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International audience; The predominantly agricultural Mekong Delta region will be profoundly affected by the effects of climate change, such as rising temperatures, sea level rise, and salinization. But recent studies show that other factors, such as sand mining and groundwater exploitation, will also largely contribute to future pressures, particularly through land subsidence. Alongside the fight against climate change, this makes it necessary to design strategies and policies for subsidence mitigation, not only at the individual level (mainly farmers), but also at the institutional level (province and region). Indeed, in the Vietnamese Mekong Delta (VMD), local provinces play a crucial role in the choice and implementation of strategies for the exploitation of natural resources, such as water or sand. However, the VMD is also a complex system in which the decisions of one province can have indirect effects on the other 12 provinces, especially because some provinces share common agro-ecological regions and aquifer areas. This chapter aims to explore, through simulation of an integrated model, the economic impact on farmers of the adaptation strategies chosen by the provinces under a number of climatic and economic scenarios. It thus builds on the adaptation options evaluated in Part 3 of the report. In particular, one objective is to understand which conditions of inter-province coordination on groundwater exploitation in common agro-ecological areas could improve the economic situation of farmers. To this end, the LUCAS model (an agent-based model for land-use change adaptation strategies in the context of climate change) [ Truong et al., 2021 ] was extended to take groundwater use by farmers into account, as well as the subsidence dynamics and macroeconomic trends from the GEMMES model. In the updated model, called LUCAS-GEMMES, subsidence-related adaptation strategies chosen at the provincial level and their interactions with individual decisions were also introduced. The simulation is performed with 4 experiments including (i) No provincial adaptation strategies and ignorance of subsidence dynamics; (ii) No adaptation strategies while subsidence impacts the benefit of land-use production; (iii) Individual adaptation strategies combined with the impact of subsidence; (iv) Province and individual adaptation combined with the impact of subsidence.The results show that decisions in early response to low-level subsidence bring many positive results in resource management, such as significantly reducing water use in the dry season, and reducing the vulnerability area from subsidence and climate change. The results also show a decrease in incomes in case of adaptation. Therefore, it is necessary to have investment solutions (technical support in shrimp farming, studying for new upland crops in the dry season) for new land-use types that could compensate for the economic benefits lost when applying policies that restrict people in the use of resources.; La région du delta du Mékong, essentiellement agricole, sera profondément touchée par les effets du changement climatique, tels que la hausse des températures, l’élévation du niveau de la mer et la salinisation. Mais des études récentes montrent que d’autres facteurs, comme l’extraction de sable et l’exploitation des eaux souterraines, contribueront également fortement aux pressions futures, notamment par la subsidence. Au-delà de la lutte contre le changement climatique, il est donc nécessaire de concevoir des stratégies et des politiques d’atténuation de la subsidence, non seulement au niveau individuel (principalement les agriculteurs), mais aussi au niveau institutionnel (province et région). En effet, dans le delta du Mékong vietnamien (DMV), les provinces locales jouent un rôle crucial dans le choix et la mise en œuvre des stratégies d’exploitation des ressources naturelles, comme l’eau ou le sable. Cependant, le DMV est aussi un système complexe dans lequel les décisions d’une province peuvent avoir des effets indirects sur les 12 autres provinces, notamment parce que certaines provinces partagent des régions agro-écologiques et des zones aquifères communes. Ce chapitre vise à explorer, par la simulation d’un modèle intégré, l’impact économique sur les agriculteurs des stratégies d’adaptation choisies par les provinces dans un certain nombre de scénarios climatiques et économiques. Il s’appuie donc sur les options d’adaptation évaluées dans la partie 3 du rapport. En particulier, un objectif est de comprendre dans quelles conditions de coordination entre les provinces sur l’exploitation des eaux souterraines, dans des zones agro-écologiques communes, la situation économique des agriculteurs peut s’améliorer. À cette fin, le modèle LUCAS (un modèle “basé agents” pour les stratégies d’adaptation au changement d’utilisation des terres dans le contexte du changement climatique) [ Truong et al., 2021 ] a été étendu pour prendre en compte l’utilisation des eaux souterraines par les agriculteurs, ainsi que la dynamique de subsidence et les tendances macroéconomiques du modèle GEMMES. Dans le modèle mis à jour, appelé LUCAS-GEMMES, les stratégies d’adaptation liées à la subsidence choisies au niveau provincial et leurs interactions avec les décisions individuelles ont également été introduites. La simulation est réalisée à l’aide de quatre expériences : (i) aucune stratégie d’adaptation provinciale et ignorance de la dynamique de la subsidence ; (ii) aucune stratégie d’adaptation alors que la subsidence a un impact sur le bénéfice de la production de l’utilisation des terres ; (iii) stratégies d’adaptation individuelles combinées à l’impact de la subsidence ; (iv) adaptation provinciale et individuelle combinée à l’impact de la subsidence. Les résultats montrent que les décisions prises en réponse précoce à un affaissement de faible niveau apportent de nombreux résultats positifs dans la gestion des ressources, tels que la réduction significative de l’utilisation de l’eau pendant la saison sèche, puis la réduction de la zone de vulnérabilité à la subsidence et au changement climatique. Les résultats montrent également une diminution des revenus en cas d’adaptation. Par conséquent, il est nécessaire d’avoir des solutions d’investissement (soutien technique dans l’élevage de crevettes, étude de nouvelles cultures de montagne en saison sèche) pour de nouveaux types d’utilisation des terres qui compenseraient les avantages économiques perdus lors de l’application de politiques qui limitent les personnes dans l’utilisation des ressources.

