integrated assessment models (top-down, bottom-up, hybrid), the IPCC evidence on past emissions and future pathways, directed technological change, and computable general equilibrium modelling, including the MANAGE and d-PLACE models and the treatment of heterogeneous labour. The last meetings are devoted to coding a simple general equilibrium model with an emissions trading system in GAMS. From meeting 10 onwards, part of each meeting is given to student presentations.
Course outline:
Meeting 1. Introduction: physical and geological background of climate change; course organisation; the tragedy of the commons.
Meeting 2. Discussion: who should pay for the transition – the South or the West, emitters or victims? Mathematical introduction to the logit model; the logit model applied to electric vehicle adoption.
Meeting 3. Discussion: who should decide on climate policy – scientists or politicians? IPCC, part 1: the evidence on past emissions.
Meeting 4. Discussion: degrowth economics and the role of technological change. Principles of integrated assessment models: top-down, bottom-up and hybrid approaches.
Meeting 5. IPCC, part 2: mitigation projections from integrated assessment models. Directed technological change.
Meeting 6. Discussion: does the labour market transition create jobs? Computable general equilibrium modelling: principles of general equilibrium.
Meeting 7. General equilibrium and the welfare theorems. Discussion: the carbon tax and the “one problem, one instrument” principle.
Meeting 8. Building one’s own general equilibrium model; the MANAGE model and its first simulation runs.
Meeting 9. Country-level results: the World Bank analysis for Poland. Derivation and results of the generalised CET approach to labour reallocation.
Meeting 10. Discussion: competitiveness (introduction to the regional level). Student presentations.
Meeting 11. (reserve) The CAKE modelling toolbox and model linking; results for the d-PLACE 2040 target. Student presentations.
Meeting 12. (reserve) d-PLACE results: interaction of climate policy with other policy instruments. Student presentations.
Meeting 13. Coding in GAMS: building a simple general equilibrium model – the framework. Student presentations.
Meeting 14. Coding in GAMS: building a simple general equilibrium model – emissions trading, several ETS systems. Student presentations.
Meetings 11 and 12 are reserve sessions, held if the schedule allows.
Course coordinators
Type of course
Learning outcomes
Knowledge – the student:
– understands the framing of climate change as an externality and as a common-pool resource problem, and the main positions in the burden-sharing and degrowth debates;
– knows the structure and the evidence base of the IPCC assessment, both for historical emissions and for mitigation pathways;
– knows the main classes of models used in climate policy analysis (discrete choice, integrated assessment, computable general equilibrium), their assumptions and their limitations.
Skills – the student:
– derives and applies a logit model of technology choice;
– formulates a simple computable general equilibrium model, implements it in GAMS and interprets carbon price and ETS scenarios;
– reads and critically assesses results of large-scale models (MANAGE, d-PLACE) at the global, national and sectoral level;
– presents and defends an analysis of a climate policy question.
Social competences – the student:
– argues a position on contested distributional questions of the transition and distinguishes disagreement about values from disagreement about evidence;
– assesses the credibility of model-based claims used in public debate.
Assessment criteria
– student presentation: 30%;
– modelling assignment in GAMS: 30%;
– essay 40%.
No more than two absences are allowed
Passing score: 50% of the total number of points.
Grading scale:
5,0 – 90–100%;
4,5 – 80–89%;
4,0 – 70–79%;
3,5 – 60–69%;
3,0 – 50–59%;
2.0 – less than 50%.
Bibliography
IPCC (2022), Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Cambridge University Press (selected chapters).
Liu, C., Lin, Z. (2017), “How uncertain is the future of electric vehicle market: results from Monte Carlo simulations using a nested logit model”, International Journal of Sustainable Transportation 11(4), 237–247.
Acemoglu, D., Aghion, P., Bursztyn, L., Hemous, D. (2012), “The Environment and Directed Technical Change”, American Economic Review 102(1), 131–166.
Goulder, L. H., Parry, I. W. H. (2008), “Instrument Choice in Environmental Policy”, Review of Environmental Economics and Policy 2(2), 152–174.
van der Mensbrugghe, D., MANAGE model documentation, The World Bank.
Course materials on the CAKE/d-PLACE provided by the lecturer.