A Macroeconomic Perspective on Climate Change Mitigation: Meeting the Financing Challenge

Bowen, Alex; Campiglio, Emanuele; Tavoni, Massimo

doi:10.1142/s2010007814400053

Cited by 33 publications

(25 citation statements)

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“…Removing energy subsidies would free up resources of the same order of magnitude as the gaps 87,88 . Moreover, all models find that climate policies could provide sufficient fiscal revenues within each region to finance the totality of investment in energy supply, while also providing incentives to the private sector to raise finance 89 . Climate finance can assist developing economies in filling the investment gap and in alleviating the distributional inequalities.…”

Section: Economic and Financial Implicationsmentioning

confidence: 99%

“…Such countries have the capacity if necessary to utilize domestic saving, although the question of whether this would be equitable would remain. 89 Figure 6 suggests that revenues from the international sales of CO2 permits could cover almost half of the investment gap of developing economies, provided industrialized countries committed to such transfers. However, in order to work, a large and well-functioning carbon market would need to be established in the next 20 years, capable of handling permits for several GtCO2-eq and hundred of billions of U.S. dollars of trades per year 14,67,70 .…”

Section: Economic and Financial Implicationsmentioning

confidence: 99%

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Post-2020 climate agreements in the major economies assessed in the light of global models

et al. 2014

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Integrated assessment models can help quantifying the implications of international climate agreements and regional climate action. This paper reviews scenario results from model intercomparison projects to explore different possible outcomes of post 2020 climate negotiations, recently announced pledges and their relation to 2°C. We provide key information for all the major economies such as the year of emission peaking, the regional carbon budgets and emissions allowances. We highlight the distributional consequences of climate policies, and discuss the role of carbon markets for financing clean energy investments, and achieving efficiency and equity.So far, international climate policy has been ineffective in curbing the rise of global greenhouse-gas emissions. Still, ambitious climate targets such as the 2°C target require a phase-out of global emissions by the end of the century, and an active participation of all world regions in climate policy 1 . Given the many obstacles to global cooperative action on climate change, the question remains how diverse national climate policies can be coordinated and strengthened globally. Within the United Nations Framework Convention on Climate Change (UNFCCC), the Durban Platform for Enhanced 2 Action 2 provides an important platform for a post-2020 international climate agreement. It contains several innovative elements, most notably a focus on the major economies that goes beyond the traditional divide between Annex I and non-Annex I countries. The Durban platform calls for a new climate treaty to be agreed in 2015 and implemented as early as 2020. The recently announced USChina climate deal and the EU climate framework provide encouraging steps forwards, but aligning the incentives of the major emitters in pursuing stringent climate policies remains a challenge. In this paper, we aim at assessing the implications of post 2020 climate policies with specific reference to the major economies. We provide quantitative estimates of regional emission budgets, timing of emission peaking, and distribution of mitigation costs. We examine the role of carbon markets and different burden sharing schemes to alleviate distributional inequalities and finance the investment needs in low carbon mitigation technologies. In order to quantify these policy relevant variables, we resort to global models.Integrated assessment models (IAMs) are tools designed to investigate the implications of achieving climate and other objectives in an integrated and rigorous framework. They are numerical models that account for major interactions among energy, land-use, economic and climate systems. Model differ in the economic, technological and sectoral representation and in the way they are solved, with some models maximizing an inter-temporal objective function (such as economic activity) and others simulating a set of equilibria (see the SOM for individual model description and references to documentation). Models generate global long-term scenarios for a number of regions or countries that ca...

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Section: Economic and Financial Implicationsmentioning

confidence: 99%

Section: Economic and Financial Implicationsmentioning

confidence: 99%

Post-2020 climate agreements in the major economies assessed in the light of global models

et al. 2014

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“…Two types of computational models that are very prominent in climate policy analysis are based on these ideas: computable general equilibrium (CGE) and optimal growth models (see, e.g., [10]). The focus of optimal growth models is the allocation of a produced good in each time step between consumption and investment in such a way that a representative household's lifetime utility-defined as an (infinite) sum of the discounted utilities derived from consumption at each time step-is maximized.…”

