Browse > Article
http://dx.doi.org/10.15266/KEREA.2016.25.1.027

Comparative Analysis of Regional Integrated Assessment Models of Climate and the Economy  

Hwang, In Chang (KEI)
Publication Information
Environmental and Resource Economics Review / v.25, no.1, 2016 , pp. 27-60 More about this Journal
Abstract
An integrated assessment model of climate and the economy (IAM) has been a standard tool for the economic analysis of climate change and policy recommendations. Since policy measures to address climate change take places at a national level, a regional integrated assessment model of climate and the economy (RIAM) is gaining more importance. A RIAM is a useful tool for the assessment of regional (or national) impacts of climate change. This paper investigates the main features of the currently available RIAMs. The focus is social welfare functions and the regional aspects of climate change. The comparative analysis shows that there is a huge gap between the economics of climate change and its applications to RIAMs. As an application, this paper examines the effect of social welfare functions on optimal solutions of the RICE (Regional Integrated model of Climate and the Economy) model. It is found that optimal climate policy such as carbon tax or emissions control rate is very sensitive to the assumptions on social welfare functions of RIAMs. It is better for each country to have their own RIAM as a basic tool for national climate policy-making and for international bargaining in greenhouse-gas mitigation. This is because a country's own preferences such as efficiency, equity, and sustainable development as well as national circumstances can be reflected in RIAM. The Republic of Korea has not developed its own RIAM yet. The comparative analysis and the numerical model in this paper can be a stepping stone for the development of such a national model.
Keywords
Climate change; Climate policy; Integrated assessment; Regional assessment model; RICE;
Citations & Related Records
연도 인용수 순위
  • Reference
1 강성원. 김민준, "중장기 환경전망 및 대응전략- KEI 통합환경모형 연구", 한국환경정책.평가연구원, 2014.
2 김용건. 공성용. 강성원. 서영. 이화랑. 양유경. 김홍균. 이윤수. 이강오. 남준우. 임종수. 김태영. 정지은, "온실가스 감축정책 평가를 위한 환경경제모형 개발. 운용", 한국환경정책. 평가연구원, 2014.
3 채여라. 김용건. 조광우. 조현주. 최성윤, "우리나라 기후변화의 경제학적 분석(III)", 환경부, 2012.
4 황인창, "기후경제통합-지역평가모형 비교분석 및 국내 모형개발을 위한 기초연구", 한국환경정책. 평가연구원, 2015.
5 Abbott, J. K. and E. P. Fenichel, "Following the golden rule: Negishi welfare weights without apology," Unpublished manuscript, 2014.
6 Ackerman, F., E. A. Stanton, and R. Bueno, "CRED: A new model of climate and development," Ecological Economics, Vol. 85, Jan, 2013a, pp. 166-176.   DOI
7 Ackerman, F., E. A. Stanton, and R. Bueno, "Epstein-Zin utility in DICE: Is risk aversion irrelevant to climate policy?," Environmental and Resource Economics, Vol. 56, No. 1, 2013b, pp. 73-84.   DOI
8 Anthoff, D., C. Hepburn, and R. S. J. Tol, "Equity weighting and the marginal damage costs of climate change," Ecological Economics, Vol. 68, No. 3, 2009, pp. 836-849.   DOI
9 Anthoff, D. and R. S. J. Tol, "On international equity weights and national decision making on climate change," Journal of Environmental Economics and Management, Vol. 60, No. 1, 2010, pp. 14-20.   DOI
10 Anthoff, D. and R. S. J. Tol, "The Climate Framework for Uncertainty, Negotiation and Distribution (FUND), Technical Description, Version 3.9," 2014a.
11 Anthoff, D. and R. S. J. Tol, "Climate policy under fat-tailed risk: An application of FUND," Annals of Operations Research, Vol. 220, No. 1, 2014b, pp. 223-237.   DOI
12 Arrow, K. J., Social Choice and Individual Values, New York, Wiley, 1954.
13 Arrow, K. J., M. Cropper, C. Gollier, B. Groom, G. M. Heal, R. G. Newell, W. D. Nordhaus, R. S. Pindyck, W. A. Pizer, P. Portney, T. Sterner, and R. S. J. Tol, "How should benefits and costs be discounted in an intergenerational context?," University of Sussex Working Paper, No. 56-2013, 2013.
14 Asheim, G. B. and T. Mitra, "Sustainability and discounted utilitarianism in models of economic growth," Mathematical Social Science, Vol. 59, No. 2, 2010, pp. 148-169.   DOI
15 Bikhchandani, S., J. Hirshleifer, and J. G. Riley, The Analytics of Uncertainty and Information, New York, Cambridge University Press, 2013.
16 Bosello, F. and E. De Cian, "Documentation on the development of damage functions and adaptation in the WITCH model," CMCC Research Papers Issue, RP0228, 2014.
