The Sky is Falling
Innovation and Climate Change Policy
Joshua Gans
American Economic Journal: Economic Policy, forthcoming
Abstract:
This paper examines the notion that more stringent climate change policies will induce innovation in environmentally friendly technologies. While past work has raised the concern that such policies may stimulate such innovation at the expense of innovation elsewhere in the economy, the model presented here challenges the presumption that environmentally friendly innovation will advance without additional assistance. This paper demonstrates that a tighter emissions cap will reduce the scale of fossil fuel usage and that this effect will diminish incentives to improve fossil fuel efficiencies. At the same time, while such policies may stimulate the relative demand for innovations that improve the efficiency of alternative energy, carbon scarcity may diminish innovation incentives overall. Only for offsetting technologies that directly abate carbon pollution will there be an unambiguously positive impact on the rate of innovation. These results have implications for the setting of climate change targets and the design of climate change policy.
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Do actions speak louder than words? An empirical investigation of corporate environmental reputation
Charles Cho et al.
Accounting, Organizations and Society, January 2012, Pages 14-25
Abstract:
In this study, we investigate the extent to which firms' environmental performance is reflected in perceptions of their environmental reputation and whether environmental disclosure serves to mediate the negative aspects of poorer environmental performance associated with those assessments. We also examine whether differences in environmental performance and environmental disclosure appear to be associated with membership selection to the Dow Jones Sustainability Index (DJSI), a factor we also believe may be associated with perceptions of environmental reputation. Based on a cross-sectional sample of 92 US firms from environmentally sensitive industries, we find that environmental performance measured using Trucost environmental performance scores is negatively related to both reputation scores and membership in the DJSI. We argue this is due to the more extensive disclosure levels of firms that are worse performers and the finding of a significant positive relation between environmental disclosure and both the environmental reputation measures and DJSI membership. Finally, we show that the DJSI designation positively influences perceptions of corporate reputation. Overall, our results suggest that voluntary environmental disclosure appears to mediate the effect of poor environmental performance on environmental reputation. Perhaps more troubling, our results also suggest that membership in the DJSI appears to be driven more by what firms say than what they do. Thus, like voluntary disclosure, the DJSI may actually be hindering improved future corporate environmental performance.
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Simultaneously Mitigating Near-Term Climate Change and Improving Human Health and Food Security
Drew Shindell et al.
Science, 13 January 2012, Pages 183-189
Abstract:
Tropospheric ozone and black carbon (BC) contribute to both degraded air quality and global warming. We considered ~400 emission control measures to reduce these pollutants by using current technology and experience. We identified 14 measures targeting methane and BC emissions that reduce projected global mean warming ~0.5°C by 2050. This strategy avoids 0.7 to 4.7 million annual premature deaths from outdoor air pollution and increases annual crop yields by 30 to 135 million metric tons due to ozone reductions in 2030 and beyond. Benefits of methane emissions reductions are valued at $700 to $5000 per metric ton, which is well above typical marginal abatement costs (less than $250). The selected controls target different sources and influence climate on shorter time scales than those of carbon dioxide-reduction measures. Implementing both substantially reduces the risks of crossing the 2°C threshold.
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The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance
Robert G. Eccles, Ioannis Ioannou & George Serafeim
Harvard Working Paper, November 2011
Abstract:
We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies many years ago - termed as High Sustainability companies - exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies - termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers instead of companies, companies compete on the basis of brands and reputations, and products significantly depend upon extracting large amounts of natural resources.
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Oil Prices, Exhaustible Resources, and Economic Growth
James Hamilton
NBER Working Paper, January 2012
Abstract:
This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored.
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The Human-Environment Dialog in Award-winning Children's Picture Books
Allen Williams et al.
Sociological Inquiry, February 2012, Pages 145-159
Abstract:
Picture books often play an important role in childhood socialization. Given the seriousness of environmental problems, we ask how natural, modified, and built environments have been portrayed in children's books. To answer this question, we analyze the 296 books receiving Caldecott awards from 1938 to 2008. Two possibilities are explored with respect to content change. Growing concern about critical environmental problems, such as decline in biodiversity and deforestation, may have led to an increase in illustrations and stories about wild animals and the natural environment. Alternatively, the increasing isolation of people from the natural world may have resulted in a decline in the perceived relevance of these environmental issues and resulted in fewer stories and depictions. Our findings support the isolation hypothesis. There have been significant declines in depictions of natural environments and animals while built environments have become much more common. These findings suggest that today's generation of children are not being socialized, at least through this source, toward an understanding and appreciation of the natural world and the place of humans within it.
