Climate Policy

Achieving the Paris Agreement goals of climate stabilization requires a transformation of energy system over the upcoming decades. Russia, as a fossil fuel producer, will have to adjust its economy to reflect lower export earnings from oil, coal, and natural gas. Using a global energy-economic modeling framework, we will assess the impacts of energy transformation policies and the resulting global market dynamics on Russian economy, including the changes in its sectoral output, energy mix, and GDP.

Russia in the Post-Paris world: a new energy landscape
The Economic, Energy and Emissions Impacts of Climate Policy in South Korea

Summary: South Korea’s Nationally Determined Contribution (NDC) to the Paris Agreement included a pledge to reduce its greenhouse gas (GHG) emissions by 37 percent in 2030 from levels projected for that year under business-as-usual policies. Using an economy-wide model, researchers at the MIT Joint Program on the Science and Policy of Global Change projected that under South Korea’s Emissions Trading System (KETS) with fuel economy standards, the country would require a 2030 carbon price of $89 per metric ton of carbon dioxide-equivalent to meet its NDC target. According to their analysis, if economic benefits from avoided climate damages are excluded from consideration, the combined policies would reduce 2030 GDP by $20.6 billion (1.0 percent) and consumer welfare by 7.9 billion (0.7 percent). Adding the fuel economy standard to KETS increases the cost of meeting South Korea’s NDC: it reduces GDP and consumer welfare by, respectively, $4.2 billion and $1.1 billion relative to reducing emissions with just an ETS. The researchers also found that production declines under the combined policies are largest for three sets of sectors: fossil-based energy; chemical, rubber and plastic products; and iron and steel.

How might climate change affect the acidification of the world’s oceans or air quality in China and india in the coming decades, and what climate policies could be effective in minimizing such impacts? To answer such questions, decision-makers routinely rely on science-based projections of physical and economic impacts of climate change on selected regions and economic sectors. But the projections they obtain may not be as reliable or useful as they appear: today’s gold standard for climate impact assessments—model intercomparison projects (MIPs)—fall short in many ways.

Projecting the impacts of climate change
Exploring the impacts of a national U.S. CO2 tax and revenue recycling options with a coupled electricity-economy model

A substantial nationwide tax on carbon dioxide (CO2) could accelerate a transition to a low-carbon economy in the United States consistent with efforts to reverse global climate change. Such a tax would also raise significant revenue, ranging from $142 billion to $579 billion in 2050 under various carbon tax rates explored in this paper. A critical issue is what to do with the revenue. Proposals range from using it to reduce disparities among households, to reducing personal income taxes, corporate income taxes or other taxes. A better understanding of the implications of how the tax revenues are recycled could enable decision-makers to choose among these options.

Toward that end, researchers from the MIT Joint Program on the Science and Policy of Global Change, HEC Montreal and the National Renewable Energy Laboratory (NREL) completed a comprehensive analysis of the potential economic impacts of a national tax on U.S. CO2 emissions, with an emphasis on the household-level effects of different CO2 tax revenue distribution methods. They performed the analysis by linking a computational general equilibrium model of the U.S. economy (MIT’s U.S. Regional Energy Policy (USREP) model) with a detailed model (NREL’s Regional Energy Deployment System (ReEDS)] of the electricity sector, the largest source of U.S. CO2 emissions.

Evaluating the economic impacts on households of different income levels resulting from a wide range of per-ton CO2 taxes (initial amounts and rates of increase) and revenue distribution methods (e.g. recycling revenue through capital income tax rebates, labor income tax rebates, or lump-sum transfers to households), the researchers found a clear trade-off between emissions-reduction efficiency and economic equity among those methods. They determined that a hybrid approach that combines capital income tax rebates with lump-sum transfers to low-income households provided an effective way for reducing disparities among households of different income levels, while reaping some of the benefits of reduced taxes on capital income.

The need to build policy literacy into climate science education

An increased focus on ‘policy literacy’ for climate scientists, parallel to ‘science literacy’ for the public, is a critical need in closing the science–society gap in addressing climate mitigation. We define policy literacy as the knowledge and understanding of societal and decision-making contexts required for conducting and communicating scientific research in ways that contribute to societal well-being. We argue that current graduate education for climate scientists falls short in providing policy literacy. We identify resources and propose approaches to remedy this, arguing that policy literacy education needs to be mainstreamed into climate science curricula. Based on our experience training science students in global environmental policy, we propose that policy literacy modules be developed for application in climate science curricula, including simulations, case studies, or hands-on policy experiences. The most effective policy literacy modules on climate change will be hands-on, comprehensive, and embedded into scientific education.

Translating international commitments to domestic action: Mercury co-benefits, sustainable development, and climate policy in China

National commitments on the Paris Agreement on climate change interact with other global environment and sustainability objectives, such as the Minamata Convention on Mercury and the global Sustainable Development Goals. Understanding the interactions between climate change, air pollution, and sustainable development can help decision-makers identify more effective policies that can address environmental and economic goals simultaneously. To address environmental goals, I assess how mercury co-benefits (positive side effects that are peripheral to a policy’s main goal) of a national climate policy in China could contribute to the country’s commitments under the Minamata Convention. I examine climate policy scenarios in 2030 corresponding to various levels of carbon intensity reductions in addition to a business-as-usual scenario and an end-of-pipe control scenario that meets China’s commitments under the Minamata Convention on Mercury. Economic analysis from a computable general equilibrium model of China’s economy provides information on changes in economic activity resulting from the climate policy scenarios. Using the economic data from this model, I scale 2007 mercury emissions in a variety of sectors to 2030. I then use a global atmospheric transport model to project changes in mercury deposition at the regional scale in China for each policy scenario. I find that climate policy in China can provide mercury emissions and deposition co-benefits similar to end-of-pipe control policies that meet the country’s Minamata Convention commitments. To address sustainable development goals, I investigate the use of the Inclusive Wealth Index for evaluating the sustainability of climate policy in China on the basis of produced capital, natural capital, and human capital at the provincial level. I find that most provinces in China exhibit an increase in Inclusive Wealth under several climate policy scenarios, providing an alternative metric for monetizing policy impacts.

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