Unit 3: Pollution and Climate Change

class: center, middle, inverse, title-slide

# Unit 3: Pollution and Climate Change
## Econ 3535
### Kyle Butts
### University of Colorado: Boulder

---

class: clear, middle

<style type="text/css">
/* -------------------------------------------------------
 *
 *     !! This file was generated by xaringanthemer !!
 *
 *  Changes made to this file directly will be overwritten
 *  if you used xaringanthemer in your xaringan slides Rmd
 * ------------------------------------------------------- */

@import url(https://fonts.googleapis.com/css?family=Roboto&display=swap);
@import url(https://fonts.googleapis.com/css?family=Roboto&display=swap);
@import url(https://fonts.googleapis.com/css?family=Source+Code+Pro:400,700&display=swap);
@import url(https://fonts.googleapis.com/css2?family=Atkinson+Hyperlegible&display=swap);

:root {
  /* Fonts */
  --text-font-family: 'Atkinson Hyperelegible';
  --text-font-is-google: 1;
  --text-font-family-fallback: Roboto, -apple-system, BlinkMacSystemFont, avenir next, avenir, helvetica neue, helvetica, Ubuntu, roboto, noto, segoe ui, arial;
  --text-font-base: sans-serif;
  --header-font-family: 'Atkinson Hyperelegible'
  --header-font-is-google: 1;
  --header-font-family-fallback: Georgia, serif;
  --code-font-family: 'Source Code Pro';
  --code-font-is-google: 1;
  --base-font-size: 20px;
  --text-font-size: 1rem;
  --code-font-size: 0.9rem;
  --code-inline-font-size: 1em;
  --header-h1-font-size: 1.75rem;
  --header-h2-font-size: 1.6rem;
  --header-h3-font-size: 1.5rem;

/* Colors */
  --text-color: #131516;
  --text-color-light: #555F61;
  --header-color: #FFF;
  --background-color: #FFF;
  --link-color: #107895;
  --code-highlight-color: rgba(255,255,0,0.5);
  --inverse-text-color: #d6d6d6;
  --inverse-background-color: #272822;
  --inverse-header-color: #f3f3f3;
  --inverse-link-color: #107895;
  --title-slide-background-color: #272822;
  --title-slide-text-color: #d6d6d6;
  --header-background-color: #FFF;
  --header-background-text-color: #FFF;
}

html {
  font-size: var(--base-font-size);
}

body {
  font-family: var(--text-font-family), var(--text-font-family-fallback), var(--text-font-base);
  font-weight: normal;
  color: var(--text-color);
}
h1, h2, h3 {
  font-family: var(--header-font-family), var(--header-font-family-fallback);
  color: var(--text-color-light);
}
.remark-slide-content {
  background-color: var(--background-color);
  font-size: 1rem;
  padding: 24px 32px 16px 32px;
  width: 100%;
  height: 100%;
}
.remark-slide-content h1 {
  font-size: var(--header-h1-font-size);
}
.remark-slide-content h2 {
  font-size: var(--header-h2-font-size);
}
.remark-slide-content h3 {
  font-size: var(--header-h3-font-size);
}
.remark-code, .remark-inline-code {
  font-family: var(--code-font-family), Menlo, Consolas, Monaco, Liberation Mono, Lucida Console, monospace;
}
.remark-code {
  font-size: var(--code-font-size);
}
.remark-inline-code {
  font-size: var(--code-inline-font-size);
  color: #000;
}
.remark-slide-number {
  color: #107895;
  opacity: 1;
  font-size: 0.9em;
}
a, a > code {
  color: var(--link-color);
  text-decoration: none;
}
.footnote {
  position: absolute;
  bottom: 60px;
  padding-right: 6em;
  font-size: 0.9em;
}
.remark-code-line-highlighted {
  background-color: var(--code-highlight-color);
}
.inverse {
  background-color: var(--inverse-background-color);
  color: var(--inverse-text-color);

}
.inverse h1, .inverse h2, .inverse h3 {
  color: var(--inverse-header-color);
}
.inverse a, .inverse a > code {
  color: var(--inverse-link-color);
}
img, video, iframe {
  max-width: 100%;
}
blockquote {
  border-left: solid 5px lightgray;
  padding-left: 1em;
}

