John Hassler, Per Krusell, and Conny Olovsson. March, 2018

Syllabus: The Climate and the Economy

Course purpose: obtain an understanding for the interrelation between climate change and the global economy. The course will give and understanding of the basic issues, tools to analyze them, and deliver assessments of various forms of policy, both qualitatively and quantitatively. This will all be accomplished from a joint natural-science and economics perspective. The course should be particularly valuable for (current and future) policymakers in the area of environment and climate change but also for anyone else with an interest in these areas.

Examination: there is a final exam and there is a set of homeworks that also count toward the final grade. Your final grade is the best score of the following two: (i) the final exam score; (ii) 0.8 times the final exam score plus 0.2 times the homework score. (Both the final exam and the homework sets have a maximum score of 100.)

Readings: the main reading is a manuscript (kompendium) prepared for this course by the instructors.  A preliminary version is found at Mondo and at http://hassler-j.iies.su.se/courses/climate/Book170320.pdf. This may be updated along the way of the course. An introduction to climate economics is found at http://hassler-j.iies.su.se/PAPERS/Mistra5.pdf or in Swedish at http://hassler-j.iies.su.se/PAPERS/sns_analys_nr_14.pdf. Another useful text is from the recently published Handbook of Macroeconomics here

 

Other information: the lectures as well as problem set sessions will be given by Hassler, Krusell, and Olovsson.

Course content (each lecture lasts for 2 hrs):

1.       Overview (PK,CO,) (30 mins): goes over the course contents, including the two-way interaction between the economy and the climate and their effects on our citizens' welfare, “externalities" and a need for policy intervention, whether and why economics/economists are needed in this field, the RICE model, and a general aim to introduce the students to the debate on climate change. Discussion of course requirements etc.

2.        Growth theory and empirics (PK) (3:30 hrs): the Solow model, optimal growth, exogenous and endogenous technological change, the world income distribution.

3.       The natural science part (JH) (6 hrs): The greenhouse effects, energy budgets, the carbon cycle, climate modeling.  Readings at http://hassler-j.iies.su.se/courses/climate/ReadingsNaturalSci.html

4.       Externalities in public economics (CO) (3 hrs): first welfare theorem, taxes vs. other instruments, free-riding, coordination issues across countries.

5.       Natural resource economics (CO) (3 hrs): the Hotelling rule, the Dasgupta-Heal model,technical change of various sorts, backstop technology.

6.       Endogenous technical change (CO) (2hrs): how the economy accumulates technology and chooses between different kinds of technology, energy-related and other.

7.       Measuring damages (JH) (2 hrs): how it is done (bottom-up  vs.  reduced form, damage functions).

8.       A complete model (PK) (4 hrs): putting everything together into an “integrated assessment model" in order to analyze policy and make forecasts.

9.       WRAP UP.Discussion of the Stern report and the public debate; what of relevance was not covered in the course and what is the aim of current and future research?

Lecture Plan

 

Thu 22/3

13-15

C6

Overview + growth

CO, PK

Wed 28/3

15-17

A5137

Growth

PK

Wed 4/4

15-17

B3

Natural Science

JH

Fri 6/4

15-17

D416

Natural Science

JH

Thu 12/4

15-17

B3

Natural Science

JH

Tue 17/4

10-12

B5

Exercise 1 (Per)  + externalities

PK, CO

Fri 20/4

10-12

B5

Exercise 2 (John) + externalities

JH, CO

Mon 23/4

15-17

B3

Externalities, Growth

CO,PK

Wed 25/4

13-15

A5137

Natural Resources

CO

Fri 27/4

15-17

A5137

Natural Resources +Endogenous tech

CO

Fri 4/5

13-15

B5

Endogenous tech, damages

CO, JH

Tue 8/5

10-12

D416

Damages + exercise 3 (Conny)

JH,CO

Wed 16/5

15-17

A5137

A complete model

PK

Fri 18/5

15-17

A5137

A complete model

PK

Tue 22/5

15-17

D416

Exercise 4 (Conny, Per)

CO PK?

Thu 24/5

13-15

A5137

Reserve

?

Fri 25/5

13-15

D416

Exercise 5 (Per)

?

Mon 28/5

13-15

A5137

Wrap-up

PK,JH,CO