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Climate Change, Crop Yields, and Internal Migration in the United States
Shuaizhang Feng, Michael Oppenheimer & Wolfram Schlenker
NBER Working Paper, January 2012
Abstract:
We investigate the link between agricultural productivity and net migration in the United States using a county-level panel for the most recent period of 1970-2009. In rural counties of the Corn Belt, we find a statistically significant relationship between changes in net outmigration and climate-driven changes in crop yields, with an estimated semi-elasticity of about -0.17, i.e., a 1% decrease in yields leads to a 0.17% net reduction of the population through migration. This effect is primarily driven by young adults. We do not detect a response for senior citizens, nor for the general population in eastern counties outside the Corn Belt. Applying this semi-elasticity to predicted yield changes under the B2 scenario of the Hadley III model, we project that, holding other factors constant, climate change would on average induce 3.7% of the adult population (ages 15-59) to leave rural counties of the Corn Belt in the medium term (2020-2049) compared to the 1960-1989 baseline, with the possibility of a much larger migration response in the long term (2077-2099). Since there is uncertainty about future warming, we also present projections for a range of uniform climate change scenarios in temperature or precipitation.
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Uncertain outcomes and climate change policy
Robert Pindyck
Journal of Environmental Economics and Management, forthcoming
Abstract:
I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. As a measure of willingness to pay (WTP), I estimate the fraction of consumption w(τ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to τ. Using information on distributions for temperature change and economic impact from recent studies assembled by the IPCC and others, I fit displaced gamma distributions for these variables. These fitted distributions, which roughly reflect the "state of knowledge" regarding warming and its impact, generally yield values of w(τ) below 2%, even for small values of τ, consistent with moderate abatement policies. I also calculate WTP for shifts in the mean and standard deviation of the temperature distribution, and show how WTP, and thus the demand for abatement, are driven more by outcome uncertainty than expected outcomes.
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The Competitiveness Impacts of Climate Change Mitigation Policies
Joseph Aldy & William Pizer
NBER Working Paper, December 2011
Abstract:
In order to clarify ongoing debates over the competitiveness impacts of climate change regulation, we develop a precise definition that can be estimated with available domestic production, trade, and energy price data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate and predict the effects a U.S.-only $15 per ton CO2 price. We find competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among energy-intensive manufacturing industries, representing about one-third of the policy's impacts on these firms' output.
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Cenozoic climate change influences mammalian evolutionary dynamics
Borja Figueirido et al.
Proceedings of the National Academy of Sciences, 17 January 2012, Pages 722-727
Abstract:
Global climate change is having profound impacts on the natural world. However, climate influence on faunal dynamics at macroevolutionary scales remains poorly understood. In this paper we investigate the influence of climate over deep time on the diversity patterns of Cenozoic North American mammals. We use factor analysis to identify temporally correlated assemblages of taxa, or major evolutionary faunas that we can then study in relation to climatic change over the past 65 million years. These taxa can be grouped into six consecutive faunal associations that show some correspondence with the qualitative mammalian chronofaunas of previous workers. We also show that the diversity pattern of most of these chronofaunas can be correlated with the stacked deep-sea benthic foraminiferal oxygen isotope (δ18O) curve, which strongly suggests climatic forcing of faunal dynamics over a large macroevolutionary timescale. This study demonstrates the profound influence of climate on the diversity patterns of North American terrestrial mammals over the Cenozoic.
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Maximilian Auffhammer & Anin Aroonruengsawat
Climatic Change, December 2011, Pages 191-210
Abstract:
This study simulates the impacts of higher temperatures resulting from anthropogenic climate change on residential electricity consumption for California. Flexible temperature response functions are estimated by climate zone, which allow for differential effects of days in different temperature bins on households' electricity consumption. The estimation uses a comprehensive household level dataset of electricity bills for California's three investor-owned utilities (Pacific Gas and Electric, San Diego Gas and Electric, and Southern California Edison). The results suggest that the temperature response varies greatly across climate zones. Simulation results using a downscaled version of the National Center for Atmospheric Research global circulation model suggest that holding population constant, total consumption for the households considered may increase by up to 55% by the end of the century. The study further simulates the impacts of higher electricity prices and different scenarios of population growth. Finally, simulations were conducted consistent with higher adoption of cooling equipment in areas which are not yet saturated, as well as gains in efficiency due to aggressive energy efficiency policies.
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How Will Energy Demand Develop in the Developing World?
