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Conservationists claim that future generations are morally entitled to enjoy the benefits of stable climatic conditions. Libertarians argue that polluters are entitled to emit greenhouse gases in the absence of undue regulation. This chapter explores the implications of these competing value judgements in a numerically calibrated overlapping generations model. Although short-term welfare is significantly higher under a laissez faire scenario in which greenhouse gas emissions remain unregulated, the stabilization of current climatic conditions confers substantial benefits on future generations that augment long-run economic growth. The finetuning of greenhouse gas emissions to achieve Pareto efficiency generates net gains that are small in comparison with the welfare differences between the laissez faire and climate stabilization paths.

This chapter demonstrates that results from climate change models using the OLG approach can depend significantly on various economic and social conditions. Thereby, policy recommendations derived from OLG models can prove rather different from those resulting from conventional ILA models. This chapter presents the integrated assessment OLG model for the analysis of global warming ALICE 1.2, which allows for modeling a flexible interest rate and for incorporating various assumptions on demographic change and public institutions designed for the protection of the environment. Thus, ALICE 1.2 is particularly appropriate for providing policy makers with quantitative figures about the desirable and feasible reduction levels of carbon dioxide emissions.

Crop yield variability is a defining characteristic of agriculture. Variations in yield and production are strongly influenced by fluctuations in weather. Concern has been expressed about the consequences of the buildup of greenhouse gases (GHGs) in the atmosphere on long-term climate patterns, including the frequency of extreme events, and the subsequent effect on crop yields and yield variability. In this chapter we present background on the variability issue, including a review of the physical and human dimensions of climate change as related to agricultural production. We also present the results of two recent studies; the first focuses on the effects of climatic variability on yields and the second on the effects of increases in extreme weather events on agriculture. The first study shows that temperature and precipitation changes affect both the mean and variances of crop yields, usually in opposite ways, e.g. under increasing temperatures, corn yields decrease and yield variance increases, while increases in precipitation increase corn yields and reduce variability. In the second study, increases in the frequency and strength of one type of extreme event, the El Niño-Southern Oscillation or ENSO, results in economica damages to agriculture. These damages can be averted by using forecasts of such events in agricultural planting decisions.

The conventional economic perspective on long run resource limitations is that short run scarcity will lead to price increases, which will induce innovation, which will in turn, overcome scarcity. In the global warming case, if we are convinced that cost-effective low carbon technologies will in fact emerge as carbon prices rise, why wait? Given that the investment dollars will be spent regardless, would it not be more efficient to invest in the new technologies today? In that way, we might avoid several decades of carbon emissions and consequent environmental damage. Moreover, such an approach is attractive for its likely impacts on both the size and composition of national R&D spending, as well as for its insurance function. On the other hand, informational constraints may argue against a technology policy strategy. This chapter explores these issues. In an application to the wind industry, I conclude that if wind power continues down its experience curve at its historical pace, early investment in wind would be socially efficient.

The Clean Development Mechanism (CDM) has been proposed as a means of reducing the costs of abating greenhouse gasses, and for assisting developing countries. Although the CDM offers apparent environmental benefits, in addition to benefiting both investors and developing country hosts, it has generated considerable controversy. We review and evaluate the arguments surrounding the CDM and we provide new empirical evidence concerning its potential benefits.

As CO2 equivalent gases increase beyond a doubling, there will likely be unavoidable damage to U.S. agriculture. In equatorial regions of the world, damage from global warming will occur earlier than in the U.S. Biogeophysical lags, including deep-ocean mixing with warmer surface waters, can delay the warming caused by CO2 emissions. In this chapter, comparative dynamics trace the path of damage to U.S. agriculture from climate change, after considering adaptation to climate change, technological change that will occur both with and without climate change, and ocean thermal lag.

This report describes an analysis of possible technology-based scenarios for the U.S. energy system that would result in both carbon savings and net economic benefits. We use a modified version of the Energy Information Administration's National Energy Modeling System (LBNL-NEMS) to assess the potential energy, carbon, and bill savings from a portfolio of carbon saving options. This analysis is based on technology resource potentials estimated in previous bottom-up studies, but it uses the integrated LBNL-NEMS framework to assess interactions and synergies among these options. The High-Efficiency Low Carbon scenario analyzed in this study would result in significant annual net savings to the U.S. economy, even after accounting for all relevant investment costs and program implementation costs. This strategy would result in roughly half of the carbon reductions needed to meet the Kyoto target being achieved from domestic U.S. investments, and net savings of more than $50B per year for the U.S. in 2010.

This chapter contributes to efforts to improve the accuracy of estimating damages resulting from climate change. It examines potential hydrological impacts on California, and how the state might adapt. For a doubled-CO2 scenario, general circulation models coupled with California hydrological data predict increased winter precipitation and dryer summers, elevated snowlines with correspondingly reduced snowpack, shifts in seasonal peak runoff patterns, increased numbers and intensity of extreme weather events, increased evapotranspiration, and declining soil moisture. Adaptations by water managers could include de-emphasizing the role multi-purpose reservoirs play in flood control in order to enhance their water-storage capabilities, making firm long-term commitments to provide water to wetlands and other ecologically-sensitive areas, and increasing the management flexibility available to local water agencies through intraregional contracting and mergers. In its conclusion, the chapter notes that while the water sector is accustomed to adapting to climatic variation, adaptations may not be consistent with an integrated assessment model's least-cost path. A region's gain or loss of overall water supplies should be evaluated in the context of its ongoing reallocation of water among competing uses. And in order to capture an appropriate level of detail, the scale of impact studies needs to be reduced to the national or sub-national level.