Section: The Most Common Approach For Modelling Climate Policymentioning

confidence: 99%

“…The emerging green growth literature variously points out that given the current fossil fuel based economy, green growth requires a major structural transition of the economic system (e.g., [5,12,13]) that needs to go beyond the energy sector alone [10,14]. Since a transition to a different economic system structure cannot be represented within a marginal analysis, it is not surprising that the possibility of win-win strategies for climate policy is beyond the horizon of this modelling methodology.…”

Section: The Most Common Approach For Modelling Climate Policymentioning

confidence: 99%

Balance or Synergies between Environment and Economy—A Note on Model Structures

2016

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Abstract:The UN sustainable development goals contain environmental, economic, and social objectives. They may only be reached, or at least it would be easier to reach them, if instead of a trade-off between these objectives that implies a need for balancing them, there are synergies to be reaped. This paper discusses how the structures of economic models typically used in policy analysis influence whether win-win strategies for the environment and the economy can be conceptualised and analysed. With a focus on climate policy modelling, the paper points out how, by construction, commonly used model structures find mitigation costs rather than benefits. This paper describes mechanisms that, when added to these model structures, can bring win-win options into a model's solution horizon, and which provide a spectrum of alternative modelling approaches that allow for the identification of such options.

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“…Existing and future climate flows have been investigated by a number of authors (see Ampri et al, 2014;Bowen, Campiglio, & Tavoni, 2014;Clapp, Ellis, & Corfee-Morlot, 2012;Jakob et al, 2014;Jürgens et al, 2012;Kirkman, Seres, & Haites, 2013;Olbrisch, Haites, Savage, Dadhich, & Shrivastava, 2011). A challenge only very recently addressed has been the lack of a common set of guidelines and definitions to ensure consistency between estimates (World Bank, 2015).…”

Section: The Landscape Of Climate Finance: a Top-down Perspectivementioning

confidence: 99%

Understanding the case for low-carbon investment through bottom-up assessments of city-scale opportunities

et al. 2015

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(2017) Understanding the case for low-carbon investment through bottom-up assessments of city-scale opportunities, Climate Policy, 17:3, 299-313, DOI: 10.1080/14693062.2015 A growing body of literature suggests that an economic case may exist for investment in large-scale climate change mitigation. At the same time, however, investment is persistently falling well short of the levels required to prevent dangerous climate change, suggesting that economically attractive mitigation opportunities are being missed. To understand whether and where these opportunities exist, this article contrasts macro-level analyses of climate finance with micro-level bottom-up analyses of the scale and composition of low-carbon investment opportunities in four case study developing world cities. This analysis finds that there are significant opportunities to redirect existing finance streams towards more cost-effective, lower-carbon options. This would mobilize substantial new investment in climate mitigation. Two key explanations are proposed for the failure to exploit these opportunities. First, the composition of cost-effective measures is highly context-specific, varying from place to place and sector to sector. Macro-level analyses of climate finance flows are therefore poor indicators of the micro-level landscape for low-carbon investment. Specific local research is therefore needed to understand the opportunities for cost-effective mitigation at that level. Second, many opportunities require enabling governance arrangements that are not currently in place. Mobilizing new lowcarbon investment and closing the 'climate finance gap' therefore requires attention to policy frameworks and financing mechanisms that can facilitate the exploitation of cost-effective low-carbon options. Policy relevanceThe importance of increasing investment in climate mitigation, especially in developing nations, is well established. This article scrutinizes four city-level studies of the scope for cost-effective low-carbon investment, and finds that significant opportunities are not being exploited in developing world cities. Enabling governance structures may help to mainstream climate considerations into investments by local actors (households, businesses and government agencies). While climate finance distributed through international bodies such as the Green Climate Fund may not always be a suitable vehicle to invest directly in disaggregated, local-level measures, it can provide the incentives to develop these governance arrangements.

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A Macroeconomic Perspective on Climate Change Mitigation: Meeting the Financing Challenge

Cited by 33 publications

References 39 publications

Post-2020 climate agreements in the major economies assessed in the light of global models

Post-2020 climate agreements in the major economies assessed in the light of global models

Balance or Synergies between Environment and Economy—A Note on Model Structures

Understanding the case for low-carbon investment through bottom-up assessments of city-scale opportunities

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