Climate Economics

Climate Economics at SEI-US
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Modeling Risk in Climate Economics

Staff: Ackerman, F. ; Stanton, E.A. ; Bueno, R.
Date: 2011-2012
Client/Funder: Litterman Family Foundation

Research Area(s): Climate Economics

Description: Climate change involves uncertain probabilities of catastrophic risks, and very long-term consequences of current actions. Climate economics, therefore, is centrally concerned with the treatment of risk and time. Yet conventional assumptions about utility and optimal economic growth create a perverse connection between risk aversion and time preference, such that more aversion to current risks implies less concern for future outcomes, and vice versa. SEI set out to address this problem, adopting methods from the economics of finance. The result was a working paper now submitted to an economics journal (see link below).
Related Publication(s): Epstein-Zin utility in DICE: Is risk aversion irrelevant to climate policy?

Climate Impact Equity Lens (CIEL)

Staff: Stanton, E.A. ; Bueno, R. ; Davis, M.
Date: 2011-12
Client/Funder: SEI Research Innovation Fund (NOVA)

Research Area(s): Climate Economics

Description: Large-scale climate impacts, with losses in the billions or trillions of dollars, may be hard to visualize. How will climate change affect you as an individual? Using a new methodology, the CIEL model calculates the net gains and losses for typical individuals resulting from a global failure to abate greenhouse-gas emissions. Results are compared for individuals facing low, medium and high damages in high-income and low-income countries. Some of the most important choices that underpin economic assessments of potential climate policies are based not on science, but on normative beliefs; CIEL approaches these choices as important information for policymakers and the public at large, and presents results for multiple values of each key assumption. Case studies will apply CIEL to the Caribbean, which faces extreme climate risks, and to the United States.
More information
Related Publication(s): Real People, Real Impacts: The Climate Impact Equity Lens
Real People, Real Impacts: The Climate Impact Equity Lens (Policy Brief)
The CIEL Backgrounder: Understanding the Climate Impact Equity Lens

How Much Are the Oceans Worth? Assessing the Economic Value of Oceans and the Cost of Inaction

Staff: Ackerman, F. ; Stanton, E.A. ; Davis, M.
Date: 2010-12

Research Area(s): Climate Economics

Description: Despite oceans' enormous importance, scant attention has been given to them in climate policy. We now realize oceans face several threats, including rising temperatures, acidification, pollution, and large regions that have become anoxic. Coastal areas are also threatened by sea-level rise. This project, part of an international, multi-disciplinary effort led by SEI, takes a holistic approach to those issues and provides estimates of their economic impacts and implications. Our research will examine the economic cost of climate impacts on marine fishing, tourism and recreation, coastal property and infrastructure, and other industries.

Climate and Regional Economics of Development (CRED)

Staff: Ackerman, F. ; Bueno, R. ; Stanton, E.A.
Date: 2009-2012

Research Area(s): Climate Economics

Description: SEI's Climate and Regional Economics of Development (CRED) is an integrated assessment model, with a central focus on the global distribution of climate damages and climate policy costs. It is designed to estimate both the best pace of investment in mitigation, and the best distribution of the cost of that investment to regions of the world. Our goal is to inform global climate negotiations and help break the stalemate between developed and developing countries. In 2011 and beyond we plan to extend and enrich the CRED model, providing projections of costs, benefits, climate impacts, and investment needs at a sub-regional level. The analysis of global inequality highlighted by CRED's basic results will be extended to include inequalities within major world regions, such as Europe and South/Southeast Asia. We are also exploring options for incorporating new approaches to risk and uncertainty into CRED, based on important recent developments in the economic theory of climate change.
More information
Related Publication(s): CRED: A new model of climate and development
Comparing climate strategies: Economic optimization versus equitable burden-sharing
Estimating Regions' Relative Vulnerability to Climate Damages in the CRED Model
Use of McKinsey abatement cost curves for climate economics modeling
CRED: A New Model of Climate and Development
Reason, Empathy, and Fair Play: the Climate Policy Gap

Turning the World Economic and Social Survey 2009 into a book

Staff: Ackerman, F. ; Davis, M.
Date: 2011
Client/Funder: UN Department of Economic and Social Affairs

Research Area(s): Climate Economics

Description: SEI, a significant contributor to the United Nations Department of Economic and Social Affairs' World Economic and Social Survey 2009: Promoting Development, Saving the Planet, was asked to edit and update the report for publication as a book in 2012, with a new preface by SEI's Frank Ackerman. This book spells out, in more detail than usual, what can and should be done to avert the real risks of climate change-related disaster. It summons world leaders to an endeavor worthy of the resources and ingenuity of the twenty-first century, to bold initiatives with big costs – and much bigger benefits.
External Link
Related Publication(s): Climate Protection and Development

San Francisco Consumption-Based Emissions Inventory (CBEI)

Staff: Stanton, E.A. ; Bueno, R. ; Cegan, J. ; Au, D. ; Ackerman, F.
Date: 2011

Research Area(s): Climate Economics

Description: In this project, which builds on previous work in Oregon and King County, WA, SEI-US will produce Consumption-Based Emissions Inventory (CBEI) results for San Francisco County and for the State of California. CBEI estimates the total greenhouse gas emissions resulting from all consumption within a study area. For this project, two study areas will be analyzed: (1) the City and County of San Francisco, and (2) the State of California. For this study emissions will be broken down by 1) emissions from households, government and business investments; 2) emissions released within the study area, outside of the study area but within the United States, and in foreign countries; 3) life-cycle phase (production, pre-purchase transportation, wholesale/retail, use, post-consumer disposal); and 4) 400-500 types of consumer goods and services that aggregate to a few dozen subcategories and approximately 15 categories.

The Social Cost of Carbon

Staff: Ackerman, F. ; Davis, M. ; Stanton, E.A. ; Au, D. ; Charles Munitz
Date: 2010-2011
Client/Funder: E3 Network

Research Area(s): Climate Economics

Description: The social cost of carbon (SCC), defined as the estimated price of the damages caused by each additional ton of CO2 released into the atmosphere, is the volume dial on government regulations affecting greenhouse gases: The higher the SCC is set, the more stringent the regulatory standards. It is used in cost-benefit analyses of proposed rules by EPA and other regulatory agencies. This project builds on our 2010 critique of the federal government process that recommended a low value of $21 per ton of CO2; our follow-up analysis looks at two of the models used to come up with that estimate, FUND and DICE. We will also recalculate the SCC, using the methods of the federal government's analysis but incorporating a full range of climate risks and uncertainties.
Related Publication(s): Climate damages in the FUND model: A disaggregated analysis
Damage Estimates and the Social Cost of Carbon: The Need for Change
The Social Cost of Carbon