Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Economics

Supervisor

Jim MacGee

Abstract

This thesis consists of three separate papers; two examining the costs of climate change policy in developing economies and one studying the economic impacts of flooding. In Chapter 2, I use a 2-sector non-balanced growth model to study the impact of structural change (the transition from industry to services) on carbon intensity. I calibrate the model to China and find that structural change plays an important role in reducing carbon intensity and lowering the economic cost of a carbon tax on GDP. For a 65% reduction target over 30 years, a $28/t carbon tax is needed and the output loss is 5.3% of GDP with structural change. Without structural change a $45/t tax is needed and 9.1% of GDP is lost. Rough calibrations to other developing countries show that structural composition matters as those with smaller service sectors can make emissions intensity reductions at lower cost. In Chapter 3, we use a computable general equilibrium (CGE) model to study how a local economy responds to a flood and the subsequent recovery/reconstruction. Initial damage is modelled as a shock to the capital stock and recovery requires rebuilding that stock. We apply the model to Metro Vancouver by considering a flood scenario causing total capital damage of $14.6 billion spread across five municipalities. Transportation and Warehousing are most severely impacted, followed by Manufacturing and Wholesale Trade. Construction and Manufacturing play significant roles in the recovery. We find that the GDP loss relative to a scenario with no flood is 1.9% ($2.07B) in the first year after the flood, 1.7% ($1.97B) in the second year, 1.5% ($1.70B) in the fifth year and 1.1% ($1.42B) in the twentieth year. In Chapter 4, I study how the composition of the energy sector and energy efficiency affect the cost of reducing carbon emissions. I show in the data that developing countries tend to be less energy efficient and have dirtier fuel mixes. I use an energy-economy model to study how GDP is affected by lowering emissions via a carbon tax. I find that developing countries face a larger decline in GDP from a carbon tax for an equivalent reduction in emissions, especially countries with a high dependence on coal. For example, China's level of GDP is reduced by 6.7% in the long-run compared to less than 1% for all developed countries (for a 50% reduction in emissions). This is compounded by larger decreases in the growth rate in the short run for developing countries. Developing countries that have relatively low energy intensities and clean fuel mixes, like Brazil and Mexico, face considerably lower losses.

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