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ABSTRACTS of MIT Global Change Joint Program Publications

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REPORT SERIES     top of page     Report List [PDF: 380 kB]
      Report Nos. [ 1 | 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | 90 | 100 | 110 | 120 | 130 | 140 | 150]

Report 160. Analysis of U.S. Greenhouse Gas Tax Proposals       [Report PDF: 800 kB]  [Appendix: 1.6 MB]
Metcalf, G.E., S. Paltsev, J. M. Reilly, H.D. Jacoby & J. Holak April 2008 (59 p.)

The U.S. Congress is considering a set of bills designed to limit the nation's greenhouse gas (GHG) emissions. Several of these proposals call for a cap-and-trade system; others propose an emissions tax. This paper complements the analysis by Paltsev et al. (2007) of cap-and-trade bills and applies the MIT Emissions Prediction and Policy Analysis (EPPA) model to carry out an analysis of the tax proposals. Several lessons emerge from this analysis. First, a low starting tax rate combined with a low rate of growth in the tax rate will not reduce emissions significantly. Second, the costs of GHG reductions are reduced with the inclusion of non-CO2 gases in the carbon tax scheme. The costs of the Larson plan, for example, fall by 20% with inclusion of the other GHGs. Third, welfare costs of the policies can be affected by the rate of growth of the tax, even after controlling for cumulative emissions. Fourth, a carbon tax — like any form of carbon pricing — is regressive. However, general equilibrium considerations suggest that the short-run measured regressivity may be overstated. A portion of the carbon tax is passed back to workers, owners of equity, and resource owners. To the extent that relatively wealthy resource and equity owners bear some fraction of the tax burden, the regressivity will be reduced. Additionally, the regressivity can be offset with a carefully designed rebate of some or all of the revenue. Finally, the carbon tax bills that have been proposed or submitted are for the most part comparable to many of the carbon cap-and-trade proposals that have been suggested. Thus the choice between a carbon tax and cap-and-trade system can be made on the basis of considerations other than their effectiveness at reducing emissions over some control period. Either approach (or some hybrid of the two approaches) can be equally effective at reducing GHG emissions in the United States.

Report 159. Impact of sulfur and carbonaceous emissions from international shipping on aerosol distributions and direct radiative forcing       [PDF: 150 kB]
Wang, C., & D. Kim April 2008 (8 p.)

We describe in this report an effort using the MIT/NCAR three-dimensional aerosol-climate model to study the impact of ship emissions on chemical composition and radiative forcing of aerosols. Our results indicate that international shipping can be a non-negligible factor in determining the radiative forcing of aerosols over specific regions with intensive ship activities. These places include the European, eastern Asian, and American coastal regions. The global mean aerosol radiative forcing caused by the ship emissions ranges from -12.5 to -23 mW/m2, depending on whether the mixing between black carbon and sulfate is included in the model. However, over the aforementioned places, the radiative forcing resulting from ship emissions can be much more important in the total regional aerosol forcing.

Report 158. Analysis of the Coal Sector Under Carbon Constraints       [PDF: 1.2 MB]
McFarland, J.R., S. Paltsev & H.D. Jacoby April 2008 (35 p.)

Application of the MIT Emissions Prediction and Policy Analysis (EPPA) model to assessment of the future of coal under climate policy revealed the need for an improved representation of load dispatch in the representation of the electric sector. A new dispatching algorithm is described and the revised model is applied to an analysis of the future of coal use to 2050 and 2100 under alternative assumptions about CO2 prices, nuclear expansion and prices of natural gas. Particular attention is devoted to the potential role of coal-electric generation with CO2 capture and storage. An appendix provides a comparison of a subset of these results with and without the more detailed model of electric dispatch.

Report 157. Constraining Climate Model Parameters from Observed 20th Century Changes
Forest, C.E., P.H. Stone & A.P. Sokolov (forthcoming)

We present revised probability density functions for climate model parameters (effective climate sensitivity, the rate of deep-ocean heat uptake, and the strength of the net aerosol forcing) that are based on climate change observations from the 20th century. First, we compare observed changes in surface, upper-air, and deep-ocean temperature changes against simulations of 20th century climate in which the climate model parameters were systematically varied. The estimated 90% range of climate sensitivity is 2.0 to 5.0 K. The net aerosol forcing strength for the 1980s has 90% bounds of -0.70 to -0.27 W/m2. The rate of deep-ocean heat uptake corresponds to an effective diffusivity, Kv, with a 90% range of 0.04 to 4.1 cm2/s. Second, we estimate the effective climate sensitivity and rate of deep-ocean heat uptake for 11 of the IPCC AR4 AOGCMs. By comparing against the acceptable combinations inferred by the observations, we conclude that the rate of deep-ocean heat uptake for the majority of AOGCMs lie above the observationally based median value. This implies a bias in the predictions inferred from the IPCC models alone. This bias can be seen in the range of transient climate response from the AOGCMs as compared to that from the observational constraints.

Report 156. Estimating the Economic Cost of Sea-Level Rise       [PDF: 810 kB]
Sugiyama, M., R.J. Nicholls & A. Vafeidis April 2008 (40 p.)

To improve the estimate of economic costs of future sea-level rise associated with global climate change, this report generalizes the sea-level rise cost function originally proposed by Fankhauser, and applies it to a new database on coastal vulnerability developed as part of the Dynamic Interactive Vulnerability Assessment (DIVA) tool.
      An analytic expression for the generalized sea-level rise cost function is obtained to explore the effect of various spatial distributions of capital and nonlinear sea-level rise scenarios. With its high spatial resolution, the DIVA database shows that capital is usually highly spatially concentrated along a nation's coastline, and that previous studies, which assumed linear marginal capital loss for lack of this information, probably overestimated the fraction of a nation's coastline to be protected and hence protection cost. In addition, the new function can treat a sea-level rise scenario that is nonlinear in time. As a nonlinear sea-level rise scenario causes more costs in the future than an equivalent linear sea-level rise scenario, using the new equation with a nonlinear scenario also reduces the estimated damage and protection fraction through discounting of the costs in later periods.
      Numerical calculations are performed, applying the cost function to the DIVA database and socioeconomic scenarios from the MIT Emissions Prediction and Policy Analysis (EPPA) model. The effect of capital concentration substantially decreases protection cost and capital loss compared with previous studies, but not wetland loss. The use of a nonlinear sea-level rise scenario further reduces the total cost because the cost is postponed into the future.

Report 155. Potential Land Use Implications of a Global Biofuels Industry      [PDF: 950 kB] [see also Reprint 2007-14]
Gurgel, A., J. Reilly & S. Paltsev March 2008 (40 p.)

In this paper we investigate the potential production and implications of a global biofuels industry. We develop alternative approaches to the introduction of land as an economic factor input, in value and physical terms, into a computable general equilibrium framework. Both approach allows us to parameterize biomass production in a manner consistent with agro-engineering information on yields and a "second generation" cellulosic biomass conversion technology. We explicitly model land conversion from natural areas to agricultural use in two different ways: in one approach we introduce a land supply elasticity based on observed land supply responses and in the other we consider only the direct cost of conversion. We estimate biofuels production at the end of the century will reach 220 to 270 exajoules in a reference scenario and 320 to 370 exajoules under a global effort to mitigate greenhouse gas emissions. The version with the land supply elasticity allows much less conversion of land from natural areas, forcing intensification of production, especially on pasture and grazing land, whereas the pure conversion cost model leads to significant deforestation. The observed land conversion response we estimate may be a short-term response that does not fully reflect the effect of long-run pressure to convert land if rent differentials are sustained over 100 years. These different approaches emphasize the importance of reflecting the non-market value of land more fully in the modeling of the conversion decision.

Report 154. Modeling the Prospects for Hydrogen Powered Transportation Through 2100      [PDF: 240 kB]
Sandoval, R., V.J. Karplus, S. Paltsev & J. Reilly February 2008 (22 p.)

Hydrogen fueled transportation has been proposed as a low carbon alternative to the current gasoline powered fleet. Using a computable general equilibrium model of the world economy we explore the economic viability of hydrogen transportation in several different tax and carbon dioxide stabilization policy scenarios. We represent the capital, labor, fuel and other costs of hydrogen production and hydrogen powered vehicles in the economic model. We examine scenarios where the hydrogen fuel price and vehicle cost are varied over a wide range to evaluate what technology improvements would be needed, in terms of cost reductions, for hydrogen vehicles to penetrate the market. We consider scenarios with and without climate policy, and in competition with other reduced-carbon fuel substitutes, such as ethanol-blend fuels. We find that hydrogen-powered fuel-cell vehicles could make a significant contribution to de-carbonization of the transportation fuel cycle if production of hydrogen itself is not carbon-intensive. Cost targets needed for the technology to penetrate in the USA are such that the hydrogen fuel would need to be in the range of 1 to 1.7 times the 1997 price of gasoline and the vehicle mark-up above an average fuel cell automobile would need no more than 1.3 to 1.5 times an average conventional vehicle. At the lower end of these cost ranges, the vehicle fleet could be competitive by 2020 but at the upper end we would only see entry of the fleet toward the end of the century. High fuel taxes in Europe makes fuel-efficient hydrogen fuel cell technology more competitive there than in the USA. Along with cost reductions, these results assume that technical issues are solved and that market hurdles of establishing the fuel distribution system are overcome. For those involved in hydrogen vehicle research this analysis provides cost targets that would need to met and, given they are achieved, an idea of when vehicles could be competitive and under what conditions.

Report 153. Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the U.S.      [PDF: 2.8 MB]
Deschenes, O., & M. Greenstone August 2007 (41 p.)

