NIFK13006U The Economics of Climate Change

This course introduces the economic aspects of climate change mitigation and the economics of climate policy in a global perspective.

The course starts with a brief introduction of the key economic concepts, which are useful to analyze the climate change problem (e.g. Neoclassical economic models, taxes and private consumption, market equilibrium, efficiency and optimality, externalities, property rights, market failure).

The course then introduces the theory of the optimal pollution level in regulating greenhouse gas (GHG) emissions and discusses national policy instruments to reduce emissions, with a particular focus on the use of tax incentives and tradable  permits to control production companies. Regulation with prescriptive instruments, property rights based instruments and voluntary measures are also discussed. A special focus is on the European Trading System for CO₂ permits. Moreover, as our private consumption of e.g. food is related to substantial emissions of GHGs, the course also discusses how knowledge about consumers’ preferences can be obtained and how policy instruments can be applied to improve the sustainability of our consumption habits.    

International climate agreements are also discussed from a game theory perspective, analyzing lack of incentives for some countries to participate in the agreements and free-ride.

The course discusses the current EU and Danish climate policies and addresses the role of developing countries in climate change mitigation, including. The latter includes ethical principles underlying equity and environmental justice considerations on who should bear the burden of GHG emission reductions in a North-South perspective.

The economic understanding and analysis of the transition to a sustainable and carbon neutral future is core to the course. Focus is on how to achieve sustainable and efficient regulation of GHG emission reductions and to identify costs and benefits of carbon reducing initiatives. The course treat the United Nations World sustainable development goals no. 7. Affordable and clean energy, 11. Sustainable cities and communities, 12. Responsible production and consumption and 13. Climate action.