Transfer issues in ia modeling
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Transfer Issues in IA Modeling. Zili Yang State University of New York at Binghamton. Transfers in different contexts. In general equilibrium theory In environmental issues In coalition theories. What do we learn in theory?.

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Transfer Issues in IA Modeling

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Transfer issues in ia modeling

Transfer Issues in IA Modeling

Zili Yang

State University of New York at Binghamton


Transfers in different contexts

Transfers in different contexts

  • In general equilibrium theory

  • In environmental issues

  • In coalition theories


What do we learn in theory

What do we learn in theory?

  • Any efficient allocation can be a Walrasian equilibrium, if endowment transfers are allowed (the second fundamental theorem of welfare economics)

  • The transfer has to be “lump-sum”, or no transaction cost


What do we learn in environmental economics

What do we learn in environmental economics?

  • Economy contains public ‘bad’ or detrimental externality (pollution)

  • The Lindahl equilibrium replaces the Walrasian equilibrium

  • The Nash equilibrium is inefficient

  • Any efficient allocation can be a Lindahl equilibrium, if endowment transfers are allowed (the second fundamental theorem of welfare economics for the economy with externality)


Transfers in coalition theory iea

Transfers in coalition theory (IEA)

  • Transfers are needed for the stability of IEA (according to some scholars)

  • The rationales of such transfers are based on incentives rather than equilibrium requirements


Various types of transfers in real world

Various types of transfers in real world

  • Transfer payments (domestic)

  • Financial transfers, such as FDI (international)

  • Technological transfers (international)


Integrated assessment models iams

Integrated assessment models (IAMs)

  • Purposes of IAM (from economic point of view)

  • Types of IAM

  • Transfers in IAM


Purposes of iam

Purposes of IAM

  • Provide future GHG emission scenarios

  • Analyze various GHG mitigation policies (transfer policy included)

  • Serve as testing platform for coalition theories


Methodologies used by iams

Methodologies used by IAMs

  • Simulation models

  • CGE models (static or recursive-dynamic)

  • Dynamic optimization models

    Only dynamic optimization models treat climate change as stock externality phenomenon


Transfers in climate change policies

Transfers in climate change policies

  • Technological transfers: an all-inclusive policy option (IPCC literature)

  • Many GHG mitigation policies under discussion require financial transfers (CDM, JI, etc.)


Why transfers are so important

Why transfers are so important?

  • Cost-effectiveness in current policy regimes (example: Kyoto Protocol)

  • Theoretic foundation of efficiency: equalization of marginal GHG mitigation costs across regions)


Modeling transfers in iam

Modeling transfers in IAM

  • Channels of transfers

  • Ex ante or endogenous vs.ex post transfers

  • Interpreting transfers


Cost benefit analysis of transfers

Cost benefit analysis of transfers

  • Under most policy targets, allowing transfers always bring net gains

  • It is widely accepted that transfers can enhance effectiveness of policies


Status of modeling transfers

Status of modeling transfers

  • Transfer amounts and directions are heavily depend on model assumptions and specifications

  • In some IA models, transfer amounts are huge and infeasible in real world

  • Publications and literature on transfer issues are extensive


Conclusions

Conclusions

  • Transfer issues deserve extensive studies

  • “devils are in the details”

  • There are much more need your study


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