This paper produces the first large-scale estimates of the U.S. health related welfare costs due to climate change. Using the presumably random year-to-year variation in temperature and two state of the art climate models, the analysis suggests that under a "business as usual" scenario climate change will lead to an increase in the overall U.S. annual mortality rate ranging from 0.5% to 1.7% by the end of the 21st century. These overall estimates are statistically indistinguishable from zero, although there is evidence of statistically significant increases in mortality rates for some subpopulations, particularly infants. As the canonical Becker-Grossman health production function model highlights, the full welfare impact will be reflected in health outcomes and increased consumption of goods that preserve individuals' health. Individuals' likely first compensatory response is increased use of air conditioning; the analysis indicates that climate change would increase U.S. annual residential energy consumption by a statistically significant 15% to 30% ($15 to $35 billion in 2006 dollars) at the end of the century. It seems reasonable to assume that the mortality impacts would be larger without the increased energy consumption. Further, the estimated mortality and energy impacts likely overstate the long-run impacts on these outcomes, since individuals can engage in a wider set of adaptations in the longer run to mitigate costs. Overall, the analysis suggests that the health related welfare costs of higher temperatures due to climate change are likely to be quite modest in the U.S.

Report 152. Energy Scenarios for East Asia: 2005-2025       [PDF: 430 kB]
Paltsev, S., & J. Reilly July 2007 (22 p.)

We describe several scenarios for economic development and energy use in East Asia based on the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. Historic indicators for Asian economic growth, energy use, and energy intensity are discussed. In the Baseline scenario, energy use in East Asia is projected to increase from around 120 EJ in 2005 to around 220 EJ in 2025. Alternative scenarios were developed to consider: (1) How fast might energy demand grow in East Asia and how does it depend on key uncertainties? (2) Do rising prices for energy affect growth in the region? (3) Would growth in East Asia have a substantial effect on world energy markets? (4) Would development of regional gas markets have substantial effects on energy use in the region and on gas markets in other regions? Briefly, we find that with more rapid economic growth, demand in East Asia could reach 430 EJ by 2025, almost twice the level in the Baseline; rising energy prices place a drag on growth of countries in the region of 0.2 to 0.6% per year; world crude oil markets could be substantially affected by demand growth in the region, with the price effect being as much as $25 per barrel in 2025; and development of regional gas markets could expand gas use in East Asia while leading to higher gas prices in Europe.

Report 151. Consequences of Considering Carbon/Nitrogen Interactions on the Feedbacks Between Climate and the Terrestrial Carbon Cycle       [PDF: 740 kB]
A.P. Sokolov, D.W. Kicklighter, J.M. Melillo, B. Felzer, C.A. Schlosser & T.W. Cronin June 2007 (22 p.)

A number of observational studies indicate that carbon sequestration by terrestrial ecosystems in a world with an atmosphere richer in carbon dioxide and a warmer climate depends on the interactions between the carbon and nitrogen cycles. However, most terrestrial ecosystem models being used in climate-change assessments do not take into account these interactions. Here we explore how carbon/nitrogen interactions in terrestrial ecosystems affect feedbacks to the climate system using the MIT Integrated Global Systems Model (IGSM) and its terrestrial ecosystems submodel, the Terrestrial Ecosystems Model (TEM). We use two versions of TEM, one with (standard TEM) and one without (carbon-only TEM) carbon/nitrogen interactions. Feedbacks between climate and the terrestrial carbon cycle are estimated by comparing model response to an increase in atmospheric CO2 concentration with and without climate change. Overall, for small or moderate increases in surface temperatures, the terrestrial biosphere simulated by the standard TEM takes up less atmospheric carbon than the carbon-only version, resulting in a larger increase in atmospheric CO2 concentration for a given amount of carbon emitted. With strong surface warming, the terrestrial biosphere simulated by the standard TEM may still become a carbon source early in the 23rd century.
      Our simulations also show that consideration of carbon/nitrogen interactions not only limits the effect of CO2 fertilization in the absence of climate change, but also changes the sign of the carbon feedback with climate change. In the simulations with the carbon-only version of TEM, surface warming significantly reduces carbon sequestration in both vegetation and soil, leading to a positive carbon-cycle feedback to the climate system. However, in simulations with standard TEM, the increased decomposition of soil organic matter with higher temperatures releases soil nitrogen to stimulate plant growth and carbon storage in the vegetation that is greater than the carbon lost from soil. As a result, sequestration of carbon in terrestrial ecosystems increases, in comparison to the fixed climate case, and the carbon cycle feedback to the climate system becomes negative for much of the next three centuries.

Report 150. U.S. Greenhouse Gas Cap-and-Trade Proposals: Application of a Forward-Looking Computable General Equilibrium Model       [PDF: 1.8 MB]
A. Gurgel, S. Paltsev, J. Reilly & G. Metcalf June 2007 (22 p.)

We develop a forward-looking version of the MIT Emissions Prediction and Policy Analysis (EPPA) model, and apply it to examine the economic implications of proposals in the U.S. Congress to limit greenhouse gas (GHG) emissions. We find that the abatement path and CO2-equivalent (CO2-e) price in the forward-looking model are quite similar to that of the recursive model, implying that the simulation of banking behavior in the recursive model by forcing the CO2-e price to rise at the discount rate approximates fairly well the banking result obtained with the forward-looking model. We find, however, that shocks in consumption path are smoothed out in the forward-looking model and that the lifetime welfare cost of GHG policy is lower than in the recursive model, results we would expect to find given that the forward-looking model can fully optimize over time. The forward-looking model allows us to explore issues for which it is uniquely well-suited, including revenue-recycling, early action crediting, and the role of a technology backstop. We find (1) capital tax recycling to be more welfare-cost reducing than labor tax recycling because of its long term effect on economic growth, (2) potentially substantial incentives for early action credits relative to emission levels in years after a policy is announced but before it is implemented that, however, when spread over the full horizon of the policy do not have a substantial effect on lifetime welfare cost or the CO2-e price, and (3) strong effects on estimates of near-term welfare costs depending on exactly how a backstop technology is represented, indicating the problematic aspects of focusing on short-term welfare costs in a forward-looking model unless there is some confidence that the backstop technology is realistically represented

Report 149 was revised and published in Energy Policy (Vol. 35, No. 11, pages 5370-5383). The published article is available as Reprint 2007-11. Report 149 is an earlier version of that article.

Report 149. Global Economic Effects of Changes in Crops, Pasture, and Forests due to Changing Climate, Carbon Dioxide, and Ozone       [PDF: 830 kB]
J. Reilly, S. Paltsev, B. Felzer, X. Wang, D. Kicklighter, J. Melillo, R. Prinn, M. Sarofim, A. Sokolov & C. Wang May 2007 (22 p.)

Multiple environmental changes will have consequences for global vegetation. To the extent that crop yields and pasture and forest productivity are affected there can be important economic consequences. We examine the combined effects of changes in climate, increases in carbon dioxide, and changes in tropospheric ozone on crop, pasture, and forest lands and the consequences for the global and regional economies. We examine scenarios where there is limited or little effort to control these substances, and policy scenarios that limit emissions of CO2 and ozone precursors. We find the effects of climate and CO2 to be generally positive, and the effects of ozone to be very detrimental. Unless ozone is strongly controlled damage could offset CO2 and climate benefits. We find that resource allocation among sectors in the economy, and trade among countries, can strongly affect the estimate of economic effect in a country. (© 2007 Elsevier)

Report 148. Relative Roles of Climate Sensitivity and Forcing in Defining the Ocean Circulation Response to Climate Change      [PDF: 3.2 MB]
J.R. Scott, A.P. Sokolov, P.H. Stone & M.D. Webster May 2007 (22 p.)

The response of the ocean's meridional overturning circulation (MOC) to increased greenhouse gas forcing is examined using a coupled model of intermediate complexity, including a dynamic 3D ocean subcomponent. Parameters are the increase in CO2 forcing (with stabilization after a specified time interval) and the model's climate sensitivity. In this model, the cessation of deep sinking in the north "Atlantic" (hereinafter, a "collapse"), as indicated by changes in the MOC, behaves like a simple bifurcation. The final surface air temperature (SAT) change, which is closely predicted by the product of the radiative forcing and the climate sensitivity, determines whether a collapse occurs. The initial transient response in SAT is largely a function of the forcing increase, with higher sensitivity runs exhibiting delayed behavior; accordingly, high CO2-low sensitivity scenarios can be assessed as a recovering or collapsing circulation shortly after stabilization, whereas low CO2-high sensitivity scenarios require several hundred additional years to make such a determination. We also systemically examine how the rate of forcing, for a given CO2 stabilization, affects the ocean response. In contrast with previous studies based on results using simpler ocean models, we find that except for a narrow range of marginally stable to marginally unstable scenarios, the forcing rate has little impact on whether the run collapses or recovers. In this narrow range, however, forcing increases on a time scale of slow ocean advective processes results in weaker declines in overturning strength and can permit a run to recover that would otherwise collapse.

Land ecosystems play a major role in the global cycles of energy, water, carbon and nutrients. A Global Land System (GLS) framework has been developed for the Integrated Global Systems Model Version 2 (IGSM2) to simulate the coupled biogeophysics and biogeochemistry of these ecosystems, as well as the interactions of these terrestrial processes with the climate system. The GLS framework has resolved a number of water and energy cycling deficiencies and inconsistencies introduced in IGSM1. In addition, a new representation of global land cover and classification as well as soil characteristics has been employed that ensures a consistent description of the global land surface amongst all the land components of the IGSM2. Under this new land cover classification system, GLS is run for a mosaic of land cover types within a latitudinal band defined by the IGSM2 atmosphere dynamics and chemistry sub-model. The GLS shows notable improvements in the representation of land fluxes and states of water and energy over the previous treatment of land processes in the IGSM1. In addition, the zonal features of simulated carbon fluxes as well as key trace gas emissions of methane and nitrous oxide are comparable to estimates based on higher resolution models constrained by observed climate forcing. Given this, the GLS framework represents a key advance in the ability of the IGSM to faithfully represent coupled terrestrial processes to the climate system, and is well poised to support more robust two-way feedbacks of natural and managed hydrologic and ecologic systems with the climate and socio-economic components of the IGSM2.

