75577 - Economics of Climate Change

Course Unit Page

SDGs

This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Affordable and clean energy Decent work and economic growth Climate Action Life on land

Academic Year 2021/2022

Learning outcomes

The purpose of the course is to present the economics of climate change in a way that integrates climate, the economy, and the policy issues that emerge in the course of attempts by countries to address global warming. The objective is to enable students to understand the drivers of climate change, the methods to analyse them, and the ways used in order to design climate change policies in theory and practice. The main focus of the course is the presentation of a unified framework of climate and the economy, along with their interactions, which is used to show how climate change policies are derived. Emphasis is also given to introducing students to the new macroeconomics of climate change. Mathematical methods which are used in climate change economics will be reviewed if necessary.

Course contents

The course begins with presentation of scientific evidence regarding global warming and climate change since the industrial revolution. The course continues with an introduction to global externalities, the economics of climate change and the presentation of approaches for modelling the coupled system of the economy and the climate. If necessary, appropriate mathematical methods for modelling of the coupled economic–climate system will be reviewed. Then the structure, the characteristics and the output of Integrated Assessment Models (IAMs) is presented. Next, discounting and uncertainty, which are topics of special interest in the economics of climate change, are analysed. The course concludes with a presentation of climate policies (taxes, tradable permits, adaptation, geoengineering), an analysis of international environmental agreements and a presentation of recent agreements about climate change policies formulated in the context of the Conference of the Parties.

The purpose of the course is to present the economics of climate change in a way that integrates climate, the economy and the policy issues that emerge in the course of attempts by countries to address global warming. The main focus of the course is the presentation of a unified framework of climate and the economy, along with their interactions, which is used to show how climate change policies are derived.

Emphasis is also given to introducing students to the new macroeconomics of climate change, the financial risks of climate change and the impacts of COVID-19 pandemic on climate change. Mathematical methods which are used in climate change economics will be reviewed if necessary.

 More specifically, the course will cover the following topics:

The climate since the industrial revolution: Historical trends of global average temperature, emissions and concentration of greenhouse gasses (GHGs); Climate modelling issues; The temperature anomaly and polar amplification; Sinks and sources; Carbon budgeting.

Coupling the economy and the climate: Modelling the coupled system of the economy and climate; Introduction to Integrated Assessment Models (IAMs); The macroeconomics of climate change; Damages from climate change; The choice of the discount rate; Uncertainty; Regional issues and introduction to spatial climate models.

Climate policy: Mitigation, including carbon taxes, cap-and-trade, The EU-ETS, carbon capture and storage (CCS), and reducing emissions from deforestation and degradation (REDD); Adaptation to climate change; International cooperation in theory and practice: International agreements; COP21-The Paris Agreement and the more recent COPs; Solar radiation management (SRM).

The financial risks of climate change: Stranded assets; Green bonds; Monetary policy and climate change

COVID-19 and climate change: SIR models and the impact of climate change

Readings/Bibliography

Reading Materials

  • Lectures in the form of slide presentations will be provided during the course.
  • G. Economides, A. Papandreou, E. Sartzetakis and A. Xepapadeas, 2018, The Economics of Climate Change, The Bank of the Greece.

Additional Readings

Brock, W. and A. Xepapadeas, 2018, Modelling Coupled Climate, Ecosystems and Economic Systems, in Dasgupta, P., Pattanayak, S. and V. Kerry Smith (eds), Handbook of Environmental Economics, Vol. 4, Elsevier

Hassler, J. and P. Krusell, 2018, Environmental Macroeconomics: The Case of Climate Change, in Dasgupta, P., Pattanayak, S. and V. Kerry Smith (eds), Handbook of Environmental Economics, Vol. 4, Elsevier

Hassler J., P. Krussel and T. Smith (2016). Environmental Macroeconomics. In Taylor, J. and H. Uhlig (eds) Handbook of Macroeconomics, Vol. 2b, 1893.2008, North Holland.

W. Nordhaus, 2017, Revisiting the social cost of carbon, PNAS, Available atwww.pnas.org/cgi/doi/10.1073/pnas.1609244114.

W. Nordhaus and P. Sztorc, 2013, DICE2013 Introduction and User’s Manual, Available at dicemodel.net.

Report of the High-Level Commission on Carbon Prices, 2017, Carbon Pricing Leadership Coalition

N. Stern, 2006. The Economics of Climate Change: The Stern Review. Cambridge University Press, Cambridge.

Teaching methods

Lectures with slide presentations

Assessment methods

There will be a final exam consisting of two questions, both of which must be answered. There is also an optional assignment. For students who complete the optional assignment the grade of the assignment counts for 20% of the final grade and the final exam counts for 80%. For students who do not complete the optional assignment the final exam counts 100% of the final grade.

In case online exams will be envisaged by the University of Bologna, the structure of the written exam is the same. The exam will be run through Zoom or MS Teams and Exams Online (EOL). Detailed instructions on how to manage and hand in the online exam are available on the course page on the VIRTUALE platform.

The maximum possible score is 30 cum laude, if all answers - and the optional assignment if submitted - are correct, complete and rigorous.

The grade is graduated as follows:

<18 failed
18-23 sufficient
24-27 good
28-30 very good
30 e lode excellent

Teaching tools

Presentations and some suggested readings are available on Insegnamenti online (IOL).

Office hours

See the website of Anastasios Xepapadeas