@page { margin: 0; }
@media print {
  .remark-slide-scaler {
    width: 100% !important;
    height: 100% !important;
    transform: scale(1) !important;
    top: 0 !important;
    left: 0 !important;
  }
}

/* Modified metropolis */

.clear{
  border-top: 0px solid #FAFAFA;
}

h1 {
  margin-top: -5px;
  margin-left: -00px;
  margin-bottom: 30px;
  color: var(--text-color-light);
  font-weight: 200;
}
h2, h3, h4 {
  padding-top: -15px;
  padding-bottom: 00px;
  color: #1A292C;
  text-shadow: none;
  font-weight: 400;
  text-align: left;
  margin-left: 00px;
  margin-bottom: -10px;
}

.title-slide .inverse .remark-slide-content {
  background-color: #FAFAFA;
}
.title-slide {
  background-color: #FAFAFA;
  border-top: 80px solid #FAFAFA;
}
.title-slide h1  {
  color: var(--text-color);
  font-size: 40px;
  text-shadow: none;
  font-weight: 400;
  text-align: left;
  margin-left: 15px;
}
.title-slide h2  {
  margin-top: -15px;
  color: var(--link-color);
  text-shadow: none;
  font-weight: 300;
  font-size: 35px;
  text-align: left;
  margin-left: 15px;
}
.title-slide h3  {
  color: var(--text-color-light);
  text-shadow: none;
  font-weight: 300;
  font-size: 25px;
  text-align: left;
  margin-left: 15px;
  margin-bottom: 0px;
}
.title-slide h3:last-of-type  {
  font-style: italic;
  font-size: 1rem;
}

/* Remove orange line */
hr, .title-slide h2::after, .mline h1::after {
  content: '';
  display: block;
  border: none;
  background-color: #e5e5e5;
  color: #e5e5e5;
  height: 1px;
}

hr, .mline h1::after {
  margin: 1em 15px 0 15px;
}

.title-slide h2::after {
  margin: 10px 15px 35px 0;
}

.mline h1::after {
  margin: 10px 15px 0 15px;
}

/* turns off slide numbers for title page: https://github.com/gnab/remark/issues/298 */
.title-slide .remark-slide-number {
  display: none;
}

/* Custom CSS */

/* More line spacing */
body {
  line-height: 1.5;
}

/* Font styling */
.hi {
  font-weight: 600;
}
.mono {
  font-family: monospace;
}
.ul {
  text-decoration: underline;
}
.ol {
  text-decoration: overline;
}
.st {
  text-decoration: line-through;
}
.bf {
  font-weight: bold;
}
.it {
  font-style: italic;
}

/* Font Sizes */
.bigger {
  font-size: 125%;
}
.huge{
  font-size: 150%;
}
.small {
  font-size: 95%;
}
.smaller {
  font-size: 85%;
}
.smallest {
  font-size: 75%;
}
.tiny {
  font-size: 50%;
}

/* Remark customization */
.clear .remark-slide-number {
  display: none;
}
.inverse .remark-slide-number {
  display: none;
}
.remark-code-line-highlighted {
  background-color: rgba(249, 39, 114, 0.5);
}

/* Xaringan tweeks */

.inverse {
  background-color: #23373B;
  text-shadow: 0 0 20px #333;
  /* text-shadow: none; */
}

.title-slide {
  background-color: #ffffff;
  border-top: 80px solid #ffffff;
}

.footnote {
  bottom: 1em;
  font-size: 80%;
  color: #7f7f7f;
}

/* Lists */
li {
    margin-top: 4px;
}

/* Mono-spaced font, smaller */
.mono-small {
  font-family: monospace;
  font-size: 16px;
}
.mono-small .mjx-chtml {
  font-size: 103% !important;
}

.pseudocode, .pseudocode-small {
  font-family: monospace;
  background: #f8f8f8;
  border-radius: 3px;
  padding: 10px;
  padding-top: 0px;
  padding-bottom: 0px;
}
.pseudocode-small {
  font-size: 16px;
}
.remark-code {
  font-size: 68%;
}

.remark-inline-code {
  background: #F5F5F5; /* lighter */
  /* background: #e7e8e2; /* darker */
  border-radius: 3px;
  padding: 4px;
}