Report 146. Assessment of U.S. Cap-and-Trade Proposals       [Summary: 150kB]   [Report: 3.6 MB]   [Appendix C: 1 MB] [Appendix D: 650 kB]  
S. Paltsev, J. Reilly, H. Jacoby, A. Gurgel, G. Metcalf, A. Sokolov & J. Holak April 2007 (95 p.) [Appendix D: February 2008]

The MIT Emissions Prediction and Policy Analysis model is applied to an assessment of a set of cap-and-trade proposals being considered by the U.S. Congress in spring 2007. The bills specify emissions reductions to be achieved through 2050 for the standard six-gas basket of greenhouse gases. They fall into two groups: one specifies emissions reductions of 50% to 80% below 1990 levels by 2050; the other establishes a tightening target for emissions intensity and stipulates a time path for a "safety valve" limit on the emission price that approximately stabilizes U.S. emissions at the 2008 level. A set of three synthetic emissions paths are defined that span the range of stringency of these proposals, and these "core" cases are analyzed for their consequences in terms of emissions prices, effects on energy markets, welfare cost, the potential revenue generation if allowances are auctioned and the gains if permit revenue were used to reduce capital or labor taxes.
   Initial period prices for the first group of proposals, in carbon dioxide equivalents, are estimated between $30 and $50 per ton CO2-e depending on where each falls in the 50% to 80% range, with these prices rising by a factor of four by 2050. Welfare costs are less than 0.5% at the start, rising in the most stringent case to near 2% in 2050. If allowances were auctioned these proposals could produce revenue between $100 billion and $500 billion per year depending on the case. Emissions prices for the second group, which result from the specified safety-valve path, rise from $7 to $40 over the study period, with welfare effects rising from near zero to approximately a 0.5% loss in 2050. Revenue in these proposals depends on how many allowances are freely distributed.
   To analyze these proposals assumptions must be made about mitigation effort abroad, and simulations are provided to illuminate terms-of-trade effects that influence the emissions prices and welfare effects, and even the environmental effectiveness, of U.S. actions. Sensitivity tests also are provided of several of the design features imposed in the "core" scenarios including the role of banking, the specification of less than complete coverage of economic sectors, and the development of international permit trading. Also, the effects of alternative assumptions about nuclear power development are explored. Of particular importance in these simulations is the role of biofuels, and analysis is provided of the implications of these proposals for land use and agriculture.
   Finally, the U.S. proposals, and the assumptions about effort elsewhere, are extended to 2100 to allow exploration of the potential role of these bills in the longer-term challenge of reducing climate change risk. Simulations using the MIT Integrated System Model show that the 50% to 80% targets are consistent with global goals of atmospheric stabilization at 450 to 550 ppmv CO2 but only if other nations, including the developing countries, follow.

Appendix D (added February 2008) [PDF: 416 kB]
Since this report was completed there has been an effort in the Senate to draft legislation that would unify support behind common legislation. One result is the Climate Security Act (S. 2191) sponsored by Senators Lieberman and Warner. In this appendix we provide an analysis of the Act's provisions as they relate to key features governing the cap-and-trade system, comparing results with the analysis in the body of the report. The analysis does not consider other features of the bill, such as the effects of how auction revenue is used, which could affect the overall cost estimates. Some of these other features are discussed, but not quantitatively analyzed, in Section D4. Also, as noted in the body of the report many uncertainties exist in projecting policy costs of an emissions constraint, including the rate of economic and emissions growth, the evolution of conditions abroad, the potential cost and availability of new technology, and different ways of interpreting the provisions of the legislation. The body of the report investigates the effects of varying some of these conditions, but we do not attempt in this short appendix to re-investigate the sensitivity of the results to key assumptions. Thus, the results presented here are based on one representation of the future conditions in a particular model.

Report 145. Biomass Energy and Competition for Land       [PDF: 1.3 MB]
J. Reilly & S. Paltsev April 2007 (18 p.)

We describe an approach for incorporating biomass energy production and competition for land into the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy, that has been widely used to study climate change policy. We examine multiple scenarios where greenhouse gas emissions are abated or not. The global increase in biomass energy use in a reference scenario (without climate change policy) is about 30 EJ/year by 2050 and about 180 EJ/year by 2100. This deployment is driven primarily by a world oil price that in the year 2100 is over 4.5 times the price in the year 2000. In the scenarios of stabilization of greenhouse gas concentrations, the global biomass energy production increases to 50-150 EJ/year by 2050 and 220-250 EJ/year by 2100. The estimated area of land required to produce 180-250 EJ/year is about 2Gha, which is an equivalent of the current global crop area. In the USA we find that under a stringent climate policy biofuels could supply about 55% of USA liquid fuel demand, but if the biofuels were produced domestically the USA would turn from a substantial net exporter of agricultural goods ($20 billion) to a large net importer ($80 billion). The general conclusion is that the scale of energy use in the USA and the world relative to biomass potential is so large that a biofuel industry that was supplying a substantial share of liquid fuel demand would have very significant effects on land use and conventional agricultural markets.

Report 144. Heavier Crude, Changing Demand for Petroleum Fuels, Regional Climate Policy, and the Location of Upgrading Capacity: A Preliminary Look       [PDF: 645 kB]
J. Reilly, S. Paltsev & F. Choumert April 2007 (6 p.)

The crude slate is likely to become heavier in the future with greater reliance on bitumens, tar sands, heavy oils, and eventually possibly shale oil. Under standard refining processes these crude oil sources produce a larger fraction of heavy products. At the same time, petroleum product demand growth is likely to disproportionately favor mid-weight products because of the strongly growing demand for transportation fuels including diesel, jet fuel, and gasoline. This will create a significant demand for new upgrading capacity in the refinery sector, and these upgrading facilities are themselves a significant source of carbon emissions. Using a version of the MIT Emissions Prediction and Policy Analysis (EPPA) model that separately considers five petroleum products we examine the need for, and the location of, refinery upgrading capacity under significant carbon policy in developed countries but not in developing countries. The results show that a carbon policy leads to a shift of most of the investment in upgrading capacity to developing countries, where the cost of carbon control is avoided, resulting in significant carbon leakage.

Report 143. Technical Change, Investment and Energy Intensity       [PDF: 1.8 MB]
K. Kratena March 2007 (18 p.)

This paper analyzes the role of different components of technical change on energy intensity by applying a Translog variable cost function setting to the new EU KLEMS dataset for 3 selected EU countries (Italy, Finland and Spain). The framework applied represents an accounting of technical change components, comprising autonomous as well as embodied and induced technical change. The inducement of embodied technical change is introduced by an equation for the physical capital stock that is a fixed factor in the short-run. The dataset on capital services and user costs of capital in EUKLEMS enables explaining capital accumulation depending on factor prices. The model can be used for explaining and tracing back the long-run impact of prices and technical change on energy intensity.

Report 142 was revised and published in Tax Policy and the Economy, Vol. 21 (J. Poterba, editor; MIT Press: Cambrigde, MA; Chapter 5, pages 145-184). The published article is available as Reprint 2007-8. Report 142 is an earlier version of that article.

Report 142. Federal Tax Policy Towards Energy       [PDF: 400 kB]
G.E. Metcalf January 2007 (28 p.)

On Aug. 8, 2005, President Bush signed the Energy Policy Act of 2005 (PL 109-58). This was the first major piece of energy legislation enacted since 1992 following five years of Congressional efforts to pass energy legislation. Among other things, the law contains tax incentives worth over $14 billion between 2005 and 2015. These incentives represent both pre-existing initiatives that the law extends as well as new initiatives.
      In this paper I survey federal tax energy policy focusing both on programs that affect energy supply and demand. I briefly discuss the distributional and incentive impacts of many of these incentives. In particular, I make a rough calculation of the impact of tax incentives for domestic oil production on world oil supply and prices and find that the incentives for domestic production have negligible impact on world supply or prices despite the United States being the third largest oil producing country in the world.
      Finally, I present results from a model of electricity pricing to assess the impact of the federal tax incentives directed at electricity generation. I find that nuclear power and renewable electricity sources benefit substantially from accelerated depreciation and that the production and investment tax credits make clean coal technologies cost competitive with pulverized coal and wind and biomass cost competitive with natural gas. (© 2007 MIT Press)

Report 141. Over-Allocation or Abatement? A Preliminary Analysis of the EU Emissions Trading Scheme Based on the 2005 Emissions Data       [PDF: 525 kB]
A.D. Ellerman & B. Buchner December 2006 (34 p.)

This paper provides an initial analysis of the European Union Emissions Trading Scheme (EU ETS) based on the installation-level data for verified emissions and allowance allocations in the first trading year. Those data, released on May 15, 2006, and subsequent updates revealed that CO2 emissions were about 4% lower than the allocated allowances. The main objective of the paper is to shed light on the extent to which over-allocation and abatement have taken place in 2005. We propose a measure by which over-allocation can be judged and provide estimates of abatement based on emissions data and indicators of economic activity as well as trends in energy and carbon intensity. Finally, we discuss the insights and implications that emerge from this tentative assessment.

Report 140. The Allocation of European Union Allowances: Lessons, Unifying Themes and General Principles       [PDF: 300 kB]
B. Buchner, C. Carraro & A.D. Ellerman October 2006 (22 p.)

