Environmental Economics and Sustainability

1 A NEW DIRECTION IN ENVIRONMENTAL ECONOMICS

Brian Chi-ang Lin

National Chengchi University

Siqi Zheng

Massachusetts Institute of Technology and Tsinghua University

1. Introduction

The global economy has evolved into a borderless age of climate change. Numerous studies such as those of Stern (2007) and Jones et al. (2013) have pointed out that the nature of climate change is an international and intergenerational externality problem. This human-induced change in the rising global mean temperature is mainly due to the enormous emission of carbon dioxide arising from the combustion of fossil fuels. To date, more than 100 countries have adopted a global warming limit of 2 °C or below (relative to preindustrial times) as a general guideline (IPCC, 2007). That is, the concentration of carbon dioxide should be maintained at a range of 400–450 parts per million (ppm). The United States and China, the two largest national economies in the world, have recently unveiled a negotiated deal to reduce their greenhouse gas (GHG) output, with China agreeing to cap its emissions by 2030 or earlier and the United States pledging to cut its emissions to 26–28% below the 2005 levels by 2025.

The issues of climate change include not only the key investigation of global warming but also the concerns about rising sea levels, melting glaciers, changes in precipitation and storminess, and so on. Thus, climate change has become a complicated problem of uncertainty to a greater extent than any other ...