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Campiglio E.,Grantham Research Institute
Ecological Economics | Year: 2016

It is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low-carbon investment. However, as this paper argues, carbon pricing in itself may not be sufficient. This is due to the existence of market failures in the process of creation and allocation of credit that may lead commercial banks - the most important source of external finance for firms - not to respond as expected to price signals. Under certain economic conditions, banks would shy away from lending to low-carbon activities even in the presence of a carbon price. This possibility calls for the implementation of additional policies not based on prices. In particular, the paper discusses the potential role of monetary policies and macroprudential financial regulation: modifying the incentives and constraints that banks face when deciding their lending strategy - through, for instance, a differentiation of reserve requirements according to the destination of lending - may fruitfully expand credit creation directed towards low-carbon sectors. This seems to be especially feasible in emerging economies, where the central banking framework usually allows for a stronger public control on credit allocation and a wider range of monetary policy instruments than the sole interest rate. © 2015 Elsevier B.V.

Zenghelis D.,Grantham Research Institute
Wiley Interdisciplinary Reviews: Climate Change | Year: 2014

Macroeconomic conditions make this a relatively favorable time to kick-start investments necessary to transition to a resource-efficient economy. There is no lack of private money, just a perceived lack of opportunity. Resource costs are low and the potential to crowd out alternative investment and employment is greatly reduced. It is often argued that the short-term macroeconomic merit of an investment, in terms of what constitutes a good economic stimulus, can be judged against established criteria. These include tests on whether an investment is timely, temporary, and targeted. Although these are important, the evidence presented here suggests that a more important criterion for a sustainable economic impact is the ability to generate private sector confidence in profitable and enduring new markets. The world is likely to transition to a resource-efficient, low-carbon economy over this century and managing this transition has early pay-offs. Clear and credible green policies have the potential restore confidence and generate growth. Providing credible early incentives to invest in resource-efficiency could generate investment and growth in the long and the short run. © 2013 John Wiley & Sons, Ltd.

Fankhauser S.,Grantham Research Institute
Wiley Interdisciplinary Reviews: Climate Change | Year: 2010

Policy interest in the cost of adaptation is growing, but compared to the mitigation literature adaptation cost research is still in its infancy. Global adaptation cost estimates from more recent studies range from around $25 billion a year to well over $100 billion by 2015-2030. The wide range is symptomatic of the poor state of knowledge. Important knowledge gaps remain both in terms of scope (whether all relevant impacts are covered) and depth (whether for a given impact all relevant adaptation options have been considered). The omissions introduce biases in both directions, upward and downward, but it is likely that adaptation costs have been underestimated so far. Adaptation is only one part of the overall response to (and therefore the costs of) climate change. The total burden of climate change consists of three elements: the costs of mitigation (reducing the extent of climate change), the costs of adaptation (reducing the impact of change), and the residual impacts that can be neither mitigated nor adapted to. The annual adaptation cost estimates reviewed here cannot be directly compared with the other two cost elements. Making this comparison would require an integrated model that takes into account the total impact of greenhouse gases over their lifetime in the atmosphere. © 2010 John Wiley & Sons, Ltd.

Fankhauser S.,Grantham Research Institute | Martin N.,University of Cape Town
Energy Policy | Year: 2010

A levy on the Clean Development Mechanism and other carbon trading schemes is a potential source of finance for climate change adaptation. An adaptation levy of 2% is currently imposed on all CDM transactions which could raise around $500 million between now and 2012. This paper analyses the scope for raising further adaptation finance from the CDM, the economic costs (deadweight loss) of such a measure and the incidence of the levy, that is, the economic burden the levy would impose on the buyers and sellers of credits. We find that a levy of 2% could raise up to $2 billion a year in 2020 if there are no restrictions on demand. This could rise to $10 billion for a 10% tax. Restrictions on credit demand (called supplementarity limits, the requirement that most emission abatement should happen domestically) curtail trade volumes and consequently tax revenues. They also alter the economic impact of the CDM levy. Without supplementarity restrictions sellers (developing countries) bear two-thirds of the cost of the tax. If there are supplementarity limits they can pass on the tax burden to buyers (developed countries) more or less in full. Without supplementarity restrictions the distortionary effect of the levy (its deadweight loss) rises sharply with the tax rate. With them the deadweight loss is close to zero. © 2009 Elsevier Ltd. All rights reserved.

Fire photographer Tod Sudmeier gets hit with flying embers from strong winds at the Solimar brush fire that started early Saturday morning in Ventura County, California December 26, 2015. Data from the U.S. space agency NASA and the National Oceanic and Atmospheric Administration showed that in 2015 the average temperature across global land and ocean surfaces was 1.62 degrees Fahrenheit (0.90 Celsius) above the 20th century average, surpassing 2014’s previous record by 0.29 F (0.16 C). Scientists at the United Kingdom's Met Office and East Anglia’s Climatic Research Unit also published data on Wednesday confirming the U.S. agencies findings. This was the fourth time a global temperature record has been set this century, the agencies said in a summary of their annual report. “2015 was remarkable even in the context of the larger, long-term warming trend,” said Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies. The sharp increase in 2015 was driven in part by El Niño, a natural weather cycle in the Pacific that warms the ocean surface every two to seven years. But scientists say human activities – notably burning fossil fuels - were the main driver behind the rise. "The 2015 data continues the pattern we’ve seen over the last four to five decades," said Thomas Karl, director of NOAA’s National Centers for Environmental Information. The latest El Niño started in late 2015 and will last until spring 2016. It is among the strongest ever recorded but Schmidt and others say the weather phenomenon played just a supporting role in the earth's temperature rise. MORE THAN HALFWAY TO U.N. TARGET The 2015 data underscores the urgency of cutting greenhouse gas emissions if the world is to hold temperature increases to well below 2 degrees C, the target agreed to by more than 190 countries at climate talks in Paris last December, scientists said. With the global mean surface temperature in 2015 more than 1 degree C above late-19th century levels, the world is now halfway to the U.N. target, which would require stronger greenhouse gas emissions cuts. "This announcement should put pressure on governments to urgently implement their commitments to act against climate change, and to increase the strength of their planned cuts in annual emissions of greenhouse gases," said Bob Ward, policy director of the Grantham Research Institute on Climate Change and the Environment in London. In the United States, some Republican lawmaker and those skeptical of human-caused climate change have pointed to a slowdown in temperature rise after the last powerful El Niño in 1998 as a sign that climate change is not a serious problem. Republican presidential candidate Ted Cruz said in December at a hearing on climate change science that there had been no significant global warming for the past 18 years. NOAA's Karl said that with two back-to-back years of record warming, likely to be followed with a third next year, any doubts that have been raised by skeptical lawmakers about a pause in global warming can be put to rest. "There is no sign of a pause and slowing," Karl told reporters Wednesday, adding that it is a safe bet that 2016 will break the 2015 record given the long-term trend and the impact of El Niño in the first quarter of the year.

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