A critical issue in dealing with climate change is deciding who has a right to emit carbon dioxide (CO2), and under what conditions, when those emissions are limited. The European Union Emissions Trading Scheme (EU ETS) is the world's first large experiment with an emission trading system for CO2 and it is likely to be copied by others if there is to be a global regime for limiting greenhouse gas emissions. This paper provides the first in-depth description and analysis of the process by which rights to emit carbon dioxide were created and distributed in the EU ETS. The main objective of the paper is to distill the lessons and general principles to be learned from the allocation of allowances in the EU ETS, i.e. in the world's first experience with allocating carbon allowances to sub-national entities. We discuss the lessons and unifying observations that emerge from this experience and provide some insights on what seem to be more general principles informing the allocation process and on what are the global implications of the EU ETS.

Report 139. Directed Technical Change and the Adoption of CO2 Abatement Technology: The Case of CO2 Capture and Storage       [PDF: 270 kB]
V.M. Otto & J. Reilly August 2006 (14 p.)

This paper studies the cost effectiveness of combining traditional environmental policy, such as CO2 trading schemes, and technology policy that has aims of reducing the cost and speeding the adoption of CO2 abatement technology. For this purpose, we develop a dynamic general equilibrium model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We specify CO2 capture and storage (CCS) as a discrete CO2 abatement technology. We find that combining CO2-trading schemes with an adoption subsidy is the most effective instrument to induce adoption of the CCS technology. Such a subsidy directly improves the competitiveness of the CCS technology by compensating for its markup over the cost of conventional electricity. Yet, introducing R&D subsidies throughout the entire economy leads to faster adoption of the CCS technology as well and in addition can be cost effective in achieving the abatement target.

Report 138. Energy Conservation in the United States: Understanding its Role in Climate Policy       [PDF: 475 kB]
G.E. Metcalf August 2006 (26 p.)

Efforts to reduce carbon emissions significantly will require considerable improvements in energy intensity, the ratio of energy consumption to economic activity. Improvements in energy intensity over the past thirty years suggest great possibilities for energy conservation: current annual energy consumption avoided due to declines in energy intensity since 1970 substantially exceed current annual domestic energy supply.
    While historic improvements in energy intensity suggest great scope for energy conservation in the future, I argue that estimates of avoided energy costs due to energy conservation are overly optimistic. Avoided costs are likely to be significantly higher than estimates from recent energy technology studies suggest once behavioral responses are taken into account.
    I then analyze a data set on energy intensity in the United States at the state level between 1970 and 2001 to disentangle the key elements of energy efficiency and economic activity that drive changes in energy intensity. Rising per capita income plays an important role in lower energy intensity. Higher energy prices also are important. Price and income predominantly influence intensity through changes in energy efficiency rather than through changes in economic activity.

Report 137 was revised and published in Environmental Science and Policy (Vol. 10, No. 7-8, pages 600-609). The published article is available as Reprint 2007-18. Report 137 is an earlier version of that article.

Report 137. Unemployment Effects of Climate Policy       [PDF: 915 kB]
M. Babiker & R.S. Eckaus July [Revised August] 2006 (17 p.)

This paper models the unemployment effects of restrictions on greenhouse gas emissions, embodying two of the most significant types of short term economic imperfections that generate unemployment: sectoral rigidities in labor mobility and sectoral rigidities in wage adjustments. A labor policy is also analyzed that would reduce the direct negative economic effects of the emissions restrictions.
    The politics of limiting greenhouse gas emissions are often dominated by relatively short term considerations. Yet the current economic modeling of emissions limitations does not embody economic features that are likely to be particularly important in the short term, in particular, the politically sensitive unemployment rate. Moreover, only a few of these studies also consider policies that would offset the negative direct economic effects of emissions restrictions. For plausible estimates of the parameters, the model shows that, with the labor market imperfections, if there were no offsetting policies, the reductions in GNP in the U.S. in the first ten years after emissions restrictions were imposed would be as much as 4 per cent. However, if there were two policies, instead of just one: a counteracting labor market policy, as well as the emissions restrictions, the negative direct economic effects could be completely eliminated. (© 2007 Elsevier Ltd.)

Report 136. Bringing Transportation into a Cap-and-Trade Regime       [PDF: 160 kB]
A.D. Ellerman, H.D. Jacoby & M.B. Zimmerman June 2006 (21 p.)

The U.S. may at some point adopt a national cap-and-trade system for greenhouse gases, and if and when that happens the system of CAFE regulation of vehicle design very likely could still be in place. Imposed independently these two systems can lead to economic waste. One way to avoid the inefficiency is to integrate the two systems by allowing emissions trading between them. Two possible approaches to potential linkage are explored here, along with a discussion of ways to guard against violation under such a trading regime of vehicle standards that may be justified by non-climate objectives. At a minimum implementation of a U.S. cap-and-trade system is several years in the future, so we also suggest intermediate measures that would gain some of the advantages of an integrated system and smooth the way to ultimate interconnection.

Report 135. Modeling Climate Feedbacks to Energy Demand: The Case of China       [PDF: 182 kB]
M.O. Asadoorian, R.S. Eckaus & C.A. Schlosser June 2006 (21 p.)

This paper is an empirical investigation of the effects of climate on the use of electricity by consumers and producers in urban and rural areas within China. It takes advantage of an unusual combination of temporal and regional data sets in order to estimate temperature, as well as price and income elasticities of electricity demand. The estimated positive temperature/electric power feedback implies a continually increasing use of energy to produce electric power which, in China, is primarily based on coal. In the absence of countervailing measures, this will contribute to increased emissions, increased atmospheric concentrations of greenhouse gases, and increases in greenhouse warming.

Report 134. Directed Technical Change and Climate Policy       [PDF: 520 kB]
V.M. Otto, A. Löschel & J. Reilly April 2006 (28 p.)

This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward-looking CGE model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We find the cost-effective climate policy to include a combination of R&D subsidies and CO2 emission constraints, although R&D subsidies raise the shadow value of the CO2 constraint (i.e. CO2 price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that CO2 constraints differentiated toward CO2-intensive sectors are more cost effective than constraints that generate uniform CO2 prices among sectors. Differentiated CO2 prices, through technical change and concomitant technology externalities, encourage growth in the non-CO2 intensive sectors and discourage growth in CO2-intensive sectors. Thus, it is cost effective to let the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used to reduce CO2 emissions.

Report 133 was revised and published in the Journal of Environmental Systems (Vol. 31, No. 1, pages 1-21). The published article is available as Reprint 2007-10. Report 133 is an earlier version of that article.

Report 133. Estimating Probability Distributions from Complex Models with Bifurcations: The Case of Ocean Circulation Collapse       [PDF: 444 kB]
M. Webster, J. Scott, A. Sokolov & P. Stone March 2006 (16 p.)

Studying the uncertainty in computationally expensive models has required the development of specialized methods, including alternative sampling techniques and response surface approaches. However, existing techniques for response surface development break down when the model being studied exhibits discontinuities or bifurcations. One uncertain variable that exhibits this behavior is the thermohaline circulation (THC) as modeled in three-dimensional general circulation models. This is a critical uncertainty for climate change policy studies. We investigate the development of a response surface for studying uncertainty in THC using the Deterministic Equivalent Modeling Method, a stochastic technique using expansions in orthogonal polynomials. We show that this approach is unable to reasonably approximate the model response. We demonstrate an alternative representation that accurately simulates the model's response, using a basis function with properties similar to the model's response over the uncertain parameter space. This indicates useful directions for future methodological improvements. (© 2006 Baywood Publishing Co., Inc.)

Report 132. The Value of Emissions Trading       [PDF: 575 kB]
M. Webster, S. Paltsev & J. Reilly February 2006 (17 p.)

This paper estimates the value of international emissions trading, focusing attention on a here-to-fore neglected component: its value as a hedge against uncertainty. Much analysis has been done of the Kyoto Protocol and other potential international greenhouse gas mitigation policies comparing the costs of achieving greenhouse gas emission targets with and without trading. These studies often show large cost reductions for all Parties under trading compared to a no trading case. We investigate the welfare gains of including emissions trading in the presence of uncertainty in economic growth rates, using both a partial equilibrium model based on marginal abatement cost curves and a computable general equilibrium model that allows consideration of the interaction of emissions trading with existing energy taxes and changes in terms of trade. We find that the hedge value of international trading is small relative to its value in reallocating emissions reductions when, as in the Kyoto Protocol, the burden-sharing scheme does not resemble a least-cost allocation. The Kyoto Protocol also allocated excess allowances to Russia, so-called "hot air," and much of the value often attributed to emissions trading stems from other Parties having access to these extra allowances, which has the effect of lowering the aggregate emissions target. We also find that the effects of preexisting tax distortions and terms of trade dominate the hedge value of trading. We conclude that the primary value of emissions trading in international agreements is as a burden-sharing or wealth transfer mechanism and should be judged accordingly.

Report 131. The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations in Weather       [PDF: 2.5 MB]
O. Deschenes & M. Greenstone January 2006 (46 p.)

This paper measures the economic impact of climate change on agricultural land in the United States by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estimates indicate that climate change will lead to a $1.1 billion (2002$) or 3.4% increase in annual profits. The 95% confidence interval ranges from -$1.8 billion to $4.0 billion and the impact is robust to a wide variety of specification checks, so large negative or positive effects are unlikely. There is considerable heterogeneity in the effect across the country with California's predicted impact equal to -$2.4 billion (or nearly 50% of state agricultural profits). Further, the analysis indicates that the predicted increases in temperature and precipitation will have virtually no effect on yields among the most important crops. These crop yield findings suggest that the small effect on profits is not due to short-run price increases. The paper also implements the hedonic approach that is predominant in the previous literature. We conclude that this approach may be unreliable, because it produces estimates of the effect of climate change that are very sensitive to seemingly minor decisions about the appropriate control variables, sample and weighting. Overall, the findings contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector.