/* Super and Subscripts */

.super{
  vertical-align: super;
  font-size: 70%;
  line-height: 1%;
}
.sub{
  vertical-align: sub;
  font-size: 70%;
  line-height: 1%;
}

/* Subheader */
.subheader{
  font-weight: 100;
  font-style: italic;
  display: block;
  margin-top: -25px;
  margin-bottom: 25px;
}

/* 2/3 left; 1/3 right */
.more-left {
  float: left;
  width: 63%;
}
.less-right {
  float: right;
  width: 31%;
}
.more-right ~ * {
  clear: both;
}

/* 9/10 left; 1/10 right */
.left90 {
  padding-top: 0.7em;
  float: left;
  width: 85%;
}
.right10 {
  padding-top: 0.7em;
  float: right;
  width: 9%;
}

/* 95% left; 5% right */
.left95 {
  padding-top: 0.7em;
  float: left;
  width: 91%;
}
.right05 {
  padding-top: 0.7em;
  float: right;
  width: 5%;
}

.left5 {
  padding-top: 0.7em;
  margin-left: 0em;
  margin-right: -0.4em;
  float: left;
  width: 7%;
}
.left10 {
  padding-top: 0.7em;
  margin-left: -0.2em;
  margin-right: -0.5em;
  float: left;
  width: 10%;
}
.left30 {
  padding-top: 0.7em;
  float: left;
  width: 30%;
}
.right30 {
  padding-top: 0.7em;
  float: right;
  width: 30%;
}

.thin-left {
  padding-top: 0.7em;
  margin-left: -1em;
  margin-right: -0.5em;
  float: left;
  width: 27.5%;
}

/* Example */
.ex {
  font-weight: 300;
  color: #555F61 !important;
  font-style: italic;
}

.col-left {
  float: left;
  width: 47%;
  margin-top: -1em;
}
.col-right {
  float: right;
  width: 47%;
  margin-top: -1em;
}

.clear-up {
  clear: both;
  margin-top: -1em;
}

/* Format tables */
table {
  color: #000000;
  font-size: 14pt;
  line-height: 100%;
  border-top: 1px solid #ffffff !important;
  border-bottom: 1px solid #ffffff !important;
}
th, td {
  background-color: #ffffff;
}
table th {
  font-weight: 400;
}

/* Attention */
.attn {
  font-weight: 500;
  color: #e64173 !important;
  font-family: 'Zilla Slab' !important;
}

/* Note */
.note {
  font-weight: 300;
  font-style: italic;
  color: #314f4f !important;
  /* color: #cccccc !important; */
  font-family: 'Zilla Slab' !important;
}

/* Question and answer */
.qa {
  font-weight: 500;
  /* color: #314f4f !important; */
  color: #e64173 !important;
  font-family: 'Zilla Slab' !important;
}

/* Figure Caption */
.caption {
  font-size: 0.8888889em;
  line-height: 1.5;
  margin-top: 1em;
  color: #6b7280;
}
</style>

<div style = "position:fixed; visibility: hidden">
$$
\require{color}
\definecolor{purple}{rgb}{0.337254901960784, 0.00392156862745098, 0.643137254901961}
\definecolor{navy}{rgb}{0.0509803921568627, 0.23921568627451, 0.337254901960784}
\definecolor{ruby}{rgb}{0.603921568627451, 0.145098039215686, 0.0823529411764706}
\definecolor{alice}{rgb}{0.0627450980392157, 0.470588235294118, 0.584313725490196}
\definecolor{daisy}{rgb}{0.92156862745098, 0.788235294117647, 0.266666666666667}
\definecolor{coral}{rgb}{0.949019607843137, 0.427450980392157, 0.129411764705882}
\definecolor{kelly}{rgb}{0.509803921568627, 0.576470588235294, 0.337254901960784}
\definecolor{jet}{rgb}{0.0745098039215686, 0.0823529411764706, 0.0862745098039216}
\definecolor{asher}{rgb}{0.333333333333333, 0.372549019607843, 0.380392156862745}
\definecolor{slate}{rgb}{0.192156862745098, 0.309803921568627, 0.309803921568627}
\definecolor{cranberry}{rgb}{0.901960784313726, 0.254901960784314, 0.450980392156863}
$$
</div>
	
