1. Climate Change Science, Policy, Politics, and Economics Guest Lecture prepared for Global Climate Change James F. Casey ‘91 Department of Economics Washington and Lee University April 4, 2016

2. Science  Can we all (mostly) agree on the basic science?  Can we all (mostly) agree there is inherent uncertainty?  Can we all (mostly) agree we might want to reduce GHG emissions?

3. Policy  Can we all (mostly) agree there might be a role for public policy?  Can we all (mostly) agree we want the policy to be efficient – (not wasteful)?

4. Politics  Sen. Marco Rubio, speaking yesterday in Iowa, said the policies being implemented by President Obama to fight global warming will "destroy" the economy, and do nothing for the environment. said the policies being implemented by President Obama to fight global warming will "destroy" the economy, and do nothing for the environment.said the policies being implemented by President Obama to fight global warming will "destroy" the economy, and do nothing for the environment.  “A $10-a-barrel tax on oil will be dead on arrival in the House,” Rep. Bill Flores (R-Tex.) said. “It is clear that in his last year in office the president is more concerned with his radical climate policies and pleasing special interest groups than providing economic stability for hardworking American families. This proposed tax will do nothing more than raise costs on consumers, who are still struggling with stagnant wages.” said. “It is clear that in his last year in office the president is more concerned with his radical climate policies and pleasing special interest groups than providing economic stability for hardworking American families. This proposed tax will do nothing more than raise costs on consumers, who are still struggling with stagnant wages.”said. “It is clear that in his last year in office the president is more concerned with his radical climate policies and pleasing special interest groups than providing economic stability for hardworking American families. This proposed tax will do nothing more than raise costs on consumers, who are still struggling with stagnant wages.”

5. Economics  a little-known fact: Many economists are also enthusiastic environmentalists.  Why?  We understand how markets work…  And how they don’t….

6. Negative Externalities

7. Climate Change Economics  Classic Negative Externality  “Climate change is the biggest market failure the world has ever seen” Sir Nicholas Stern  Tragedy of the Commons  Free Rider Problem

8. So, what should we do?  http://www.npr.org/sections/money/2013/0 6/28/196355493/economists-have-a-one- page-solution-to-climate-change http://www.npr.org/sections/money/2013/0 6/28/196355493/economists-have-a-one- page-solution-to-climate-change http://www.npr.org/sections/money/2013/0 6/28/196355493/economists-have-a-one- page-solution-to-climate-change  Not my favorite economist - http://gregmankiw.blogspot.com/2006/10/p igou-club-manifesto.html http://gregmankiw.blogspot.com/2006/10/p igou-club-manifesto.html http://gregmankiw.blogspot.com/2006/10/p igou-club-manifesto.html  Definitely, my favorite economist - http://www.taxecarbone.info/Docs/CASEY- James-F-Gasprice2006.pdf http://www.taxecarbone.info/Docs/CASEY- James-F-Gasprice2006.pdf http://www.taxecarbone.info/Docs/CASEY- James-F-Gasprice2006.pdf  http://www.igmchicago.org/igm- economic-experts-panel/poll- results?SurveyID=SV_9Rezb430SESUA4Y http://www.igmchicago.org/igm- economic-experts-panel/poll- results?SurveyID=SV_9Rezb430SESUA4Y http://www.igmchicago.org/igm- economic-experts-panel/poll- results?SurveyID=SV_9Rezb430SESUA4Y

9. Micro vs. Macro  What about the US Economy?   20% reduction in CO2 by 2020 ~ $100B / Year (0.67% of GDP)   the economic cost of 80 percent reduction by 2050 is in the range of 2 to 3% by 2050   http://globalchange.mit.edu/files/document /MITJPSPGC_Rpt173.pdf http://globalchange.mit.edu/files/document /MITJPSPGC_Rpt173.pdf  http://www.rff.org/research/subtopics/carb on-tax http://www.rff.org/research/subtopics/carb on-tax http://www.rff.org/research/subtopics/carb on-tax

10. Costs of Inaction  http://papers.risingsea.net/downloads/cost- of-climate-change-discount-rate.pdf http://papers.risingsea.net/downloads/cost- of-climate-change-discount-rate.pdf http://papers.risingsea.net/downloads/cost- of-climate-change-discount-rate.pdf  http://e360.yale.edu/feature/calculating_th e_true_cost_of_global_climate_change/235 7/ http://e360.yale.edu/feature/calculating_th e_true_cost_of_global_climate_change/235 7/ http://e360.yale.edu/feature/calculating_th e_true_cost_of_global_climate_change/235 7/  http://web.stanford.edu/~mburke/climate/B urkeHsiangMiguel2015.pdf http://web.stanford.edu/~mburke/climate/B urkeHsiangMiguel2015.pdf http://web.stanford.edu/~mburke/climate/B urkeHsiangMiguel2015.pdf

11. Evidence   British Columbia’s Revenue-Neutral Carbon Tax: A Review of the Latest “Grand Experiment” in Environmental Policy  https://nicholasinstitute.duke.edu/sites/default/files/ publications/ni_wp_15-04_full.pdf https://nicholasinstitute.duke.edu/sites/default/files/ publications/ni_wp_15-04_full.pdf https://nicholasinstitute.duke.edu/sites/default/files/ publications/ni_wp_15-04_full.pdf   Over the last three years (2012-2014), the RGGI program led to $1.3 billion (net present value) of economic value to the nine-state region.  http://www.analysisgroup.com/uploadedfiles/conte nt/insights/publishing/analysis_group_rggi_report_jul y_2015.pdf http://www.analysisgroup.com/uploadedfiles/conte nt/insights/publishing/analysis_group_rggi_report_jul y_2015.pdf http://www.analysisgroup.com/uploadedfiles/conte nt/insights/publishing/analysis_group_rggi_report_jul y_2015.pdf  http://www.nytimes.com/2016/03/02/business/does- a-carbon-tax-work-ask-british- columbia.html?em_pos=large&emc=edit_nn_201603 02&nl=morning-briefing&nlid=25614199&_r=2 http://www.nytimes.com/2016/03/02/business/does- a-carbon-tax-work-ask-british- columbia.html?em_pos=large&emc=edit_nn_201603 02&nl=morning-briefing&nlid=25614199&_r=2 http://www.nytimes.com/2016/03/02/business/does- a-carbon-tax-work-ask-british- columbia.html?em_pos=large&emc=edit_nn_201603 02&nl=morning-briefing&nlid=25614199&_r=2

12. Expanding our perspective  “Climate change is one of the greatest challenges facing humanity, and it is the world’s most vulnerable populations who are most immediately at risk. The actions of the wealthiest nations – those generating the vast majority of greenhouse gases – have tangible consequences for people in the rest of the world, especially in the poorest nations.”  Costs in Developing Countries  Policy – 1%  Inaction – 2%  http://www- wds.worldbank.org/external/default/WDSContentSer ver/WDSP/IB/2013/03/26/000445729_20130326120429/ Rendered/PDF/632190WP0Turn000Box374367B00PUBLI C0.pdf http://www- wds.worldbank.org/external/default/WDSContentSer ver/WDSP/IB/2013/03/26/000445729_20130326120429/ Rendered/PDF/632190WP0Turn000Box374367B00PUBLI C0.pdf http://www- wds.worldbank.org/external/default/WDSContentSer ver/WDSP/IB/2013/03/26/000445729_20130326120429/ Rendered/PDF/632190WP0Turn000Box374367B00PUBLI C0.pdf