Catherine Wolfram, Orie Shelef & Paul Gertler
NBER Working Paper, January 2012
Abstract:
Most of the medium-run growth in energy demand is forecast to come from the developing world, which consumed more total units of energy than the developed world in 2007. We argue that the main driver of the growth is likely to be increased incomes among the poor and near-poor. We document that as households come out of poverty and join the middle class, they acquire appliances, such as refrigerators, and vehicles for the first time. These new goods require energy to use and energy to manufacture. The current forecasts for energy demand in the developing world may be understated because they do not accurately capture the dramatic increase in demand associated with poverty reduction.
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Does Fairness Matter in the Context of Anger About Nuclear Energy Decision Making?
John Besley
Risk Analysis, January 2012, Pages 25-38
Abstract:
Several recent studies have questioned whether nonoutcome forms of fairness matter in decision-making situations where individuals feel strongly engaged by the issue at hand. This survey-based study focuses on perceptions about a decision-making process related to a proposal to expand a nuclear power plant in the U.S. Southeast. It finds that anger moderates the impacts of outcome and procedural fairness on willingness to accept a decision process as satisfactory and legitimate. The more anger a person said he or she would feel if a decision were to contradict that person's point of view, the more perceived outcome and procedural fairness mattered. The study also finds that interpersonal fairness is also moderated by anger, but in the opposite direction. Interpersonal fairness had less of an impact on willingness to accept a decision for those who said they would feel angry if the decision did not go their preferred way.
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A Social Capital Basis for Environmental Concern: Evidence from Northern New England
Thomas Macias & Elysia Nelson
Rural Sociology, December 2011, Pages 562-581
Abstract:
This study, based on a random-digit-dialing telephone survey of adults in Maine, New Hampshire, and Vermont, uses ordinary least squares regression to examine a relatively neglected element in the sociological literature on environmental concern, namely, the influence of an individual's social capital on the formation of environmental attitudes. We argue that it is those individuals with a greater diversity of social connections who are most likely to be influenced by ecological perspectives grounded in conservation and environmental protection. Controlling for other theoretically relevant variables, we regress an index of environmental concern that gives special emphasis to environmental-economic trade-offs on our measures of relational and community social capital. While confirming much of the earlier work in this area, our model provides evidence that connections to other people play an important role in determining individual concern for the environment. Specifically, the number of respondents' "weak ties" - that is, not their closest relationships - and the average occupational status of respondents' social ties, in general, were both positively correlated with environmental concern. Additionally, one of our three measures of community social capital, the number of visits from friends over the past month, was statistically significant and negatively correlated with environmental concern.
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Current and future impacts of extreme events in California
Michael Mastrandrea et al.
Climatic Change, December 2011, Pages 43-70
Abstract:
In the next few decades, it is likely that California must face the challenge of coping with increased impacts from extreme events such as heat waves, wildfires, droughts, and floods. This study presents new projections of changes in the frequency and intensity of extreme events in the future across climate models, emissions scenarios, and downscaling methods, and for each California county. Consistent with other projections, this study finds significant increases in the frequency and magnitude of both high maximum and high minimum temperature extremes in many areas. For example, the frequency of extreme temperatures currently estimated to occur once every 100 years is projected to increase by at least ten-fold in many regions of California, even under a moderate emissions scenario. Under a higher emissions scenario, these temperatures are projected to occur close to annually in most regions. Also, consistent with other projections, analyses of precipitation extremes fail to detect a significant signal of change, with inconsistent behavior when comparing simulations across different GCMs and different downscaling methods.
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Tension between reducing sea-level rise and global warming through solar-radiation management
P.J. Irvine, R.L. Sriver & K. Keller
Nature Climate Change, forthcoming
Abstract:
Geoengineering using solar-radiation management (SRM) is gaining interest as a potential strategy to reduce future climate change impacts1, 2, 3. Basic physics and past observations suggest that reducing insolation will, on average, cool the Earth. It is uncertain, however, whether SRM can reduce climate change stressors such as sea-level rise or rates of surface air temperature change1, 4, 5, 6. Here we use an Earth system model of intermediate complexity to quantify the possible response of sea levels and surface air temperatures to projected climate forcings7 and SRM strategies. We find that SRM strategies introduce a potentially strong tension between the objectives to reduce (1) the rate of temperature change and (2) sea-level rise. This tension arises primarily because surface air temperatures respond faster to radiative forcings than sea levels. Our results show that the forcing required to stop sea-level rise could cause a rapid cooling with a rate similar to the peak business-as-usual warming rate. Furthermore, termination of SRM was found to produce warming rates up to five times greater than the maximum rates under the business-as-usual CO2 scenario, whereas sea-level rise rates were only 30% higher. Reducing these risks requires a slow phase-out of many decades and thus commits future generations.