17 Botzen, W. J. W. and J. C. J. M. van der Bergh, "Specifications of social welfare in economic studies of climate policy: Overview of criteria and related policy insights," Environmental and Resource Economics, Vol. 58, No. 1, 2014, pp. 1-33.   DOI
18 Chae, Y., S. Y. Bae, and J. E. Kim, "Estimating Climate Change Damage Using PAGE model," Korea Environment Institute, 2006.
19 Chichilnisky, G., G. Heal, and A. Beltratti, "The green golden rule," Economics Letters, Vol. 49, No. 2, 1995, pp. 175-179.   DOI
20 Chichilnisky, G., "An axiomatic approach to sustainable development," Social Choice and Welfare, Vol. 13, No. 2, 1996, pp. 231-257.   DOI
21 Chichilnisky, G., "Avoiding extinction: Equal treatment of the present and the future," Economics: The Open-Access, Open-Assessment E-Journal, Vol. 3, 2009, pp. 1-25.
22 Clarke, L., K. Jiang, K. Akimoto, M. Babiker, G. Blanford, K. Fisher-Vanden, J. C. Hourcade, V. Krey, E. Kriegler, A. Loschel, and D. McCollum, "Assessing Transformation Pathways," In Climate Change 2014: Mitigation of Climate Change, Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, 2014, pp. 413-510, Edenhofer, O. et al., eds., Cambridge, United Kingdom and New York, NY, USA, Cambridge University Press, 2014.
23 Clarkson, R. and K. Deyes, "Estimating the social cost of carbon emissions," Government Economic Service Working Paper 140, HM Treasury, 2002.
24 Cline, W. R., "The Economics of Global Warming. Institute for International Economics," 1992.
25 de Bruin, K. C., "Calibration of the AD-RICE 2012 model," Unpublished manuscript, 2014.
26 Dietz, S. and G. B. Asheim, "Climate policy under sustainable discounted utilitarianism," Journal of Environmental Economics and Management, Vol. 63, No. 3, 2012, pp. 321-335.   DOI
27 Eeckhoudt, L., C. Gollier, and H. Schlesinger, "Economic and Financial Decisions under Risk. Princenton," Princeton University Press, 2005.
28 Epstein, L. G. and S. E. Zin, "Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework," Econometrica, Vol. 57, No. 4, 1989, pp. 937-969.   DOI
29 Epstein, L. G. and S. E. Zin, "Substitution, risk aversion, and the temporal behavior of consumption and asset returns: an empirical analysis," Journal of Political Economy, Vol. 99, No. 2, 1991, pp. 263-286.   DOI
30 Hope, C., "The PAGE09 integrated assessment model: A technical description," University of Cambridge Working Paper Series 4/2011, 2011.
31 Hwang, I. C., F. Reynes, and R. S. J. Tol, "Climate policy under fat-tailed risk: An application of DICE," Environmental and Resource Economics, Vol. 56, No. 4, 2013, pp. 415-436.   DOI
32 Hwang, I. C., R. S. J. Tol, and M. W. Hofkes, "The effect of learning on optimal climate policy," MPRA Working paper No. 53681, 2014.
33 Hwang, I. C., R. S. J. Tol, and M. W. Hofkes, "Fat-tailed risk about climate change and climate policy," Energy Policy, Vol. 89, Feb, 2016. pp. 25-35.   DOI
34 Hwang, I. C., "A recursive method for solving a climate-economy model: Value function iterations with logarithmic approximations," 2016 Korea's Allied Economic Associations Annual Meeting, 2016.
35 IPCC, Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, IPCC, Geneva, Switzerland, 2014.
36 IWGSCC, Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis- Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, United States Government, 2013.
37 Kahneman, D. and A. Tversky, "Prospect theory: An analysis of decision under risk," Econometrica, Vol. 47, No. 2, 1979, pp. 263-291.   DOI
38 Kelly, D. L. and C. D. Kolstad, "Integrated assessmemt models for climate change control," In Folmer, H. and Tietenberg, T., eds., International Yearbook of Environmental and Resource Economics 1999/2000: A Survey of Current Issues, Cheltenham, UK, Edward Elgar, 1999.
39 Klibanoff, P., M. Marinacci, and S. Mukerji, "A smooth model of decision making under ambiguity," Econometrica, Vol. 73, No. 6, 2005, pp. 1849-1892.   DOI
40 Kim, Y. G., "A Game-theoretic Analysis on Negotiation Mechanisms for Climate Change Mitigation," Korea Environment Institute, 2004.
41 Kurosawa, A. "Carbon concentration target and technological choice," Energy Economics, Vol. 26, No. 4, 2004, pp. 675-684.   DOI
42 Manne, A. S. and R. Richels, "MERGE: An integrated assessment model for global climate change," In Loulou, R. et al., eds., Energy and Environment, Springer US, 2005.
43 Masui, T., T. Hanaoka, S. Hikita, and M. Kainuma, "Assessment of $CO_2$ reductions and economic impacts considering energy- saving investments," The Energy Journal, Vol. 27(Special issue), 2006, pp. 175-190.