This paper investigates the effect of typhoons on economic activities in Vietnam. During the period covered by our analysis, 1992-2013, we observed 63 typhoons affecting different locations of the country in different years with varying intensity. Using measures of the intensity of nightlight from satellite imagery as a proxy for the level of economic activity, we study how the nighttime light brightness varies across locations that were variably affected by the tropical cyclones. The results suggest that typhoons have on average dimmed nighttime luminosity of the places hit by 5 ± 5.8% or 8 ± 7.8% depending on the specifications we made., AFD Research Papers, 263

International audience

International audience

The aim of this study is to examine farm household-level impacts of weather extreme events on Vietnamese rice technical efficiency. Vietnam is considered among the most vulnerable countries to climate change, and the Vietnamese economy is highly dependent on rice production that is strongly affected by climate change. A stochastic frontier analysis is applied with census panel data and weather data from 2010 to 2014 to estimate these impacts while controlling for both adaptation strategy and household characteristics. Also, this study combines these estimated marginal effects with future climate scenarios (Representative Concentration Pathways 4.5 and 8.5) to project the potential impact of hot temperatures in 2050 on rice technical efficiency. We find that weather shocks measured by the occurrence of floods, typhoons and droughts negatively affect technical efficiency. Also, additional days with a temperature above 31°C dampen technical efficiency and the negative effect is increasing with temperature. For instance, a one day increase in the bin [33°C-34°C] ([35°C and more]) lessen technical efficiency between 6.84 (2.82) and 8.05 (3.42) percentage points during the dry (wet) season.

A temporary gap is generated by the difference between the Social Value of Mitigation Activities (SVMA) and implementable carbon prices. A spectrum of options are available to handle this. These options encompass policy instruments that give different weights to ‘command and control’ measures and to economic incentives. We analyze here how to combine an explicit carbon price that rewards mitigation activities every year and a notional price embedded in devices that reward low carbon investments beforehand through lowering their risk-weighted capital costs.The latter option is essential in order to hedge against two uncertainties that adversely affect technologies having high capital costs1. The first relates to technologies which are at the beginning or mid-way of their experience curve. The second relates to the net signal launched by explicit carbon prices given the presence of noises that swamp it.We first illustrate, based on five case studies, the equivalence curves between carbon prices and percentages of reduction of capital costs. We argue then that a notional price equated to the SVMA can maximize the economic efficiency of financial devices that reduce the capital costs of a low carbon project and we discuss the necessity of a world SVMA and of national SVMAs. We then introduce uncertainty in the analysis and show that contingent risks theoretically need carbon prices to grow to a level well beyond their political acceptability. Reducing the risk-weighted capital costs and rewarding upfront low-carbon investments at the present value of the SVMA is an efficient way of overcoming these barriers.Finally, we show, in the case of India, how to assess a national SVMA that includes the climate benefits and the development co-benefits of mitigation activities.We then discuss how to articulate a World SVMA (paragraph 108 of the Paris Decision), national SVMAs and explicit carbon prices (in line with NDCs) to bridge the funding gap, tackle the ‘100G$ and +’ issue, and maximize the gains of cooperation around climate policies.