We elucidate the differences between absolute and intensity-based limits of CO2 emission when there is uncertainty about the future. We demonstrate that the two limits are identical under certainty, and rigorously establish their relative attractiveness under two criteria: preservation of expectations-the minimization of the difference between the actual level and the initial expectation of abatement associated with a one-shot emission target, and temporal stability-the minimization of the variance of abatement due to fluctuations in emissions and GDP over time. Empirical tests of these theoretical propositions indicate that intensity caps are preferable for a broad range of emission reduction commitments. This finding is robust for developing countries, but is more equivocal for developed economies.

Report 129. Future Carbon Regulations and Current Investments in Alternative Coal-Fired Power Plant Designs       [PDF: 875 kB]
R.C. Sekar, J.E. Parsons, H.J. Herzog & H.D. Jacoby December 2005 (19 p.)

This paper assesses the role of uncertainty over future U.S. carbon regulations in shaping the current choice of which type of power plant to build. The pulverized coal technology (PC) still offer the lowest cost power—assuming there is no need to control emissions of carbon. The integrated coal gasification combined cycle technology (IGCC) may be cheaper if carbon must be captured. Since a plant built now will be operated for many years, and since carbon regulations may be instituted in the future, a U.S. electric utility must make the current investment decision in light of the uncertain future regulatory rules. This paper shows how this decision is to be made. We start by describing the economics of the two key coal-fired power plant technologies, PC and IGCC. We then analyze the potential costs of future carbon regulations, including the costs of retrofitting the plant with carbon capture technology and the potential cost of paying charges for emissions. We present the economics of each design in the form of a cash flow spreadsheet yielding the present value cost, and show the results for different scenarios of emissions regulation. We then discuss how to incorporate uncertainty about the future regulation of carbon emissions into the decision to build one plant design or the other. As an aid to decision making, we provide some useful benchmarks for possible future regulation and show how these benchmarks relate back to the relative costs of the two technologies and the optimal choice for the power plant investment. Few of the scenarios widely referenced in the public discussion warrant the choice of the IGCC technology. Instead, the PC technology remains the least costly. The level of future regulation required to justify a current investment in the IGCC technology appears to be very aggressive, if not out of the question. However, the current price placed on carbon emissions in the European Trading System, is higher than these benchmarks. If it is any guide to possible future penalties for emissions in the U.S., then current investment in the IGCC technology is warranted.

The study of the uncertainties in future climate projections requires large ensembles of simulations with different values of model characteristics that define its response to external forcing. These characteristics include climate sensitivity, strength of aerosol forcing and the rate of ocean heat uptake. The latter can be easily varied over a wide range in an anomaly diffusing ocean model (ADOM). The rate of heat uptake in a three-dimensional ocean general circulation model (OGCM) is, however, defined by a large number of factors and is far more difficult to vary. The range of the rate of the oceanic heat uptake produced by existing Atmosphere-Ocean General Circulation Models (AOGCMs) is narrower than the range suggested by available observations. As a result, simpler models, like an ADOM, are useful in probabilistic climate forecast type studies as they can take into account the full uncertainty in ocean heat uptake.
        To evaluate the performance of the ADOM on different time scales we compare results of simulations with two versions of the MIT Integrated Global System Model (IGSM): one with an ADOM and the second with a full three dimensional OCGM. Our results show that in spite of its inability to depict feedbacks associated with the changes in the ocean circulation and a very simple parameterization of the ocean carbon cycle, the version of the IGSM with ADOM is able to reproduce important aspects of the climate response simulated by the version with the OCGM through the 20th and 21st century and can be used to obtain probability distributions of changes in many of the important climate variables, such as surface air temperature and sea level, through the end of 21st century. On the other hand, the ADOM is not able to reproduce results for longer term climate change and specifically those concerned with details of the feedbacks on the heat and carbon storage. Such studies will require the use of the OGCM and uncertainties in those results will be limited.

Report 127. An Analysis of the European Emission Trading Scheme       [PDF: 335 kB]
R.M. Reilly & S. Paltsev October 2005 (23 p.)

An international emissions trading system is a featured instrument in the Kyoto Protocol to the Framework Convention on Climate Change, designed to reduce emissions of greenhouse gases among major industrial countries. The US was the leading proponent of emissions trading in the negotiations leading up to the Protocol, with the European Union initially reluctant to embrace the idea. However the US withdrawal from the Protocol has greatly changed the nature of the agreement. One result is that the EU has moved rapidly ahead, establishing in 2003 the Emission Trading Scheme (ETS) for the period of 2005-2007. This Scheme was intended as a test designed to help its member states transition to a system that would lead to compliance with their Kyoto Protocol commitments, which cover the period 2008-2012. The ETS covers CO2 emissions from big industrial entities in the electricity, heat, and energy-intensive sectors. It is a system that itself is evolving as allocations, rules, and registries were still being finalized in some member states late into 2005, even though the system started in January of that year. We analyze the ETS using the MIT Emissions Prediction and Policy Analysis (EPPA) model. We find that a competitive carbon market clears at a carbon price of about 0.6 to 0.9 €/tCO2 (~2 to 3 €/tC) for the 2005-2007 period in a base run of our model in line with many observers' expectations who saw the cuts required under the system as very mild, but in sharp contrast to the actual history of trading prices, which have settled in the range of 20 to 25 €/tCO2 (~70 to 90 €/tC) by the middle of 2005. In various comparison exercises the EPPA model's estimates of carbon prices have been similar to that of other models, and so the contrast between projection and reality in the ETS raises questions regarding the potential real cost of emissions reductions vis-á-vis expectations previously formed based on results from the modeling community. While it is beyond the scope of this paper to reach firm conclusions on reasons for this difference, what happens over the next few years will have important implications for greenhouse gas emissions trading and so further analysis of the emerging European trading system will be crucial.

Report 126. Estimated PDFs of Climate System Properties Including Natural and Anthropogenic Forcings       [PDF: 875 kB]
C.E. Forest, P.H. Stone & A.P. Sokolov September 2005 (26 p.)

We present revised probability density functions (PDF) for climate system properties (climate sensitivity, rate of deep-ocean heat uptake, and the net aerosol forcing strength) that include the effect on 20th century temperature changes of natural as well as anthropogenic forcings. The additional natural forcings, primarily the cooling by volcanic eruptions, affect the PDF by requiring a higher climate sensitivity and a lower rate of deep-ocean heat uptake to reproduce the observed temperature changes. The estimated 90% range of climate sensitivity is 2.4 to 9.2 K. The net aerosol forcing strength for the 1980s decade shifted towards positive values to compensate for the now included volcanic forcing with 90% bounds of -0.7 to -0.16 W/m2. The rate of deep-ocean heat uptake is also reduced with the effective diffusivity, Kv, ranging from 0.25 to 7.3 cm2/s. This upper bound implies that many coupled atmosphere-ocean GCMs mix heat into the deep ocean (below the mixed layer) too efficiently.

Report 125. The MIT Emissions Prediction and Policy Analysis (EPPA) Model: Version 4      [PDF: 1.75 MB]
S. Paltsev, J.M. Reilly, H.D. Jacoby, R.S. Eckaus, J. McFarland, M. Sarofim, M. Asadoorian & M. Babiker August 2005 (72 p.)

The Emissions Prediction and Policy Analysis (EPPA) model is the part of the MIT Integrated Global Systems Model (IGSM) that represents the human systems. EPPA is a recursive-dynamic multi-regional general equilibrium model of the world economy, which is built on the GTAP dataset and additional data for the greenhouse gas and urban gas emissions. It is designed to develop projections of economic growth and anthropogenic emissions of greenhouse related gases and aerosols. The main purpose of this report is to provide documentation of a new version of EPPA, EPPA version 4. In comparison with EPPA3, it includes greater regional and sectoral detail, a wider range of advanced energy supply technologies, improved capability to represent a variety of different and more realistic climate policies, and enhanced treatment of physical stocks and flows of energy, emissions, and land use to facilitate linkage with the earth system components of the IGSM. Reconsideration of important parameters and assumptions led to some revisions in reference projections of GDP and greenhouse gas emissions. In EPPA4 the global economy grows by 12.5 times from 2000 to 2100 (2.5%/yr) compared with an increase of 10.7 times (2.4%/yr) in EPPA3. This is one of the important revisions that led to an increase in CO2 emissions to 25.7 GtC in 2100, up from 23 GtC in 2100 projected by EPPA3. There is considerable uncertainty in such projections because of uncertainty in various driving forces. To illustrate this uncertainty we consider scenarios where the global GDP grows 0.5% faster (slower) than the reference rate, and these scenarios result in CO2 emissions in 2100 of 34 (17) GtC. A sample greenhouse gas policy scenario that puts the world economy on a path toward stabilization of atmospheric CO2 at 550 ppmv is also simulated to illustrate the response of EPPA4 to a policy constraint.

Report 124. The MIT Integrated Global System Model (IGSM) Version 2: Model Description and Baseline Evaluation      [PDF: 1.1 MB]
A.P. Sokolov, C.A. Schlosser, S. Dutkiewicz, S. Paltsev, D.W. Kicklighter, H.D. Jacoby, R.G. Prinn, C.E. Forest, J. Reilly, C. Wang, B. Felzer, M.C. Sarofim, J. Scott, P.H. Stone, J.M. Melillo & J. Cohen July 2005 (40 p.)