44 Millner, A., S. Dietz, and G. Heal, "Scientific ambiguity and climate policy," Environmental and Resource Economics, Vol. 55, No. 1, 2013, pp. 21-46.   DOI
45 Negishi, T., "Welfare economics and existence of an equilibrium for a competitive economy," Metroeconomica, Vol. 12, No. 2-3, 1960, pp. 92-97.   DOI
46 Nordhaus, W. D., "Economic aspects of global warming in a post Copenhagen environment," Proceedings of the National Academy of Sciences, Vol. 107, No. 26, 2010, pp. 11721-11726.   DOI
47 Nordhaus, W. D., "The Climate Casino, New Haven," Yale University Press, 2013.
48 Nordhaus, W. D. and Z. Yang, "A regional dynamic general-equilibrium model of alternative climate-change strategies," American Economic Review, Vol. 86, No. 4, 1996, pp. 741-765.
49 Nordhaus, W. D. and J. Boyer, "Warming the World: Economic Models of Global Warming, Cambridge," MIT Press, 2000.
50 Pearce, D., "The social cost of carbon," In Helm, D., eds., Climate-change Policy, New York, Oxford University Press, 2005.
51 Peck, S. C. and T. J. Teisberg, "$CO_2$ concentration limits, the costs and benefits of control, and the potential for international agreement," In Carraro, C., eds, International Environmental Agreements on Climate Change, Springer Netherlands, 1999.
52 Quggin, J., "A theory of anticipated utility," Journal of Economic Behavior and Organization, Vol. 3, No. 4, 1982, pp. 323-343.   DOI
53 Ramsey, F. P., "A mathematical theory of saving," The Economic Journal, Vol. 38, No. 152, 1928, pp. 543-559.   DOI
54 Rawls, J., "Some reasons for the maximin criterion," The American Economic Review, Vol. 64, No. 2, 1974, pp. 141-146.
55 Roemer, J. E., "The ethics of intertemporal distribution in a warming planet," Environmental and Resource Economics, Vol. 48, No. 3, 2011, pp. 363-390.   DOI
56 Savage, L. J. "The theory of statistical decision," Journal of the American Stastical Association, Vol. 46, No. 253, 1951, pp. 55-67.   DOI
57 Stanton, E. A., F. Ackerman, and S. Kartha, "Inside the Integrated Assessment Models: Four Issues in Climate Economics," Stockholm Environment Institute Working Paper WP-US-0801, 2008.
58 Stanton, E. A., "Negishi welfare weights in integrated assessment models: The mathematics of global inequality," Climatic Change, Vol. 107, No. 3-4, 2011, pp. 417-432.   DOI
59 Stern, N. H., "Stern Review: The Economics of Climate Change," London, HM treasury, 2006.
60 Stern, N. H., "The economics of climate change," American Economic Review, Vol. 98, No. 2, 2008, pp. 1-37.   DOI
61 Tol, R. S. J. and G. W. Yohe, "A review of the Stern review," World Economics, Vol. 7, No. 4, 2006, pp. 233-250.
62 Sterner, T. and U. M. Persson, "An even sterner review: Introducing relative prices into the discounting debate," Review of Environmental Economics and Policy, Vol. 2, No. 1, 2008, pp. 61-76.   DOI
63 Tol, R. S. J., "Time discounting and optimal emission reduction: An application of FUND," Climatic Change, Vol. 41, No. 3-4, 1999, pp. 351-362.   DOI
64 Tol, R. S. J., "Equitable cost-benefit analysis of climate change policies," Ecological Economics, Vol. 36, 2001, pp. 71-85.   DOI
65 Tol, R. S. J. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Vol. 37, No. 5, 2013, pp. 911-928.   DOI
66 Tol, R. S. J., Climate Economics, Cheltenham, Edward Elgar, 2014.
67 Von Neumann, J. and O. Morgenstern, "Theory of Games and Economic Behavior," Princeton University Press, 1944.
68 Weitzman, M., "A review of the Stern review on the economics of climate change," Journal of Economic Literature, Vol. 45, No. 3, 2007, pp. 703-724.   DOI
69 Weitzman, M., "On modeling and interpreting the economics of catastrophic climate change," Review of Economics and Statistics, Vol. 91, No. 1, 2009, pp. 1-19.   DOI
70 Weyant, J. P., B. Knopf, E. De Cian, I. Keppo, and D. P. van Vuuren, "Introductioin to the EMF28 study on scenarios for transforming the European energy system," Climate Change Economics, Vol. 4, Supp01, 1302001, 2013.   DOI
71 Yang, Z., "Strategic Bargaining and Cooperation in Greenhouse Gas Mitigations," Cambridge, The MIT Press, 2008.
72 Wong, K. Y., "Evaluating Climate Change Taxation for Economic and Environmental Policy Purposes in Malaysia: Insights from the Enhanced PAGE09 Integrated Assessment Model," Ph. D. thesis, University of Cambridge, 2012.
73 World Bank, World Development Indicators, 2015.