<script type="text/x-mathjax-config">
MathJax.Hub.Config({
	TeX: {
		Macros: {
			purple: ["{\\color{purple}{#1}}", 1],
			navy: ["{\\color{navy}{#1}}", 1],
			ruby: ["{\\color{ruby}{#1}}", 1],
			alice: ["{\\color{alice}{#1}}", 1],
			daisy: ["{\\color{daisy}{#1}}", 1],
			coral: ["{\\color{coral}{#1}}", 1],
			kelly: ["{\\color{kelly}{#1}}", 1],
			jet: ["{\\color{jet}{#1}}", 1],
			asher: ["{\\color{asher}{#1}}", 1],
			slate: ["{\\color{slate}{#1}}", 1],
			cranberry: ["{\\color{cranberry}{#1}}", 1]
		},
		loader: {load: ['[tex]/color']},
		tex: {packages: {'[+]': ['color']}}
	}
});
</script>

# Lecture 22

- Climate change

- Science overview

- Policy overview

---
## Science overview

CO2 and other GHGs are *fund pollutants*
  - Environment has moderate capacity to absorb
  
  - Alternative is *stock pollutant*: little to no capacity

Accumulation begins past a certain emissions level
  - Atmospheric CO2 accumulation is basically permanent

- Other chemicals begin to break down over some time frame

---
## Emissions

Emissions are often measured in terms of CO2 equivalence

- Carbon, CO2 and GHGs are often used interchangeably in this context

Global Warming Potential (GWP)

- How much a chemical contributes to warming, relative to CO2

- CO2 is 81% of the concentration, not the mass

.center[
![Greenhouse Gas Emission by Gas](data:image/png;base64,#graphics/greenhouse-emissions-by-gas.png)
]

---
### `$CO_2$` Emissions

Since 1980, humans have released more than half of all emitted `$CO_2$`.

---
## Consensus is easy to misrepresent

.pull-left[
Multiple sources of uncertainty in temperature models:

*Human-driven uncertainty*
  - How much do humans continue to emit?

*Statistical uncertainty*
  - Yearly emissions `$\to$` concentrations

- Concentrations `$\to$` temperature changes

- Temperature changes `$\to$` outcomes
]
.pull-right[
![Model Uncertainty](data:image/png;base64,#graphics/climate_models.png)

*In this figure, identify the two sources of uncertainty*
]

---
### Local vs non-local pollutants

Local pollutants are simpler to regulate because the damages are contained within roughly the same region they come from
  - SO2, particulate matter, ground-level ozone, etc.

Non-local pollutants, including all important greenhouse gases (GHGs), are more challenging to regulate
  - Prisoner’s dilemma with billions of players

- Even for big economies, most of the outcome is determined by actions of others

---
### Strategy overview

*Plan A: Mitigation*
  - Prevent emissions from reaching the atmosphere

- Increase efficiency, reduce polluting activities, carbon capture and storage

*Plan B: Adaptation*
  - Reduce damages from climate change
  - Infrastructure improvement, long-term planning, agriculture technology

*Plan C: Geoengineering*
  - Directly counteract some effects of climate change, particularly temperature
  - Emit particles that reflect solar radiation

---
## Paris Agreement
From the UN Framework Convention on Climate Change (UNFCCC)

Overall goal is to keep global temperature increases below 2 degrees Celsius (relative to pre-industrial averages)

US goal by 2025: reduce emissions by 26-28% below 2005 levels

---
![Current Trend](data:image/png;base64,#graphics/co2_trend.png)

---
![Paris Agreeement](data:image/png;base64,#graphics/co2_trend_paris.png)

---
![2 Degrees](data:image/png;base64,#graphics/co2_trend_2deg.png)

---
### Why 2 degrees?

Various sources of damages respond to temperature increases differently

Lower is better, but things start getting bad around 2

<br>

Although there is no "cliff", things get worse an often at an exponential fashion:

- [The Uninhabitable Earth](../Articles/The Uninhabitable Earth.pdf) ([online version](https://nymag.com/intelligencer/2017/07/climate-change-earth-too-hot-for-humans.html)).

