The Economics of Climate Policy

Description:
The Economics of Climate Policy is an introductory course into the economics of climate change mitigation and adaptation policies. Essentially, the mitigation of climate change is a global public good, posing policy challenges both at the national level (within countries) as well as at the international level (between countries). In the course, concepts such as market failures, externalities, and Pigouvian taxes are developed and applied to climate change. Game theory will be introduced to understand the challenges in international climate negotiations. The history and status quo of international negotiations will be reviewed, as well as implementation policies such as the EU ETS and Germany’s Energiewende. Since these concepts can be applied to many public policy problems, the course is also an introduction into allocation theory, environmental economics, public finance and game theory. 

The course consists of a lecture and a tutorial. The lecture provides reasoning, theory, and the narrative. The tutorial provides analytical concepts, formal models, and mathematical techniques.

Topics:
Starting from the perspective of decentralized decision making and coordination, we provide a systematic overview of the relevant issues in climate change policy. This includes, inter alia:

• Climate change as a market failure: externalities and public goods, internalization options such as Pigouvian tax and cap and trade systems (prices vs. quantities), policy instrument design
• Game theory, behavioral economics and Elinor Ostrom’s approaches to govern commons
• The international politics of climate change: the history and status quo of UNFCCC climate negotiations from Rio to Kyoto and Paris, incentives for countries to reduce emissions: co-benefits, double dividend, and climate agreements
• Climate policies today: The European Union Emission Trading scheme (EU ETS), Germany’s Energiewende, and the U.S. EPA Clean Power Plan

Literature:
Further information can be found on the course website. 

Time & venue:
Lectures: Fridays, 14:00-16:00, Straße des 17. Juni 145, room BH-N 243
Tutorials: Mondays, 10:00-12:00, Straße des 17. Juni 145, room PTZ S001

Dates and venues: on Moses. Due to time constraints, lecture and tutorials might switch. Please find the latest schedule on ISIS. 

Exam:
Students will be graded based on weekly problem sets (homework assignments) and a mid-term exam; there is no final exam. Make sure you attend the course from the beginning on, as we start with assignments immediately. Ph.D. students will be asked to take an oral exam in addition to the assignments and the mid-term exam. 

Course material such as slides and assignments, will be provided via the ISIS-course (PW for guests: Stern2024/25). Assignments can be submitted electronically or handed in in class. 

Further information can be found on the course website. 

If you have questions, please contact Luis Brendel and Hania Hribal-Kornilowicz (teaching@mcc-berlin.net).