NIFK13006U The Economics of Climate Change

This course investigates the economic aspects of climate change and the economics of climate policy in a global perspective – under the assumption that students are already familiar with the scientific models for climate change. The course starts with a brief introduction to the concept of efficiency and optimality in welfare economics. It then defines the concepts of externalities, public goods, property rights, and market failure. Pollution control instruments are first described in general terms and then with particular focus on the use of tax incentives and marketable permits to control emissions of greenhouse gases. The presentation of control instruments involves issues associated with international environmental problems including game theory. In this context the provisions of the Kyoto protocol are addressed along with current climate policy proposals. The analysis of policy frameworks also includes considerations regarding uncertainty and technological progress. The overall mitigation problem is addressed using the methodological framework provided by cost effectiveness and cost-benefit analysis. In this context the issue of choosing the appropriate social discount rate is discussed. The final part of the course addresses specific issues related to global climate change: the role of energy prices, transition to renewable energy and the situation and role of developing countries. The latter includes ethical principles underlying equity and environmental justice considerations in a North-South perspective. The course concludes with a brief assessment of recent and current climate policy events.