Introduction to Climate Change and Economic System

• Lecture 1 Module: BUS368 The Political Economy of Global Environmental Change

Course Details

• Course Title: The Political Economy of Global Environmental Change

• Module Code: BUS368

• Lecturer: Lilit Popoyan (Email: l.popoyan@qmul.ac.uk)

• Meeting Schedule: Tuesdays, 16:00-18:00, Peter Landin: PL-302

• Course Material: Available online at QMPlus

• Office Hours: Tuesdays from 14:30 to 15:30, Room 2.35, Francis Bancroft Building

About the Lecturer

• Position: Lecturer at QMUL, School of Business and Management

• Affiliated Researcher: Institute of Economics, Scuola Superiore Sant’Anna, Italy

• Lecturer in Money and Banking: New York University (NYU)

• Research Interests:

  • Monetary Economics

  • Financial Regulations

  • Macro-prudential Policy and Systemic Risk

  • Climate Change and Economic Dynamics

Aim of the Course

• Main Aim: Understand climate-economy interactions

• Research Questions:

  • Present and future economic impacts of climate change?

  • Macro-financial implications of low-carbon transition?

  • Optimal climate mitigation/adaptation strategies?

• Functional Objectives:

  • Expand knowledge on empirical evidence, theories, and key facts

  • Familiarize with current scientific/policy research focused on climate and economic transition

  • Develop an original critical analysis

Course Overview

1. Introduction and big picture on Climate Change and Economic System (W1)

2. Drivers, impacts, and scenarios of Climate Change (W2)

3. Socio-economic impact of Climate Change scenarios (W3)

4. Decarbonization of the global economic system (W4)

5. Climate-related policies and commitments (W5)

6. Climate-related financial risks (W6)

7. Climate-related macro-financial risks (W8)

8. Climate change and the monetary system (W9)

9. Just transition with a guest lecturer (W10)

10. Policy institutions addressing Climate Change (W11)

Lecture Structure and Exams

• Structure: Eleven 2-hour frontal lectures (Lecture 11: online review session)

• Practice Quizzes and Exam Sessions to prepare for assessments

• Exams:

  • Midterm Exam: In-class (30 minutes), TBD, contributes 30% to final evaluation

  • Final Exam: In-class (2 hours written), TBD, contributes 70% to final evaluation

Students’ Role

• Attend classes as content is key to passing

• Participation encouraged: Diversity enriches learning

• Keep questions and comments interactive

• Arrive on time: Lectures start/end punctually

• Maintain focus: Limited use of laptops for note-taking only, no mobile phones

Main Readings

• No specific textbook, but suggested readings:

  • Economides et al., (2018) - "The Economics of Climate Change" (free on QMPlus)

  • Tol, R. (2019) - "Climate Economics", 2nd edition (QMPlus)

  • Keohane and Olmstead (2016) - "Markets and the Environment", 2nd edition (QMPlus)

• Key Reading: IPCC Assessment Report 6

Key Reading Resource: IPCC AR6

• Produced by UN Intergovernmental Panel on Climate Change (IPCC)

• Aims to assess knowledge on climate change and societal responses

• Key Features:

  • Overarching periodic Assessment Reports (first in 1990, latest AR6 - 2021-22)

  • Three Working Groups:

    • WGI: Physical science of climate change

    • WGII: Climate impacts and adaptation options

    • WGIII: Climate mitigation options

• Each group publishes:

  • Summary for Policy-Makers (SPM)

  • Technical Summary (TS)

  • Full report with focused chapters

Discussion Questions

• What comes to mind regarding "climate change"?

• What are perceived main causes of climate change?

• How does climate change impact global economies and societies?

Climate System Overview

• Climate System Definition: Interconnected system including atmosphere, water, ice, land, and ecosystems

• Existence and evolution precede human activity

• Rapid changes observed, primarily anthropogenic in origin

• Climate Definition (IPCC AR6): Mean statistical description over 30 years, encompassing variability

Climatic Variables of Interest

• Temperature: Mean global temperature, changes relative to baseline, GHG impact on energy balance

• Greenhouse Gas Concentrations: Key GHGs include CO2, CH4, N2O; affects warming

• Hydrological Dynamics: Precipitation patterns, extreme weather events necessary for life

Studying Climate

• Methods:

  • Paleoclimatology using tree rings, sediments, etc.

  • Instrumental observation (surface, weather balloons, satellites)

  • Dynamic modeling for future projections (CMIP)

Understanding Climate Change Dynamics

• Recent decades show rapid changes: Unprecedented temperature increases (1.09°C since 1850-1900)

• Other changes include sea level rise, increased extreme weather

• Policy consensus: Limit warming to below 1.5-2°C

Anthropogenic Drivers of Climate Change

• Growth in GHG emissions primarily from human activities

• Major sources of GHGs: CO2 from fossil fuels, CH4 from livestock and waste, N2O from fertilizers

Adaptation to Climate Change

Examples

• Infrastructure developments (e.g., sea walls)

• Market adaptation (business relocations)

Policies and Challenges

• Government investment in adaptation infrastructure

• Many adaptation measures have long-term viability issues

Mitigation Necessity

• Adaptation alone insufficient; emission reductions are essential

Mitigation Strategies

• Goal: Achieve atmospheric GHG stabilization

• Main strategies include:

  • Reducing emissions

  • Sequestering GHGs (natural and technological methods)

Global Decarbonization Project

• Shift from carbon-based energy to carbon-free technologies

  • Examples: Transition from coal to solar, gasoline to electric vehicles

• Historical precedents exist, but urgency and societal factors complicate transition

Implementing Transition Policies

• Legal/regulatory frameworks needed to guide transition

• Encouragement of behavioral changes in consumption, investments

• Essential focus on carbon pricing and financial policies

Risks of Rapid Transition

• Possible disruptions for firms/countries reliant on fossil fuels

• Potential financial instability; research focus on transition risk

Collaborative Efforts in Climate Macro & Finance

• Involvement of climate scientists, economists, and multi-disciplinary teams

• Central banks and financial authorities emerging as key players in climate finance

Role of Economists

• Investigate socio-economic impacts, financing low-carbon transitions, effective policies

• Utilize methods such as econometrics and behavioral analysis

Economy-Climate Interactions

• Interplay between economic activities and climate dynamics impacting broader societal functions

Investment Behavior Focus

• Explore investment patterns in capital stock vs R&D

• Consider uncertainty and various economic perspectives during decision-making

Financial System in Transition

• External financing is crucial for facilitating green investments

• Various actors play significant roles in capital flows and investment strategies

Concluding Remarks

• Complex but crucial questions on climate adaptation/mitigation and economic viability

• Emphasize interdisciplinary research and remain engaged in course materials

• Upcoming Lecture: Drivers, Impacts, Scenarios of Climate Change

Questions

• For inquiries, contact: I.popoyan@qmul.ac.uk