The MIT Integrated Global System Model (IGSM) is designed for analyzing the global environmental changes that may result from anthropogenic causes, quantifying the uncertainties associated with the projected changes, and assessing the costs and environmental effectiveness of proposed policies to mitigate climate risk. This report documents Version 2 of the IGSM, which like the previous version, includes an economic model for analysis of greenhouse gas and aerosol precursor emissions and mitigation proposals, a coupled atmosphere-ocean-land surface model with interactive chemistry, and models of natural ecosystems. In this global framework the outputs of the combined anthropogenic and natural emissions models provide the driving forces for the coupled atmospheric chemistry and climate models. Climate model outputs then drive a terrestrial model predicting water and energy budgets, CO2, CH4, and N2O fluxes, and soil composition, which feed back to the coupled climate/chemistry model.
        The first version of the integrated framework (which we will term IGSM1) is described in Prinn et al. (1999) and in publications and Joint Program Reports and Technical Notes provided on the Program's website. Subsequently, upgrades of component model capabilities have been achieved, allowing more comprehensive and realistic studies of global change. Highlights of these improvements include: a substantially improved economics model, needed to provide emissions projections and to assess an increasingly complex policy environment; a new global terrestrial model comprised of state-of-the-art biogeophysical, ecological and natural biogeochemical flux components, which provides an improved capacity to study consequences of hydrologic and ecologic change; the addition of a three-dimensional ocean representation, replacing the previous two-dimensional model, which allows examination of the global thermohaline circulation and its associated climate change impacts; the addition of an explicit oceanic carbon cycle including the impact of the biological pump; the addition of a new urban air pollution model enabling better treatments of human health and climate impacts; and the addition of greater flexibility for study of terrestrial ecosystem and urban pollution effects. This report documents the essential features of the new IGSM structure.

Report 123. Simulating the Spatial Distribution of Population and Emissions to 2100      [PDF: 1.2 MB]
M.O. Asadoorian May 2005 (18 p.)

Urbanization and economic development have important implications for many environmental processes including global climate change. Although there is evidence that urbanization depends endogenously on economic variables, long-term forecasts of the spatial distribution of population are often made exogenously and independent of economic conditions. A beta distribution for individual countries/regions is estimated to describe the geographical distribution of population using a 1 ° by 1° latitude-longitude global population data set. Cross-sectional country/regional data are then used to estimate an empirical relationship between parameters of the beta distribution and macroeconomic variables as they vary among countries/regions. This conditional beta distribution allows the simulation of a changing distribution of population, including the growth of urban areas, driven by economic forecasts until the year 2100.

Report 122. A Three-Dimensional Ocean-Seaice-Carbon Cycle Model and its Coupling to a Two-Dimensional Atmospheric Model: Uses in Climate Change Studies       [PDF: 1.3 MB]
S. Dutkiewicz, A. Sokolov, J. Scott & P. Stone May [Revised November] 2005 (47 p.)

We describe the coupling of a three-dimensional ocean circulation model, with explicit thermodynamic seaice and ocean carbon cycle representations, to a two-dimensional atmospheric/land model. This coupled system has been developed as an efficient and flexible tool with which to investigate future climate change scenarios. The setup is sufficiently fast for large ensemble simulations that address uncertainties in future climate modeling. However, the ocean component is detailed enough to provide a tool for looking at the mechanisms and feedbacks that are essential for understanding the future changes in the ocean system.
        Here we show results from a single example simulation: a spin-up to pre-industrial steady state, changes to ocean physical and biogeochemical states for the 20th century (where changes in greenhouse gases and aerosol concentrations are taken from observations) and predictions of further changes for the 21st century in response to increased greenhouse gas and aerosol emissions. We plan, in future studies to use this model to investigate processes important to the heat uptake of the oceans, changes to the ocean circulation and mechanisms of carbon uptake and how these will change in future climate scenarios.

Report 121 was revised and published in the Environmental and Resource Economics (Vol. 37, No. 2, pages 377-410). The published article is available as Reprint 2007-6. Report 121 is an earlier version of that article.

Report 121. Climate Change Taxes and Energy Efficiency in Japan      [PDF: 720 kB]
S. Kasahara, S. Paltsev, J. Reilly, H. Jacoby & A.D. Ellerman May 2005 (30 p.)

In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to several sectors of the economy to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Prediction and Policy Analysis (EPPA) model shows that this policy is unlikely to bring Japan into compliance with its Kyoto target unless the subsidy encourages improvement in energy intensity well beyond Japan's recent historical experience. Similar demand-management programs in the U.S., where there has been extensive experience, have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal. The Climate Change Tax proposal also calls for restricting Japan's participation in the international emission trading. We consider the economic implications of limits on emissions trading and find that they are substantial. Full utilization of international emission trading by Japan reduces the carbon price, welfare loss, and impact on its energy-intensive exports substantially. The welfare loss with full emissions trading is one-sixth that when Japan meets its target though domestic actions only, but Japan can achieve substantial savings even under cases where, for example, the full amount of the Russian allowance is not available in international markets. (© 2006 Springer Science & Business Media)

Report 120. What Should the Government Do To Encourage Technical Change in the Energy Sector?       [PDF: 223 kB]
J. Deutch May 2005 (10 p.)

Government support of innovation—both technology creation and technology demonstration—is desirable to encourage private investors to adopt new technology. In this paper, I review the government role in encouraging technology innovation and the success of the U.S. Department of Energy (DOE) and its predecessor agencies in advancing technology in the energy sector. The DOE has had better success in the first stage of innovation (sponsoring R&D to create new technology options) than in the second stage (demonstrating technologies with the objective of encouraging adoption by the private sector). I argue that the DOE does not have the expertise, policy instruments, or contracting flexibility to successfully manage technology demonstration, and that consideration should be given to establishing a new mechanism for this purpose. The ill-fated 1980 Synthetic Fuels Corporation offers an interesting model for such a mechanism.

Report 119 was revised and published in the Journal of Climate (Vol. 19, No. 13, pages 3294-3306). The published article is available as Reprint 2006-4. Report 119 is an earlier version of that article.

Report 119. Does Model Sensitivity to Changes in CO2 Provide a Measure of Sensitivity to the Forcing of Different Nature?       [PDF: 270 kB]
A.P. Sokolov March 2005 (14 p.)

Simulation of both the climate of the twentieth century and a future climate change requires taking into account numerous forcings, while climate sensitivities of general circulation models are defined as the equilibrium surface warming due to a doubling of atmospheric CO2 concentration. A number of simulations with the Massachusetts Institute of Technology (MIT) climate model of intermediate complexity with different forcings have been carried out to study to what extent sensitivity to changes in CO2 concentration (SCO2) represent sensitivities to other forcings.
        The MIT model, similar to other models, shows a strong dependency of the simulated surface warming on the vertical structure of the imposed forcing. This dependency is a result of "semidirect" effects in the simulations with localized tropospheric heating. A method for estimating semidirect effects associated with different feedback mechanisms is presented. It is shown that forcing that includes these effects is a better measure of expected surface warming than a forcing that accounts for stratospheric adjustment only.
        Simulations with the versions of the MIT model with different strengths of cloud feedback show that, for the range of sensitivities produced by existing GCMs, SCO2 provides a good measure of the model sensitivity to other forcings. In the case of strong cloud feedback, sensitivity to the increase in CO2 concentration overestimates model sensitivity to both negative forcings, leading to the cooling of the surface and "black carbon"-like forcings with elevated heating. This is explained by the cloud feedback being less efficient in the case of increasing sea ice extent and snow cover or by the above-mentioned semidirect effects, which are absent in the CO2 simulations, respectively. (© 2006 American Meteorological Society)

Report 118 was revised and published in the book: Human-Induced Climate Change: An Interdisciplinary Assessment (M. Schlesinger et al., editors, Cambridge University Press, pages 93-102). The published chapter is available as Reprint 2007-15. Report 118 is an earlier version of that article.

Report 118. Effects of Air Pollution Control on Climate       [PDF: 248 kB]
R. Prinn, J. Reilly, M. Sarofim, C. Wang & B. Felzer January 2005 (14 p.)

Urban air pollution and climate are closely connected due to shared generating processes (e.g., combustion) for emissions of the driving gases and aerosols. They are also connected because the atmospheric lifecycles of common air pollutants such as CO, NOx and VOCs, and of the climatically important methane gas (CH4) and sulfate aerosols, both involve the fast photochemistry of the hydroxyl free radical (OH). Thus policies designed to address air pollution may impact climate and vice versa. We present calculations using a model coupling economics, atmospheric chemistry, climate and ecosystems to illustrate some effects of air pollution policy alone on global warming. We consider caps on emissions of NOx, CO, volatile organic carbon, and SOx both individually and combined in two ways. These caps can lower ozone causing less warming, lower sulfate aerosols yielding more warming, lower OH and thus increase CH4 giving more warming, and finally, allow more carbon uptake by ecosystems leading to less warming. Overall, these effects significantly offset each other suggesting that air pollution policy has a relatively small net effect on the global mean surface temperature and sea level rise. However, our study does not account for the effects of air pollution policies on overall demand for fossil fuels and on the choice of fuels (coal, oil, gas), nor have we considered the effects of caps on black carbon or organic carbon aerosols on climate. These effects, if included, could lead to more substantial impacts of capping pollutant emissions on global temperature and sea level than concluded here. Caps on aerosols in general could also yield impacts on other important aspects of climate beyond those addressed here, such as the regional patterns of cloudiness and precipitation. (© 2007 Cambridge University Press)

Report 117 was revised and published in the book: Energy and Environment (R. Loulou et al., editors, Springer-Verlag: New York, pp. 211-238). The published article is available as Reprint 2005-7. Report 117 is an earlier version of that article.

Report 117. Modeling the Transport Sector: The Role of Existing Fuel Taxes in Climate Policy       [PDF: 225 kB]
S. Paltsev, H.D. Jacoby, J. Reilly, L. Viguier & M. Babiker November 2004 (22 p.)