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Potential impacts of increased coastal flooding in California due to sea-level rise
Matthew Heberger et al.
Climatic Change, December 2011, Pages 229-249
Abstract:
California is likely to experience increased coastal flooding and erosion caused by sea-level rise over the next century, affecting the state's population, infrastructure, and environment. As part of a set of studies on climate change impacts to California, this paper analyzes the potential impacts from projected sea-level rise if no actions are taken to protect the coast (a "no-adaptation scenario"), focusing on impacts to the state's population and infrastructure. Heberger et al. (2009) also covered effects on wetlands, costs of coastal defenses, and social and environmental justice related to sea-level rise. We analyzed the effect of a medium-high greenhouse gas emissions scenario (Special Report on Emissions Scenarios A2 in IPCC 2000) and included updated projections of sea-level rise based on work by Rahmstorf (Science 315(5810): 368, 2007). Under this scenario, sea levels rise by 1.4 m by the year 2100, far exceeding historical observed water level increases. By the end of this century, coastal flooding would, under this scenario, threaten regions that currently are home to approximately 480,000 people and $100 billion worth of property. Among those especially vulnerable are large numbers of low-income people and communities of color. A wide range of critical infrastructure, such as roads, hospitals, schools, emergency facilities, wastewater treatment plants, and power plants will also be at risk. Sea-level rise will inevitably change the character of California's coast; practices and policies should be put in place to mitigate the potentially costly and life-threatening impacts of sea-level rise.
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Economics and Climate Change: Integrated Assessment in a Multi-Region World
John Hassler & Per Krusell
NBER Working Paper, January 2012
Abstract:
This paper develops a model that integrates the climate and the global economy --- an integrated assessment model --- with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full stochastic general-equilibrium version of RICE, Nordhaus's pioneering multi-region integrated assessment model. Like RICE, our model features traded fossil fuel but otherwise has no markets across regions --- there is no insurance nor any intertemporal trade across them. The extreme form of market incompleteness is not fully realistic but arguably not a decent approximation of reality. Its major advantage is that, along with a set of reasonable assumptions on preferences, technology, and nature, it allows a closed-form model solution. We use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil-consuming and -producing regions. We show that, surprisingly, only taxes on oil producers can improve the climate: taxes on oil consumers have no effect at all. The calibrated model suggests large differences in views on climate policy across regions.
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Effect of climate change on field crop production in California's Central Valley
Juhwan Lee, Steven De Gryze & Johan Six
Climatic Change, December 2011, Pages 335-353
Abstract:
Climate change under various emission scenarios is highly uncertain but is expected to affect agricultural crop production in the 21st century. However, we know very little about future changes in specific cropping systems under climate change in California's Central Valley. Biogeochemical models are a useful tool to predict yields as it integrates crop growth, nutrient dynamics, hydrology, management and climate. For this study, we used DAYCENT to simulate changes in yield under A2 (medium-high) and B1 (low) emission scenarios. In total, 18 climate change predictions for the two scenarios were considered by applying different climate models and downscaling methods. The following crops were selected: alfalfa (hay), cotton, maize, winter wheat, tomato, and rice. Sunflower was also selected because it is commonly included in rotations with the other crops. By comparing the 11-year moving averages for the period 1956 to 2094, changes in yield were highly variable depending on the climate change scenarios across times. Furthermore, yield variance for the crops increased toward the end of the century due to the various degrees of climate model sensitivity. This shows that future climate, suggested by each of the emission scenarios, has a broad range of impacts on crop yields. Nevertheless, there was a general agreement in trends of yield changes. Under both A2 and B1, average modeled cotton, sunflower, and wheat yields decreased by approximately 2% to 9% by 2050 compared to the 2009 average yields. The other crops showed apparently no decreases in yield for the period 2010-2050. In comparison, all crop yields except for alfalfa significantly declined by 2094 under A2, but less under B1. Under A2, yields decreased in the following order: cotton (25%) > sunflower (24%) > wheat (14%) > rice (10%) > tomato and maize (9%). Under A2 compared to B1, the crop yield further decreased by a range of 2% (alfalfa) to 17% (cotton) by 2094, with more variation in yield change in the southern counties than the northern counties. The CO2 fertilization effects were predicted to potentially offset these yield declines (>30%) but may be overestimated. Our results suggest that climate change will decrease California crop yields in the long-term, except for alfalfa, unless greenhouse gas emissions and resulting climate change is curbed and/or adaptation of new management practices and improved cultivars occurs.
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Human activity and anomalously warm seasons in Europe
Nikolaos Christidis et al.