- [Why Half a Degree Matters (1.5 to 2)](https://www.nytimes.com/interactive/2018/10/07/climate/ipcc-report-half-degree.html)

---
### Cost of climate change
Net present value of damages
  - What society should be willing to pay now

Discount rate matters
  - Small `$r$` `$\implies$` immediate action
  - Large `$r$` `$\implies$` we can wait longer

Average social cost of carbon (per ton) estimate
  - $r=.05 \implies \$11$
  
  - $r=.03 \implies \$36$
  
  - $r=.025 \implies \$56$
  
**Biden just set it to $51!**

---
class: center, middle

#### Economic Costs in the US

![Climate Change GDP Costs](data:image/png;base64,#graphics/climate_change_costs.png)

[Source](https://www.economist.com/graphic-detail/2019/03/05/climate-change-will-affect-more-than-the-weather)

---
## Reading for next time

[The Uninhabitable Earth](../Articles/The Uninhabitable Earth.pdf) ([online version](https://nymag.com/intelligencer/2017/07/climate-change-earth-too-hot-for-humans.html)).

[Why Half a Degree Matters (1.5 to 2)](https://www.nytimes.com/interactive/2018/10/07/climate/ipcc-report-half-degree.html)

---
class: clear, middle
# Lecture 23

- Policies for local air pollution

- US Acid Rain Program

- Programs in France, Sweden, Japan

---
## Acid Rain Program

Targeted coal-burning power plants to reduce atmospheric SO2 and NOx
  - Major causes of acid rain

- Acid rain harms forest health, certain animal species, and degrades infrastructure

Market-based policy from the US Clean Air Act of 1990
  - Goal was to lower annual SO2 emissions from 18.9 million tons `$\to$` 8.95 million tons
  - Less than half of 1980 emissions level
  
---
## Acid Rain Program
.subtitle.alice[as explained by Hank Green]

.center[
<iframe width="560" height="315" src="https://www.youtube.com/embed/oqJO8HwxTkg" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
]

---
## Acid Rain Program
Phase 1 (1995): 110 of the largest plants forced to reduce SO2 emission rates to 2.5 lbs/mmBtu
  - Pounds per million British thermal units (measure of fuel inputs)

- 1 Btu = amount of heat required to raise one pound of water by 1 degree F

If plants end up with excess permits
  - Use them on another plant they own, sell to a different plant, or keep for future

- Permits and pollution are counted at the end of each year

- In effect, firms were given permits for 2.5 lbs/mmBtu;

- Firms that pollute more got more permits because it is a rate, not a sum total

- Initial permit allocation was relatively friendly towards the biggest polluters

---
## Acid Rain Program

Phase 2 (2000): target rate was lowered to 1.2 lbs/mmBtu, and expanded to include many more plants

- Plants still allowed to trade allowances

- Fine of $2,000 per ton of SO2 for pollution over the permitted amount

Allowance Auction Reserve

- What happens if nobody is willing to sell at the end of the year?

- EPA withholds 2.8% of total permits to be auctioned

---
class: center, middle

![SO2 Caps and Emissions](data:image/png;base64,#graphics/so2_caps.png)

[Source](http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.103)

---
### Acid Rain Program conclusions

Extremely successful and efficient
  - Really big influence on environmental policy

Cost of compliance was lower than expected because of railroad deregulation
  - Low-sulfur coal from Powder River Basin

Benefits were much greater than expected
  - Accidentally fixed a problem even more costly than acid rain

- PM2.5 (fine particulate matter) has important human health impacts

- [The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment](http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.103)

---
## France - emissions tax

Per-unit emissions tax on all "large" polluting sources 
  
  - Starting at 23 euros/ton, applicable for SO2, NOx, and HCl

- Lots of exceptions

90% of revenue `$\to$` subsidy for pollution control equipment

10% of revenue `$\to$` public research

In retrospect, tax level was too low to be effective
  - Pollution removed from cheapest sources first, but not much
  
  - Incentive to decrease emissions was too low

---
## Sweden - NOx tax with rebate

Emissions tax on nitrogen oxide emissions

Polluting firms often find it rational to invest in lobbying against environmental taxes

- Compromise: tax emissions, give tax revenue back to firms as a rebate

- If the rebate is proportional to how much tax was paid, this reduces the incentive to abate emissions

