Conference Agenda

The concept of a carbon budget implies that when CO2 emissions exceed the budget, a temperature threshold is triggered. This raises the question how and when to spend the remaining carbon budget wisely. Economists have proposed that the carbon budget should be depleted following Hotelling’s rule. In a simple, general model with a dynamic resource stock, I theoretically investigate three solution structures: the Hotelling solution (derived for fossil reserves), the Faustmann solution (for forestry), and the greedy solution (consuming as much as possible). The question is under which conditions each of these solution structures is optimal. While the Hotelling solution is a useful approach to steer away from greediness, the Faustmann approach could become more appropriate when the world comes closer to a climate-neutral economy. This alternative would imply a yearly emission ceiling, depending on the natural carbon cycle.

Rising temperatures may negatively impact rural landscapes in temperate climates due to reduced yields in agriculture and forestry, an increased risk of biodiversity loss, changes in the local climate and a de-crease in recreational value. One promising way to mitigate increasing land surface temperatures (LST) in rural landscapes is to implement land-use and land-cover measures as adaptation measures that retain precipitation in soils, water bodies, and groundwater to allow vegetation to evaporate more water to reduce LST in summer. We develop an integrated modelling procedure to identify cost-effective spatially differentiated adaptation measures in agriculture and forestry to mitigate LST increases. With cost-effective we mean that the LST mitigation in a landscape is maximised for given costs. The procedure combines the results of a model that predicts the spatially differentiated effects of adaptation measures on LST with the results of an economic model that estimates the respective spatially differentiated costs in an optimisation algorithm. We demonstrate how the procedure works by applying it to the Elbe-Elster-county in Germany. One result is that the introduction of agroforestry systems on cropland, reforestation and the conversion of tree plantations into ecological forest are most cost-effective in mit-igating LST increases for costs of 20 Mio. €. We also compare results from our integrated modelling procedure with a (purely natural science) approach that selects those adaptation measures first which perform best in terms of LST mitigation and find that our approach leads to a better heat mitigating effect by a factor of 3.5 – 4.8.

Energy taxation schemes have been in place for a long time but are currently being reconsidered in order to align fiscal incentives with the transition to climate neutrality. At the same time, policies emerge to tackle other environmental challenges, such as air pollution, raising questions about the optimal policy package to address multiple externalities simultaneously. This paper illustrates how a model-based assessment can shed light on synergies and trade-offs by quantifying environmental and economic outcomes of alternative policy pathways. Findings indicate environmental co-benefits and suggest a trade-off between emissions reduction and inequality, although both can be reconciled through revenue recycling. Overall, results suggest that gearing the energy tax structure towards environmental sustainability can help deliver a just transition when embedded in a broader policy package.

We use an agent-based, stock-flow consistent integrated assessment model to evaluate the macroeconomic effects of energy price shocks. We empirically calibrate the model's business cycle dynamics on data from the EU27, with long-term growth set to be in line with an SSP2 trajectory. Our focus is on a scenario in which the model economy experiences a sudden, sharp increase in the price of an externally supplied fossil fuel, which feeds through into the production cost of final output. We show that the magnitude and persistence of the resulting inflationary episode, as well as the effects on functional distribution, employment and economic activity depend strongly on the extent to which increases (and subsequent decreases) in the price of energy inputs are passed on into the price of final output. We highlight the critical role of well-targeted public policies in mitigating distributional impacts of energy price shocks and curbing economic instability.