International Journal of Climatology, February 2012, Pages 225-239
Abstract:
Seasonal mean temperatures averaged over the European region have warmed at a rate of 0.35-0.52 K/decade since 1980. The last decade has seen record-breaking seasonal temperatures in Europe including the summer of 2003 and the spring, autumn, and winter of 2007. Previous studies have established that European summer warming since the early twentieth century can be attributed to the effects of human influence. The attribution analysis described here employs temperature data from observations and experiments with two climate models and uses optimal fingerprinting to partition the climate response between its anthropogenic and natural components. These responses are subsequently combined with estimates of unforced climate variability to construct distributions of the annual values of seasonal mean temperatures with and without the effect of human activity. We find that in all seasons, anthropogenic forcings have shifted the temperature distributions towards higher values. We compute the associated change in the likelihood of having seasons whose temperatures exceed a pre-specified threshold. We first set the threshold equal to the seasonal temperature observed in a particular year to assess the effect of anthropogenic influences in past seasons. We find that in the last decade (1999-2008) it is extremely likely (probability greater than 95%) that the probability has more than doubled under the influence of human activity in spring and autumn, while for summer it is extremely likely that the probability has at least quadrupled. One of the two models employed in the analysis indicates it is extremely likely the probability has more than doubled in winter too. We also compute the change in probability over a range of temperature thresholds which enables us to provide updates on the likely change in probability attributable to human influence as soon as observations become available. Such near-real time information could be very useful for adaptation planning.
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Anders Levermann et al.
Climatic Change, February 2012, Pages 845-878
Abstract:
We discuss potential transitions of six climatic subsystems with large-scale impact on Europe, sometimes denoted as tipping elements. These are the ice sheets on Greenland and West Antarctica, the Atlantic thermohaline circulation, Arctic sea ice, Alpine glaciers and northern hemisphere stratospheric ozone. Each system is represented by co-authors actively publishing in the corresponding field. For each subsystem we summarize the mechanism of a potential transition in a warmer climate along with its impact on Europe and assess the likelihood for such a transition based on published scientific literature. As a summary, the 'tipping' potential for each system is provided as a function of global mean temperature increase which required some subjective interpretation of scientific facts by the authors and should be considered as a snapshot of our current understanding.
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Is There an Energy Efficiency Gap?
Hunt Allcott & Michael Greenstone
NBER Working Paper, January 2012
Abstract:
Many analysts have argued that energy efficiency investments offer an enormous "win-win" opportunity to both reduce negative externalities and save money. This overview paper presents a simple model of investment in energy-using capital stock with two types of market failures: first, uninternalized externalities from energy consumption, and second, forces such as imperfect information that cause consumers and firms not to exploit privately-profitable energy efficiency investments. The model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision, energy efficiency subsidies and standards may be merited. We therefore review the empirical work on the magnitude of profitable unexploited energy efficiency investments, a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured. These problems notwithstanding, recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering-accounting studies suggest. Finally, there is tremendous opportunity and need for policy-relevant research that utilizes randomized controlled trials and quasi-experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs.
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Yiping Wu, Shuguang Liu & Omar Abdul-Aziz
Climatic Change, February 2012, Pages 977-1003
Abstract:
Increased atmospheric CO2 concentration and climate change may significantly impact the hydrological and meteorological processes of a watershed system. Quantifying and understanding hydrological responses to elevated ambient CO2 and climate change is, therefore, critical for formulating adaptive strategies for an appropriate management of water resources. In this study, the Soil and Water Assessment Tool (SWAT) model was applied to assess the effects of increased CO2 concentration and climate change in the Upper Mississippi River Basin (UMRB). The standard SWAT model was modified to represent more mechanistic vegetation type specific responses of stomatal conductance reduction and leaf area increase to elevated CO2 based on physiological studies. For estimating the historical impacts of increased CO2 in the recent past decades, the incremental (i.e., dynamic) rises of CO2 concentration at a monthly time-scale were also introduced into the model. Our study results indicated that about 1-4% of the streamflow in the UMRB during 1986 through 2008 could be attributed to the elevated CO2 concentration. In addition to evaluating a range of future climate sensitivity scenarios, the climate projections by four General Circulation Models (GCMs) under different greenhouse gas emission scenarios were used to predict the hydrological effects in the late twenty-first century (2071-2100). Our simulations demonstrated that the water yield would increase in spring and substantially decrease in summer, while soil moisture would rise in spring and decline in summer. Such an uneven distribution of water with higher variability compared to the baseline level (1961-1990) may cause an increased risk of both flooding and drought events in the basin.