The Numbers Game and Climate Change

EDF's experts are at the forefront of work with the economics of climate policy; the figure above is one example of how economic experiments could help take the guesswork out of economic projections when “real life” intervenes.

Some of the papers and reports unveiled this week at the International Energy Workshop in Stockholm, Sweden had the look of a math professor gone mad.

But this conference and others like it are the frontier of climate policy.  The research discussed here will ultimately shape the thinking of negotiators in international climate talks, and governments responsible for designing and implementing policy.

Environmental Defense Fund’s internationally recognized economists are in the vanguard of efforts to create new and better ways of measuring everything from the impact of global economics and climate change to the value of a “strategic reserve” system for regulating emissions allowance prices.

EDF’s economic modeling expert Oleg Lugovoy tackled the long-standing problem of how to measure the interaction of climate and economics when policymakers don’t have perfect information.  The model he proposes could help take the guesswork out of economic projections when “real life” intervenes.  (Also see Lugovoy’s presentation at the International Energy Workshop, “Deterministic models are going stochastic.”)

In another paper, Senior Research Fellow Alexander Golub – along with Lugovoy and climate scientist James Wang — unveiled their ideas for yet another vexing problem: How to factor in unforeseen events and uncertainties when trying to choose the best economic path in the face of climate change. You can read more about the work they compiled along with economists from the Basque Center for Climate Change in the “The DICER Model: methodological issues and initial results of calibration“.

You’ve heard of the strategic oil reserve that can be used help stave off massive fluctuations in oil prices and supplies?

Golub and fellow economist (and Director of Economic Policy and Analysis) Nathaniel Keohane presented a pioneering study of the design and performance of a “strategic reserve” of emission allowances in a U.S. cap-and-trade program for greenhouse gases.

For those who may not understand the complex mathematical formulas behind all the studies, most of the studies illustrate their theories with amazing color charts and graphs.

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