Forthcoming

Finance has been critical to the development of interest and momentum concerning the Paris Agreement, which emerged from COP21. However, a quick scan of the accord could lead many to derive a disappointing picture because of the absence of practical commitments to financial devices that can limit the risks of climate change. We support the opposite view that the text marks a new departure by committing countries to “making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development ». This was matched by parallel developments such as the Financial Stability Board’s launch of a new Task Force on climate disclosure. We argue that, further steps now need to be taken within the broader context of financing the new model of prosperity laid out in the UN Sustainable Development Goals (UN, September 2015). At a time of increasing financial uncertainty and inadequate investment in the real economy, putting in place a framework for financing the transition to a low-carbon, resilient model of development is now an economic imperative – and an immense opportunity. Mitigating the systemic risks of climate change while putting the global financial system on a path toward balanced and sustainable development, is in the long-term strategic interests of both industrialized and developing countries and we suggest what practical steps can be accomplished in a near future in this direction.

Forthcoming

International audience

This paper aims at providing a consistent framework to appraise alternative modeling choices that have driven the so-called “when flexibility" controversy since the early 1990s dealing with the optimal timing of mitigation efforts and the Social Cost of Carbon (SCC). The literature has emphasized the critical impact of modeling structures on the optimal climate policy. But, to our knowledge, there has been no contribution trying to estimate the comparative impact of modeling structures within a unified framework. In this paper, we use the Integrated Assessment Model (IAM) RESPONSE to bridge this gap and investigate the structural modeling drivers of differences in climate policy recommendations. RESPONSE is both sufficiently compact to be easily tractable and detailed enough to capture a wide array of modeling choices. Here, we restrict the analysis to the following emblematic modeling choices: the forms of the damage function (quadratic vs. sigmoid) and the abatement cost (with or without inertia), the treatment of uncertainty, and the decision framework (one-shot vs. sequential). We define an original methodology based on an equivalence criterion to carry out a sensitivity analysis over modeling structures in order to estimate their relative impact on two output variables: the optimal SCC and abatement trajectories. This allows us to exhibit three key findings: (i) IAMs with a quadratic damage function are insensitive to changes of other features of the modeling structure, (ii) IAMs involving a non-convex damage function entail contrasting climate strategies, (iii) Precautionary behaviours can only come up in IAMs with non-convexities in damages.

Despite growing scientific evidence that passing a 2°C temperature increase may trigger tipping points in climate dynamics, most Integrated Assessment Models (IAM) based on Cost Benefit Analysis (CBA) with smooth quadratic damage functions are unable to account for the possibility of strong increase in climate damage. Our IAM RESPONSE makes it possible to bridge this gap by integrating a threshold effect damage function which sets a threshold of temperature increase from which climate damages increase significantly. To fit with on-going climate negotiations, this threshold is set at 2°C. Regardless of the bleak prospect of passing the threshold, it turns out that among a broad set of scenarios accounting for the diversity of worldviews in the climate debate, overshooting the 2°C target and then facing the resulting damage may become an optimal strategy for many economic agents who are struck by what we call a “doomsday effect”. We show that this effect happens for any level of jump in damage and dramatically increases if the beginning of mitigation efforts is postponed till the decade 2010-2020 on. In light of these results, we believe that any further delay in reaching a clear international agreement will close the window of opportunity for meeting the 2°C target with a reasonable chance of diplomatic success.

Despite growing scientific evidence that passing a 2êC temperature increase may trigger tipping points in climate dynamics, most Integrated Assessment Models (IAM) based on Cost Benefit Analysis (CBA) with smooth quadratic damage functions are unable to account for the possibility of strong increase in climate damage. Our IAM RESPONSE makes it possible to bridge this gap by integrating a threshold effect damage function which sets a threshold of temperature increase from which climate damages increase significantly. To fit with on-going climate negotiations, this threshold is set at 2êC. Regardless of the bleak prospect of passing the threshold, it turns out that among a broad set of scenarios accounting for the diversity of worldviews in the climate debate, overshooting the 2êC target and then facing the resulting damage may become an optimal strategy for many economic agents who are struck by what we call a doomsday effect. We show that this effect happens for any level of jump in damage and dramatically increases if the beginning of mitigation efforts is postponed till the decade 2010-2020 on. In light of these results, we believe that any further delay in reaching a clear international agreement will close the window of opportunity for meeting the 2êC target with a reasonable chance of diplomatic success.

This paper discusses the growth model with environmental constraints recently presented in (Acemoglu et al., 2011) which focuses on the redirection of technical change by climate policies with research subsidies and a carbon tax. First, Acemoglu et al.'s model and chosen parameters yield numerical results that do not support the conclusion that ambitious climate policies can be conducted “without sacrificing (much or any) long-run growth”. Second, they select unrealistic key parameters for carbon sinks and elasticity of substitution. We find that more realistic parameters lead to very different results. Third, the model leads to an unrealistic conclusion when used to analyse endogenous growth, suggesting specification problems.