Climate change exam 2

Country-Specific Social Cost of Carbon (CSCC)

The CSCC quantifies the economic damages associated with an additional ton of carbon dioxide emitted within a specific country. It takes into account local economic conditions, environmental impacts, and social factors, providing a tailored estimate compared to the global Social Cost of Carbon (SCC).

Lorenz Curve

The Lorenz Curve is a graphical representation of income or wealth distribution within a population. It plots the cumulative percentage of total income received against the cumulative percentage of the population, illustrating inequality. A perfectly equal income distribution is represented by a 45-degree line.

Gini Coefficient

The Gini Coefficient is a statistical measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality). It is derived from the Lorenz Curve and is widely used to assess economic disparities.

Social Vulnerability

Social vulnerability refers to the degree to which a community is susceptible to harm from external stressors, including climate change, based on factors like socioeconomic status, health, access to resources, and social networks. It helps identify populations at greater risk.

Net Zero

Net zero refers to achieving a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere. It typically involves reducing emissions as much as possible and using measures such as carbon capture and storage or reforestation to offset any remaining emissions.

Command and Control Regulation

This type of regulation involves direct government mandates that specify how firms must operate, often setting limits on emissions or requiring specific technologies. It contrasts with market-based approaches and can be inflexible.

Performance Standard

Performance standards set specific limits on emissions or resource use that must be met by firms. Unlike technology standards, which dictate how to achieve compliance, performance standards focus on the outcomes.

Technology Standard

A technology standard mandates the use of specific technologies or methods to achieve compliance with environmental regulations. It aims to promote particular solutions but may limit flexibility for innovation.

Pigouvian Tax/Subsidy

A Pigouvian tax is levied on activities that generate negative externalities, such as pollution, to internalize the social costs. Conversely, a Pigouvian subsidy incentivizes activities that have positive externalities, encouraging beneficial behaviors.

Cap and Trade Regulation

Cap and trade is a market-based approach to controlling pollution by setting a cap on total emissions and allowing firms to buy and sell permits to emit greenhouse gases. It incentivizes reductions by allowing the market to determine the cost of compliance.

Double Dividend

The double dividend hypothesis suggests that implementing an environmental tax can generate two benefits: reducing environmental damage and increasing economic efficiency by using the tax revenues to reduce other taxes, such as income tax.

Triple Dividend

The triple dividend extends the double dividend concept by adding a third benefit: improvements in health and well-being from reduced pollution, alongside environmental and economic gains.

Carbon Fee & Dividend

A carbon fee and dividend is a policy where a fee is charged for carbon emissions, and the revenue generated is distributed back to citizens as a dividend. This approach aims to encourage emissions reductions while providing financial support to households.

Border Tax Adjustment

Border tax adjustments are tariffs imposed on imported goods based on their carbon emissions, aimed at leveling the playing field for domestic industries subject to carbon pricing while encouraging global emissions reductions.

Regressive Taxation

Regressive taxation refers to a tax system where lower-income individuals pay a higher percentage of their income in taxes compared to wealthier individuals. This can disproportionately affect vulnerable populations.

Vertical Equity

Vertical equity is the principle that individuals with greater ability to pay (higher income or wealth) should contribute more to taxation than those with lesser ability to pay. It aims for a fair distribution of tax burdens.

Horizontal Equity

Horizontal equity holds that individuals with similar ability to pay should owe similar amounts in taxes. It emphasizes fairness in tax treatment based on equivalent circumstances.

Carbon Credit

A carbon credit is a permit that allows the holder to emit a certain amount of carbon dioxide or other greenhouse gases. One credit typically equals one ton of CO2. These credits can be traded in emissions markets.

Carbon Offset

A carbon offset represents a reduction in greenhouse gas emissions (or an increase in carbon sequestration) that can be used to compensate for emissions produced elsewhere. Offsets can come from projects like reforestation or renewable energy.

Derived Demand

Derived demand refers to the demand for a good or service that is not sought for its own sake but rather for the value it provides in producing another good or service. In environmental contexts, it often relates to the demand for natural resources based on their use in production processes.

Additionality

Additionality refers to the principle that a carbon offset or mitigation project must result in emissions reductions that would not have occurred in the absence of the project. This ensures that the benefits are truly incremental.

Adaptation

Adaptation involves adjusting practices, processes, or structures to minimize the damage caused by climate change and its impacts. This includes measures like building flood defenses or developing drought-resistant crops.

Maladaptation

Maladaptation refers to actions taken to respond to climate change that inadvertently lead to increased vulnerability or negative consequences. For example, reinforcing coastal structures may lead to habitat loss or increased flooding in other areas.

Cost-Benefit Analysis

A cost-benefit analysis evaluates the economic pros and cons of a decision or project by comparing the total expected costs against the total expected benefits, helping policymakers make informed choices.

Green Infrastructure

Green infrastructure refers to natural or semi-natural systems that provide environmental benefits, such as stormwater management, urban cooling, and biodiversity support. Examples include parks, green roofs, and wetlands.

Common Resource

A common resource is a resource that is non-excludable but rivalrous, meaning that it is accessible to all but can be depleted through use, such as fisheries or groundwater.

Total Economic Value (TEV) of Water

TEV of water encompasses all the benefits derived from water, including direct uses (drinking, irrigation), indirect uses (ecosystem services), and non-use values (cultural significance). Estimating TEV is complex due to its multifaceted nature.

Use Value

Use value refers to the value derived from the direct use of a resource, such as drinking water or recreational activities.

Option Value

Option value represents the value placed on the potential future use of a resource, recognizing that individuals may want to preserve resources for possible future benefits.

Non-Use Value

Non-use value captures the value individuals place on resources that they do not intend to use directly, such as preserving a species for future generations or maintaining ecosystem integrity.

