Climate Policy

A consistent framework for uncertainty in coupled human-Earth system models

Abstract: Addressing climate change is ultimately a challenge of risk management, which requires an understanding of the likelihood of potential outcomes. We provide integrated, probabilistic socio-economic and climate projections obtained using updated estimates of probability distributions for key parameters in both the human and Earth system components of the MIT Integrated Global System Model (IGSM).

The Reference scenario results in median end-of-century warming of 3.5oC and a 90% range of 2.8-4.3oC, which is lower than the median of 5.7oC from a prior study using a previous version of the IGSM. About 0.5oC of the difference is due to updated estimates in the human system and the rest of the difference is explained by changes in Earth system estimates.

Our results show that climate policy lowers the upper tail of temperature change distributions more than the median, and that even relatively modest policies can significantly reduce the likelihood of high global temperature outcomes. Human system uncertainties contribute more to uncertainty in projected CO2 concentrations and total radiative forcing, while Earth system uncertainties have the greatest influence on temperature and precipitation. Including additional uncertain inputs does not automatically increase the outcome range because uncertainties can offset one another.

Results also show how policy costs can vary greatly among regions.  As we improve understanding of underlying technology and economic factors as well as Earth system response to human forcing, further updating of these estimates of uncertainty can make an important contribution to decision-making about mitigation and adaptation.

Distributional Impacts of Low-Carbon Policies in USA and Spain: Does One Size Fit All?

Abstract: Distributional impacts of environmental policies have become an increasingly important consideration in policymaking, but current studies have focused on just a few countries individually. To evaluate the country-specific impacts of carbon pricing with different revenue recycling schemes, we integrate national economic models for the USA and Spain with household microdata that provides consumption patterns and other socio-economic characteristics for thousands of households in each country. Using these combined models, we explore the applicability of results from one country to other countries by focusing on different revenue recycling schemes.

We find that, with some exceptions, the USA and Spain overall show similar patterns of distributional impacts for the two revenue recycling schemes, despite their differences in size, existing tax structure, energy sources and prices, level of income inequality, consumption patterns, etc. We find that in both countries an equal household rebate has progressive welfare impacts that are positive for the majority of income ventiles while the payroll tax reduction tends to be proportional or slightly regressive. We also explore welfare impacts for different household classifications, the impact of the policy design on overall inequality, and the role of inequality aversion on the social welfare implications of the policy design.

The Covid-19 effect on the Paris Agreement

Abstract: The pandemic and efforts to control it are causing sharp reductions in global economic activity and associated fossil energy use, with unknown influence on longer-term efforts to limit greenhouse gas emissions under the Paris Climate Agreement. To explore this effect, estimates of economic recession and recovery in near-term months are extended to cover a return to full employment in future years, to be compared with an estimate of growth had COVID-19 not occurred.

On the assumption that the Paris emissions pledges for 2020 will be met in any case, projection of global emissions with and without the pandemic show that, through its growth impact alone, it will yield only a small effect on emissions in 2030 and beyond. Other COVID legacies may include residual influences in patterns of consumption and travel, and the direction of recovery funds to low carbon investments.

Most important, however, will be the effect of the economic shocks on the willingness of nations to meet (or augment) their existing Paris emissions pledges. The main effect of the pandemic on the threat of climate change, therefore, will be not its growth impact but its influence on national commitments to action. 

Improving Evaluation of Energy Policies with Multiple Goals: Comparing Ex Ante and Ex Post Approaches

Abstract: Sustainability policies are often motivated by the potential to achieve multiple goals, such as simultaneously mitigating the climate change and air quality impacts of energy use. Ex ante analysis is used prospectively to inform policy decisions by estimating a policy’s impact on multiple objectives. In contrast, ex post analysis of impacts that may have multiple causes can retrospectively evaluate the effectiveness of policies. Ex ante analyses are rarely compared with ex post evaluations of the same policy. These comparisons can assess the realism of assumptions in ex ante methods and reveal opportunities for improving prospective analyses.

We illustrate the benefits of such a comparison by examining a case of two energy policies in China. Using ex post analysis, we estimate the impacts of two policies, one that targets energy intensity and another that imposes quantitative targets on SO2 emissions, on energy use and pollution outcomes in two major energy-intensive industrial sectors (cement, iron and steel) in China.

We find that the ex post effects of the energy intensity policy on both energy and pollution outcomes are very limited on average, while the effects of the SO2 emissions policy are large. Compared with ex ante analysis, ex post estimates of benefits of the energy intensity policy are on average smaller, and differ by location in both sign and magnitude. Accounting for firm-level heterogeneity in production processes and policy responses, as well as the use of empirically grounded counterfactual baselines, can improve the realism of ex ante analysis and thus provide a more reliable basis for policy design.

The impact of climate change policy on the risk of water stress in southern and eastern Asia

Abstract: The adequacy of freshwater resources remains a critical challenge for a sustainable and growing society. We present a self-consistent risk-based assessment of water availability and use under future climate change and socioeconomic growth by midcentury across southern and eastern Asia (SEA). We employ large ensemble scenarios from an integrated modeling framework that are consistent across the spectrum of regional climate, population, and economic projections. We find socioeconomic growth contributes to an increase in water stress across the entire ensemble. However, climate change drives the ensemble central tendency toward an increase in water stress in China but a reduction in India, with a considerable spread across the ensemble. Nevertheless, the most deleterious unabated climate-change impact is a low probability but salient extreme increase in water stress over China and India. In these outcomes, annual withdrawals will routinely exceed water-storage capacity. A modest greenhouse gas mitigation pathway eliminates the likelihood of these extreme outcomes and also benefits hundreds of millions of people at risk to various levels of water stress increase. Over SEA we estimate an additional 200 million people under threat of facing at least heavily water-stressed conditions from climate change and socioeconomic growth, but the mitigation scenario reduces the additional population-under-threat by 30% (60 million). Nevertheless, there remains a 1-in-2 chance that 100 million people across SEA experience a 50% increase in water stress and a 1-in-10 chance they experience a doubling of water stress. Therefore, widespread adaptive measures may be required over the coming decades to meet these unavoidable risks in water shortfalls.

For much of 2020, Covid-19 has captured the world’s attention. The pandemic has impacted billions of lives, and with over a million deaths and counting, continues to drive home a profound message that the survival and well-being of our growing and complex society hinges on our willingness to confront environmental threats with global consequences. Key to protecting lives and making our communities more resilient to such threats will be an emphasis on proactive, science-based decision-making at all levels of society.

Covid-19: A teachable moment for how we confront climate change and economic challenges

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