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TERI Information Digest on Energy and Environment
Year : 2002, Volume : 1, Issue : 1
First page : ( 168) Last page : ( 170)
Print ISSN : 0972-6721.

Climate change: Global changes: equity, economy, and technology transfer


[223]Managing climate risks using a tradable contingent security approach
Adamson S and Sagar A. 2001Policy instruments such as tradable permit systems and carbon taxes ignore the fact that various groups have very different views on the likelihood of climate change. Risk-based instruments may help bridge the gap. The paper discusses risk-based instruments that can explicitly incorporate certain risk and uncertainty aspects of the problem into an abatement policy that is mediated and fine-tuned through the market. Governments would require each polluter to buy a special risk-contingent security for each unit of GHG emission. The effective face value of the security required to emit a unit of GHGs may be determined.
(3 figures, 13 references)
Energy Policy30(1):43–51
Frontier Economics Inc.,
Two Brattle Square, Cambridge, MA 02138, USA


[224]Determinants of emissions growth in OECD countries
Hamilton C and Turton H. 2001The paper analyses the sources of growth in energy-related GHG emissions for the OECD (Organisation for Economic Co-operation and Development) countries over the period 1982-97. It employs a decomposition formula that separates out the effects of changes in population, economic growth, energy intensity of output (in aggregate and by sector), primary energy use in final energy consumption, the share of fossil fuels and the carbon intensity of fossil fuel combustion. It is shown that, in general, growth in emissions depends on how effectively energy use can be changed to offset the effects of economic growth. Across the OECD as a whole, growth in emissions has been mainly due to economic growth (both GDP per capita and population growth), as well as an increase in primary energy required for final energy consumption, offset by falling energy intensities and a declining share of fossil fuels. Overall, the large fall in the energy intensity of OECD economies over 1982-97 has been driven primarily by falling energy intensities in the services and industry sectors of the USA and the services sector of the European Union, but these have been somewhat offset by rising energy intensity of services in Japan. The influence of falling energy intensities and the declining share of fossil fuels, weakened in the five-year period of 1992-97 resulting in faster emissions growth. There were sharp differences between countries, with population growth and worsening fuel mix playing a much stronger role in the USA compared to the EU and Japan, but with the US making much larger reductions in energy use per unit of GDP. The analysis suggests that opportunities to reduce emissions are more limited in Germany, the UK and Japan, with more opportunities in the US, Canada, The Netherlands and Australia.
(8 figures, 3 tables, 15 references).
Energy Policy30(1):63–71
The Australia Institute,
Garden Wing, University House, Australian National University, ACT 0200, Australia


[225]Discounting the benefits of climate change mitigation: how much do uncertain rates increase valuations?
Newell R and Pizer W. 2001This paper explores some of the analytic difficulties of applying conventional discounting techniques to long-term problems such as global climate change. In particular, the paper focuses on the influence of uncertainty in the discount rate on the valuation of future climate damages, finding that this uncertainty has a large effect on valuations at horizons of 100 years or more in the future. Relative to the standard approach that ignores this uncertainty, the paper finds that the valuation today, of benefits 300 years or more in the future, rises by a factor of many thousand, solely due to this uncertainty in discount rates. The paper also finds that the debate over which is the 'right' rate to use is rendered less important once uncertainty in that rate is taken into account. The results of this study show that the conventional application of constant discount rates undervalues the benefits of GHG abatement measures. Moreover, they suggest that the concern expressed by those who argue for low discount rates is at least partially addressed - without abandoning conventional economic theory - by viewing future interest rates as uncertain. While this will not yield the same dramatic effects as the decision to arbitrarily apply a lower discount rate, uncertainty does have a large effect on valuations at horizons of 100 years or more in the future.
(6 figures, 3 tables, 36 references)
Technical Series 52 pp.
Resources for the Future,
1616 P Street, NW, Washington, DC 20036, USA <http://www.rff.org/reports/


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