Economies of Scale

Economies of scale occur when the cost per unit of production decreases as the volume of production increases, often due to factors like improved efficiency or bulk purchasing.

Climate Migration

Climate migration refers to the movement of individuals or communities due to changes in climate conditions, such as extreme weather events, sea-level rise, or resource scarcity. It can be internal or international.

Property Buyout

Property buyout involves purchasing land or properties in high-risk areas, often due to climate-related threats (e.g., flooding). This strategy aims to reduce vulnerability and facilitate relocation, allowing communities to adapt to changing conditions.

Market failure: A situation where the allocation of goods and services is not efficient, often leading to a loss of economic welfare. This can occur due to externalities, public goods, monopolies, and information asymmetries.

Deadweight loss: The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved in a market, often due to taxes, subsidies, or other market distortions.

Producer surplus: The difference between the amount producers are willing to accept for a good or service and the actual amount they receive. It represents the benefit to producers from selling at a market price higher than their minimum acceptable price.

Consumer surplus: The difference between the maximum price consumers are willing to pay for a good or service and the actual price they pay. It measures the benefit to consumers from purchasing at a lower price.

Efficiency: A state in which resources are allocated in a way that maximizes total surplus (consumer plus producer surplus) and no further improvements can be made without making someone worse off.

Externality: A cost or benefit incurred or received by a third party who is not directly involved in a transaction. Externalities can be positive (benefits) or negative (costs), affecting others outside the market.

Command and control regulation: A regulatory approach where the government sets specific limits or standards for pollution or resource use, often mandating specific technologies or practices.

Pigouvian tax: A tax imposed on activities that generate negative externalities, intended to correct market outcomes by aligning private costs with social costs.

Pigouvian subsidy: A subsidy provided to encourage activities that generate positive externalities, helping to increase the level of these beneficial activities.

Excludability: The ability to prevent individuals who do not pay for a good or service from using it. Excludable goods can be limited to those who pay for them.

Rivalry: A characteristic of a good where one person's consumption reduces the availability for others. Rival goods cannot be consumed simultaneously by multiple people.

Public good: A good that is non-excludable and non-rivalrous, meaning that it is available for everyone to use without diminishing its availability (e.g., national defense, clean air).

Common resource: A resource that is non-excludable but rivalrous, leading to potential overuse (e.g., fisheries, forests). Individuals can use the resource, but their use reduces its availability for others.

Kaya identity: An equation that relates carbon emissions to population, GDP per capita, energy intensity, and carbon intensity, illustrating the factors that contribute to greenhouse gas emissions.

Life-cycle analysis: A method for assessing the environmental impacts of a product or service throughout its entire life cycle, from production to disposal, including resource extraction, manufacturing, use, and end-of-life.

Non-use value: The value derived from the existence of a resource, even if it is not used or consumed, including values such as bequest value (preserving for future generations) and intrinsic value (value for its own sake).

Stated preference method: A survey-based approach used to elicit individuals' values for non-market goods and services by asking them about their preferences in hypothetical scenarios.

Revealed preference method: An approach that infers individuals' values based on their actual choices and behaviors in the market, providing insights into the value of non-market goods.

Present value: The current value of a future sum of money or stream of cash flows, discounted at a specific rate to account for the time value of money.

Discount rate: The interest rate used to discount future cash flows to their present value, reflecting the opportunity cost of capital and the time preference for money.

Social cost of carbon: An estimate of the economic costs associated with an incremental increase in carbon dioxide emissions, representing the monetary value of the damages from climate change impacts.

Integrated assessment model: A tool that combines climate science, economics, and policy analysis to assess the impacts of climate change and evaluate different mitigation strategies.

Monte Carlo analysis: A statistical technique used to model the probability of different outcomes in processes that are uncertain, often involving repeated random sampling to obtain distributions of possible results.

Benefit-cost analysis: A systematic approach to estimating the strengths and weaknesses of alternatives in order to determine the best option by comparing the benefits of an action to its costs.

Counterfactual: A scenario that considers what would happen if a particular event did not occur or if conditions were different, often used in causal analysis to understand impacts.

Value of a statistical life: An estimate of the monetary value associated with reducing the risk of death, often used in cost-benefit analyses for health and safety regulations.

Ecosystem services: The benefits that humans derive from ecosystems, including provisioning (food, water), regulating (climate regulation, flood control), supporting (nutrient cycling), and cultural (recreational, aesthetic) services.

Risk: The potential for loss or harm associated with uncertain events, typically quantified as the probability of an event occurring multiplied by the impact of that event.

Ambiguity: A form of uncertainty where the probability of outcomes is unknown or not well defined, making it difficult to assess risks accurately.

Expected value: A calculated average of all possible outcomes of a decision or event, weighted by their probabilities, providing a measure of the central tendency of uncertain events.

Risk aversion: A preference for certainty over uncertainty, where individuals prefer outcomes that are more certain even if they have a lower expected value.

Certainty Equivalent: The guaranteed amount of money that an individual would view as equally desirable as a risky prospect, reflecting their risk preference.

Risk Premium: The additional return expected by an investor for taking on risk compared to a risk-free asset, compensating for the uncertainty associated with a risky investment.

Fat tail: A probability distribution that has a higher likelihood of extreme events than normal distributions, complicating risk assessments by potentially underestimating the frequency of severe outcomes.

Tipping point: A threshold beyond which a relatively small change can lead to significant and often irreversible effects in a system, such as climate tipping points that can trigger abrupt climate changes.

Precautionary principle: An approach that advocates for proactive action in the face of uncertainty, suggesting that preventive measures should be taken to avoid potential harm to the public or the environment even if some cause-and-effect relationships are not fully established.