Swedish solution: tax based on emissions, rebate based on energy production
  - Good: greatly encourages energy efficiency
  
  - Bad: no incentive to reduce energy consumption

- Overall, benefits were found to outweigh the costs 3 to 1

---
## Japan - health impact tax

1973: Law for the Compensation of Pollution-Related Health Injury

Compensation: based on medical expenses and lost earnings

- Must have a disease from the list, or else general respiratory problems

- Polluting firms taxed proportionally to estimated damages from emissions; vehicles taxed by weight

Interesting approach to "social cost of pollution"

- Unintended consequences

- Greater population density + lower emissions base `$\to$` very high per-unit charges

---
## Video for Next Time

[A Brief History of Environmental Justice](https://www.youtube.com/watch?v=30xLg2HHg8Q)

Example: Cancer Alley - [Why This Town is Dying From Cancer](https://www.youtube.com/watch?v=ZB8CbDG7gpk)

---
class: clear, middle
# Lecture 24

- International air pollution policies

---
## Ozone layer

Ozone depletion is related to climate change, but it is not a major cause

We primarily care about the ozone layer for human health reasons
  - Prevents UV radiation- cancer risk

Ozone depleting substances (ODS’s)
  - Refrigerants, solvents, propellants, chlorofluorocarbons (CFC’s)

---
### Montreal Protocol (1988)

International agreement to phase out the damaging chemicals
  - First universally ratified treaty in history of the UN

Command and control policy, but aimed to mimic market outcomes
  - Chemicals with good alternatives or high costs were phased out more quickly

- Slower phase-out for others

Some "essential use" chemicals got exceptions
  - Asthma inhalers, submarine/aircraft fire extinguishers

Multilateral Fund
  - UN: countries have a common but differentiated responsibility to protect and manage the global commons.
  
  - Provides support for developing countries to more easily comply with Montreal

---
### Montreal Protocol effects

As of 2008, 95% of ODC’s have been phased out of the market

Ozone layer is projected to return to normal by 2050-2070

> "…perhaps the single most successful international agreement to date has been the Montreal Protocol"
> 
> Kofi Annan (2003)

Note: HCFCs are less important for ozone, but more important for climate change

---
### Failed Climate Change Agreement

.pull-left[
<img src="data:image/png;base64,#graphics/losing-earth.jpg" width="80%" style="display: block; margin: auto;" />

]
.pull-right[
- Starting in 1970s, there were large congressional hearings headed by Al Gore.

- UN put out reports similar in concensus as the IPCC reports are today

- By 1989, had a **binding** agreement ready to be signed, but the US decided against signing it at the last minute
]

---
### Early climate negotiations

Europe wanted carbon taxes, US wanted cap and trade

Issues with a tax
  - Want to keep revenue in the country it came from
  
  - Financial burden on firms

- Not every country is taxed `$\to$` leakage

Kyoto Protocol eventually adopted cap and trade, but the US failed to ratify
  - Did not get through Congress under Clinton, later withdrawn by G.W. Bush

---
### Kyoto Protocol
1992: UN Framework Convention on Climate Change (UNFCCC)
  - Endorsed market-based mechanisms as the primary method for dealing with climate change

1997: Kyoto Protocol was signed by 82 countries (now 192)
  - By 2008-2012, countries must reduce emissions to 5% below 1990 levels

- Targeted a GWP-weighted average of CO2 and the other major GHGs

- Flexible ways to meet this standard using market-based mechanisms

---
### Kyoto Protocol- three mechanisms

*Emissions trading*

- Classic cap and trade mechanism with countries as the market participants

- Buy and sell AAUs (Assigned Allowance Units, basically permits) with other countries

*Joint Implementation*

- Countries receive ERUs (Emission Reduction Unit) for financing projects that reduce emissions in another participating country

*Clean Development Mechanism*

- Receive CERs (Certified Emission Reduction)

- Similar to above, but targets non-participating, developing countries

---
### EU ETS
Kyoto requires participating countries to meet a standard or else pay other countries to exceed the standard
  - Countries get to decide how to reduce their own emissions

- Can use any policy or set of policies they want

Large group of European countries got together and formed the Emissions Trading System (EU ETS)
  - Work together rather than separately