Existing fuel taxes play a major role in determining the welfare effects of exempting the transportation sector from measures to control greenhouse gases. To study this phenomenon we modify the MIT Emissions Prediction and Policy Analysis (EPPA) model to disaggregate the household transportation sector. This improvement requires an extension of the GTAP data set that underlies the model. The revised and extended facility is then used to compare economic costs of cap-and-trade systems differentiated by sector, focusing on two regions: the USA where the fuel taxes are low, and Europe where the fuel taxes are high. We find that the interplay between carbon policies and pre-existing taxes leads to different results in these regions: in the USA exemption of transport from such a system would increase the welfare cost of achieving a national emissions target, while in Europe such exemptions will correct pre-existing distortions and reduce the cost. (© 2005 Springer Science and Business Media)

Report 116 was revised and published in Energy Policy (Vol. 35, No. 11, pages 5267-5286). The published article is available as Reprint 2007-19. Report 116 is an earlier version of that article.

Report 116. Explaining Long-Run Changes in the Energy Intensity of the U.S. Economy       [PDF: 472 kB]
I. Sue Wing & R.S. Eckaus September 2004 (36 p.)

Recent events have revived interest in explaining the long-run changes in the energy intensity of the U.S. economy. We use a KLEM dataset for 35 industries over 39 years to decompose changes in the aggregate energy-GDP ratio into shifts in sectoral composition (structural change) and adjustments in the energy demand of individual industries (intensity change). We find that although structural change offsets a rise in sectoral energy intensities from 1960 until the mid-1970s, after 1980 the change in the industrial mix has little impact and the average sectoral energy intensity experiences decline. Then, we use these data to econometrically estimate the influence on within-industry changes in energy intensity of price-induced substitution of variable inputs, shifts in the composition of capital and embodied and disembodied technical progress. Our results suggest that innovations embodied in information technology and electrical equipment capital stocks played a key role in energy intensity's long-run decline.

Report 115. Future United States Energy Security Concerns       [PDF: 261 kB]
J. Deutch September 2004 (12 p.)

Without energy, the economy can neither function nor grow. However, for at least the next half-century, the U.S. will not have an inexhaustible supply of inexpensive, clean energy. Dependence on energy imports, vulnerability to energy supply disruption, and issues of proliferation of nuclear material are cause for special concern. This paper addresses the geopolitical realities of and connections between energy and security, especially how the energy security issues that we face in the future differ from those we faced in the past.

Report 114 was revised and published in The Energy Journal (Special Issue #3: Multi-Greenhouse Gas Mitigation and Climate Policy, pp. 503-520). The published article is available as Reprint 2006-10. Report 114 is an earlier version of that article.

Report 114. The Role of Non-CO2 Greenhouse Gases in Climate Policy: Analysis Using the MIT IGSM       [PDF: 231 kB]
J. Reilly, M. Sarofim, S. Paltsev and R.G. Prinn August 2004 (18 p.)

First steps toward a broad climate agreement, such as the Kyoto Protocol, have focused on less than global geographic coverage. We consider instead a policy that is less comprehensive in term of greenhouse gases (GHGs), including only the non-CO2 GHGs, but is geographically comprehensive. Abating non-CO2 GHGs may be seen as less of a threat to economic development and therefore it may be possible to involve developing countries in such a policy even though they have resisted limits on CO2 emissions. The policy we consider involves a GHG price of about $15 per ton carbon-equivalent (tce) levied only on the non-CO2 GHGs and held at that level through the century. We estimate that such a policy would reduce the global mean surface temperature in 2100 by about 0.55 °C if only methane is covered that alone would achieve a reduction of 0.3 to 0.4°C. We estimate the Kyoto Protocol in its current form would achieve a 0.25°C reduction in 2100 if Parties to it maintained it as is through the century. Furthermore, we estimate the costs of the non-CO2 policies to be a small fraction of the Kyoto policy. Whether as a next step to expand the Kyoto Protocol, or as a separate initiative running parallel to it, the world could well make substantial progress on limiting climate change by pursuing an agreement to abate the low cost non-CO2 GHGs. The results suggest that it would be useful to proceed on global abatement of non-CO2 GHGs so that lack of progress on negotiations to limit CO2 does not allow these abatement opportunities to slip away. (© 2006 IAEE)

Report 113 was revised and published in Climatic Change (DOI 10.1007/s10584-006-9185-4 [Online First - In Press]). The published article is available as Reprint 2007-12. Report 113 is an earlier version of that article.

Report 113. Economic Benefits of Air Pollution Regulation in the USA: An Integrated Approach       [PDF: 300 kB]
T. Yang, K. Matus, S. Paltsev & J. Reilly July 2004 [Revised January 2005] (25 p.)

Market and non-market effects of air pollution on human health are estimated for the U.S. for the period from 1970 to 2000. The pollutants include tropospheric ozone, nitrogen dioxide, sulfur dioxide, carbon monoxide, and particulate matter. We develop a methodology for integrating the health effects from exposure to air pollution into the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the economy that has been widely used to study climate change policy. Benefits of air pollution regulations in USA rose steadily from 1975 to 2000 from $50 billion to $400 billion (from 2.1% to 7.6% of market consumption). Our estimated benefits of regulation are somewhat lower than the original estimates made by the US Environmental Protection Agency, and we trace that result to our development of a stock model of pollutant exposure that predicts that the benefits from reduced chronic air pollution exposure will only be gradually realized. We also estimate the economic burden of uncontrolled levels of air pollution over that period. The estimate of economic benefits and damages depends on the validity of the underlying epidemiological relationships and direct estimates of the consequences of health effects such as lost work and non-work time and increased medical expenses.

Report 112. The Cost of Kyoto Protocol Targets: The Case of Japan       [PDF: 306 kB]
S. Paltsev, J.M. Reilly, H.D. Jacoby & K.H. Tay July 2004 (27 p.)

This paper applies the MIT Emissions Prediction and Policy Analysis (EPPA) model to analysis of the cost of the Kyoto Protocol targets, with a special focus on Japan. The analysis demonstrates the implications of the use of different measures of cost, and explains the apparent paradox that the relative carbon price among Kyoto parties may not be an accurate measure of their relative welfare costs. Attention is given to the role of relative emissions intensity and various distortions, in the form of fuel and other taxes, in determining the burden of a climate policy. Also, effects of climate policy on welfare through an influence on the terms of trade are explored. We consider the cases of the EU, Japan, and Canada, each meeting their Kyoto targets, and the US meeting the Bush Administration's intensity target. For a country with a low emissions intensity as in Japan, the absolute reduction in tons is small relative to the macroeconomy, and this reduces its welfare loss as a share of total national welfare. Low emissions intensity (high energy efficiency) also means the economy has few options to reduce emissions still further, resulting in a higher carbon price. Energy efficiency thus pushes in both directions, lowering the number tons that need to be reduced but raising the direct cost per ton. But other factors also are important in explaining costs differences. Existing fuel taxes are very high in Japan and Europe, increasing the economic cost of a greenhouse gas emissions reduction policy. For these regions, the extra cost due to these distortions is several times the direct cost of the emissions mitigation policy itself. In contrast, fuels taxes are low in the US and relatively low in Canada. The US, EU, and Japan gain somewhat from reductions in world prices of oil and other fuels because they are net importers. Canada, in contrast, is a significant net energy exporter, and its policy costs rise considerably because of lost energy export revenue. This effect on Canada is due mostly to implementation of the policy in the other regions rather than to domestic implementation. Canada is also the most emissions intensive of these regions, a factor that contributes to its cost of control.

Report 111 was revised and published in Energy Economics (Vol. 28, No. 5-6, pp. 610-631). The published article is available as Reprint 2006-5. Report 111 is an earlier version of that article.

Report 111. Technology and Technical Change in the MIT EPPA Model       [PDF: 272 kB]
H.D. Jacoby, J.M. Reilly, J.R. McFarland & S. Paltsev July 2004 (25 p.)

Potential technology change has a strong influence on projections of greenhouse gas emissions and costs of control, and computable general equilibrium (CGE) models are a common device for studying these phenomena. Using the MIT Emissions Prediction and Policy Analysis (EPPA) model as an example, two ways of representing technology in these models are discussed: the sector-level description of production possibilities founded on social accounting matrices and elasticity estimates, and sub-models of specific supply or end-use devices based on engineering-process data. A distinction is made between exogenous and endogenous technical change, and it is shown how, because of model structure and the origin of key parameters, such models naturally include shifts in production process that reflect some degree of endogenous technical change. As a result, the introduction of explicit endogenous relations should be approached with caution, to avoid double counting. (© 2006 Elsevier)

Report 110 was revised and published in Global and Planetary Change (Vol. 47, No. 2-4, pp. 266-272). The published article is available as Reprint 2005-5. Report 110 is an earlier version of that article.

Report 110. Stabilization and Global Climate Policy       [PDF: 284 kB]
M. Sarofim, C.E. Forest, D.M. Reiner & J.M. Reilly July 2004 (10 p.)

Academic and political debates over long-run climate policy often invoke "stabilization" of atmospheric concentrations of greenhouse gases (GHGs), but only rarely are non-CO2 greenhouse gases addressed explicitly. Even though the majority of short-term climate policies propose trading between gases on a global warming potential (GWP) basis, discussions of whether CO2 concentrations should be 450, 550, 650, or perhaps as much as 750 ppm leave unstated whether there should be no additional forcing from other GHGs beyond current levels or whether separate concentration targets should be established for each GHG. Here, we use an integrated modeling framework to examine multi-gas stabilization in terms of temperature, economic costs, carbon uptake, and other important consequences. We show that there are significant differences in both costs and climate impacts between different "GWP equivalent" policies and demonstrate the importance of non-CO2 GHG reduction on timescales of up to several centuries. (© 2004 Elsevier)

Report 109 was revised and published in the Journal of Climate (Vol. 18, No. 13, pp. 2460-2481, 2482-2496). The published article is available as Reprint 2005-6. Report 109 is an earlier version of that article.

Report 109. Sensitivity of Climate to Diapycnal Diffusivity in the Ocean. Part I: Equilibrium State. Part II: Global Warming Scenario       [PDF: 2 MB]
F. Dalan, P.H. Stone, I. Kamenkovich & J. Scott (Part I); F. Dalan, P.H. Stone & A. Sokolov (Part II) May 2004 (46 p.)

