March, 2021
Teachers:
John Hassler john@hassler.se
Per Krusell Per.krusell@iies.su.se
Conny Olovsson conny.olovsson@riksbank.se
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.
Corona: Due to the regulation against the
Corona virus, classes will be held via Zoom. We encourage all students to
participate with sound and video. We encourage active participation and
interaction. We are optimistic this will work, but hope everyone understands
this is new to most of us.
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 http://hassler-j.iies.su.se/courses/climate/Book200320.pdf.
This may be updated along the way of the course. For the natural science part
(6 first hours) we will use the report I, Per and
others wrote for SNS which now is translated http://hassler-j.iies.su.se/SNS/KR2020English.pdf
Chapter 2, in
particular the box starting at page 55 contains the material on climate science.
The content in the compendium is very similar, but the notation is partly a
little different. The SNS- report also exists in Swedish
Additional reading is:
·
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.
·
A relatively non-technical paper on climate
economics is a paper in Economic
Policy.
·
Another useful text is from the recently
published Handbook of Macroeconomics here.
Course
content (each lecture lasts for 2 hrs):
1.
Overview (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.
The
natural science part (JH) (6 hrs): The greenhouse
effects, energy budgets, the carbon cycle, climate modeling.
3.
Growth theory and empirics (PK) (3:30 hrs): the Solow model, optimal growth, exogenous and
endogenous technological change, the world income distribution.
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?