Part I: The diapycnal diffusivity in the ocean is one of the least known parameters in current climate models. Measurements of this diffusivity are sparse and insufficient for compiling a global map. Inferences from inverse methods and energy budget calculations suggest as much as a factor of 5 difference in the global mean value of the diapycnal diffusivity. Yet, the climate is extremely sensitive to the diapycnal diffusivity. In this paper we study the sensitivity of the current climate to the diapycnal diffusivity using a coupled model with a 3-dimensional global ocean component with idealized geometry. In a subsequent paper we analyze the sensitivity of the climate change to the same parameter.
      Our results show that, at equilibrium, the strength of the thermohaline circulation in the North Atlantic scales with the 0.44 power of the diapycnal diffusivity, in contrast to the theoretical value of 2/3. On the other hand, the strength of the circulation in the South Pacific scales with the 0.63 power of the diapycnal diffusivity. The implication is that the amount of water upwelling from the deep ocean may be regulated by the diapycnal diffusion in the Indo-Pacific Ocean.
     The vertical heat balance in the ocean is controlled by: in the downward direction, (i) advection and (ii) diapycnal diffusion; in the upward direction, (iii) isopycnal diffusion and (iv) bolus velocity (GM) advection. The size of the latter three fluxes increases with diapycnal diffusivity, because the thickness of the thermocline also increases with diapycnal diffusivity leading to greater isopycnal slopes at high latitudes, and hence enhanced isopycnal diffusion and GM advection. Thus larger diapycnal diffusion is compensated for by changes in isopycnal diffusion and GM advection. Little change is found for the advective flux because of compensation between downward and upward advection.
     We present sensitivity results for the hysteresis curve of the thermohaline circulation. The stability of the climate system to slow freshwater perturbations is reduced as a consequence of a smaller diapycnal diffusivity. This result confirms the findings of 2-dimensional climate models. However, contrary to the results of these studies, a common threshold for the shutdown of the thermohaline circulation is not found in our model. (© 2005 American Meteorological Society)

Part II: The sensitivity of the transient climate to the diapycnal diffusivity in the ocean is studied for a global warming scenario in which CO2 increases by 1% per year for 75 years. The thermohaline circulation slows down for about 100 years and recovers afterward, for any value of the diapycnal diffusivity. The rates of slowdown and of recovery, as well as the percentage recovery of the circulation at the end of 1000-year integrations, are variable but a direct relation with the diapycnal diffusivity cannot be found. At year 70 (when CO2, has doubled) an increase of the diapycnal diffusivity from 0.1 cm²/s to 1.0 cm²/s leads to a decrease in surface air temperature of about 0.4 K and an increase in sea level rise of about 4 cm The steric height gradient is divided into thermal component and haline component. It appears that, in the first 60 years of simulated global warming, temperature variations dominate the salinity ones in weakly diffusive models, whereas the opposite occurs in strongly diffusive models.
      The analysis of the vertical heat balance reveals that deep ocean heat uptake is due to reduced upward isopycnal diffusive flux and Gent-McWilliams advective flux. Surface warming, induced by enhanced CO2 in the atmosphere, leads to a reduction of the isopycnal slope which translates into a reduction of the above fluxes. The amount of reduction is directly related to the magnitude of the isopycnal diffusive flux and GM advective flux at equilibrium. These latter fluxes depend on the thickness of the thermocline at equilibrium, hence on the diapycnal diffusion. Thus, the increase of deep-ocean heat uptake with diapycnal diffusivity is an indirect effect that the latter parameter has on the isopycnal diffusion and GM advection. (© 2005 American Meteorological Society)

Report 108 was revised and published in Global Biogeochemical Cycles (Vol. 18, GB3010). The published article is available as Reprint 2004-9. Report 108 is an earlier version of that article.

Report 108. Methane Fluxes Between Terrestrial Ecosystems and the Atmosphere at Northern High Latitudes During the Past Century: A Retrospective Analysis with a Process-Based Biogeochemistry Model       [PDF: 910 kB]
Q. Zhuang, J.M. Melillo, D.W. Kicklighter, R.G. Prinn, A.D. McGuire, P.A. Steudler, B.S. Felzer & S. Hu March 2004 (31 p.)

We develop and use a new version of the Terrestrial Ecosystem Model (TEM) to study how rates of methane (CH4) emissions and consumption in high-latitude soils of the Northern Hemisphere have changed over the past century in response to observed changes in the region's climate. We estimate that the net emissions of CH4 (emissions minus consumption) from these soils have increased by an average 0.08 Tg CH4 yr^-1 during the 20th century. Our estimate of the annual net emission rate at the end of the century for the region is 51 Tg CH4 yr^-1. Russia, Canada, and Alaska are the major CH4 regional sources to the atmosphere; responsible for 64%, 11%, and 7% of these net emissions, respectively. Our simulations indicate that large inter-annual variability in net CH4 emissions occurred over the last century. If CH4 emissions from the soils of the pan-Arctic region respond to future climate changes as our simulations suggest they have responded to observed climate changes over the 20th century, a large increase in high latitude CH4 emissions is likely and could lead to a major positive feedback to the climate system. (© 2004 American Geophysical Union)

Report 107 was revised and published in Global Environmental Change Part A, Special Issue: The Benefits of Climate Policy (Vol. 14, No. 3, pp. 287-297). The published article is available as Reprint 2004-7. Report 107 is an earlier version of that article.

Report 107. Informing Climate Policy Given Incommensurable Benefits Estimates       [PDF: 247 kB]
H.D. Jacoby February 2004 (19 p.)

The determination of long-term goals for climate policy, or of near-term mitigation effort, requires a shared conception among nations of what is at stake. Unfortunately, because of different attitudes to risk, problems of valuing non-market effects, and disagreements about aggregation across rich and poor nations, no single benefit measure is possible that can provide commonly accepted basis for judgment. In response to this circumstance, a portfolio of estimates is recommended, including global variables that can be represented in probabilistic terms, regional impacts expressed in natural units, and integrated monetary valuation. Development of such a portfolio is a research task, and the needed program of work suggested. (© 2004 Elsevier)

Report 106 was revised and published in State of the Planet: Frontiers and Challenges in Geophysics R.S.J. Sparks and C.J. Hawksworth (eds.), American Geophysical Union Monograph Vol. 150: Washington, DC (pp. 259-267). The published article is available as Reprint 2004-10. Report 106 is an earlier version of that article.

Report 106. Climate Prediction: The Limits of Ocean Models       [PDF: 406 kB]
P.H. Stone February 2004 (19 p.)

We identify three major areas of ignorance which limit predictability in current ocean GCMs. One is the very crude representation of subgrid-scale mixing processes. These processes are parameterized with coefficients whose values and variations in space and time are poorly known. A second problem derives from the fact that ocean models generally contain multiple equilibria and bifurcations, but there is no agreement as to where the current ocean sits with respect to the bifurcations. A third problem arises from the fact that ocean circulations are highly nonlinear, but only weakly dissipative, and therefore are potentially chaotic. The few studies that have looked at this kind of behavior have not answered fundamental questions, such as what are the major sources of error growth in model projections, and how large is the chaotic behavior relative to realistic changes in climate forcings. Advances in computers will help alleviate some of these problems, for example by making it more practical to explore to what extent the evolution of the oceans is chaotic. However models will have to rely on parameterizations of key small-scale processes such as diapycnal mixing for a long time. To make more immediate progress here requires the development of physically based prognostic parameterizations and coupling the mixing to its energy sources. Another possibly fruitful area of investigation is the use of paleoclimate data on changes in the ocean circulation to constrain more tightly the stability characteristics of the ocean circulation. (© 2004 International Union of Geodesy and Geophysics and the American Geophysical Union)

Report 105. Analysis of Strategies of Companies under Carbon Constraint: Relationship between Profit Structure of Companies and Carbon/Fuel Price Uncertainty      [PDF: 362 kB]
S. Hashimoto January 2004 (18 p.)

This paper examines the relationship between future carbon prices and the expected profit of companies by case studies with model companies. As the future carbon price will vary significantly in accordance with the political and economic situation, a specified probability density profile for the carbon price in the future has been assumed in this paper and the expected profits of the model company have been calculated on the basis of this profile. A power company has been selected as the model company representing a typical instance of a large-scale emitter of CO2. In the case of a single-fuel using company, it has been established that the influence on corporate profits can be assessed quantitatively by determining the profit break-even line with the carbon price as the parameter using the company's carbon emission intensity and its operating profit per unit of production output. For multi-fueled companies, it is shown that the future optimum fuel mix is determined not only by the carbon price but also by the operating profit ratio for the fuels concerned. These studies have thus confirmed that corporate profits are governed by the ratio of the operating profit levels achieved per unit of production output for the different fuels and the carbon price.

Report 104. A Process-based Analysis of Methane Exchanges Between Alaskan Terrestrial Ecosystems and the Atmosphere       [PDF: 235 kB]
Q. Zhuang, J.M. Melillo, D.W. Kicklighter, R.G. Prinn, P.A. Steudler, A.D. McGuire, B.S. Felzer & S. Hu November 2003 (7 p.)

We developed and used a new version of the Terrestrial Ecosystem Model (TEM) to study how rates of methane (CH4) emissions and consumption in Alaskan soils have changed over the past century in response to observed changes in the state's climate and are likely to change with projected climate changes over this century. We estimate that the current net emissions of CH4 (emissions minus consumption) from Alaskan soils are about 3 Tg CH4 per year. We project that net CH4 emissions will almost double by the end of the century in response to high-latitude warming and associated climate changes. If CH4 emissions from soils of the pan-Arctic region respond to climate changes in the