Chapter 15 — Further Reading

Foundational works on climate economics

William Nordhaus, The Climate Casino: Risk, Uncertainty, and Economics for a Warming World, Yale University Press, 2013 Nordhaus (Nobel 2018) makes the case for carbon pricing as the efficient response to climate change. Clear, rigorous, and accessible. The book includes a clear explanation of the DICE model and the discount rate debate.

Nicholas Stern, The Economics of Climate Change: The Stern Review, Cambridge University Press, 2007 The 700-page report that changed the global climate debate. At minimum, read the executive summary and the chapters on the discount rate.

Martin Weitzman, "On Modeling and Interpreting the Economics of Catastrophic Climate Change," Review of Economics and Statistics, 2009 Weitzman's "fat tails" argument: the probability of catastrophic outcomes is higher than standard models assume, and these tail risks should dominate the cost-benefit analysis. One of the most influential papers in climate economics.

William Nordhaus, "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, 2007 Nordhaus's detailed critique of the Stern Review. The essential companion to the Stern Review itself.

On carbon pricing

Gilbert Metcalf, Paying for Pollution: Why a Carbon Tax Is Good for America, Oxford University Press, 2019 A clear, accessible case for a U.S. carbon tax by a leading environmental economist.

Lawrence Goulder and Andrew Schein, "Carbon Taxes versus Cap and Trade: A Critical Review," Climate Change Economics, 2013 The best comparison of the two main market-based approaches.

Resources for the Future, multiple policy briefs on carbon pricing (rff.org) RFF has been the leading think tank on carbon pricing for decades. Their briefs are consistently excellent.

On the Inflation Reduction Act (case study 2)

Rhodium Group, "A Turning Point for US Climate Progress: Assessing the Climate and Clean Energy Provisions in the Inflation Reduction Act," August 2022 The most-cited independent analysis of the IRA's likely emissions impact.

Jesse Jenkins et al., "The Inflation Reduction Act Will Set the United States on Course for ~40% Emissions Reductions by 2030," REPEAT Project, Princeton University, 2022 Princeton's detailed modeling of the IRA's effects. Available free online.

Brookings Institution, multiple analyses of the IRA, 2022–2025 Several excellent policy analyses of the IRA's climate, industrial, and fiscal implications.

Congressional Budget Office, Estimated Budgetary Effects of H.R. 5376, August 2022 The CBO's official scoring of the IRA. Free at cbo.gov.

On the discount rate debate (case study 1)

Partha Dasgupta, "Discounting Climate Change," Journal of Risk and Uncertainty, 2008 Dasgupta, a Cambridge economist, offers an intermediate position between Stern and Nordhaus.

Christian Gollier, Pricing the Planet's Future: The Economics of Discounting in an Uncertain World, Princeton University Press, 2012 A rigorous treatment of discounting under uncertainty. Technical but important.

Tyler Cowen and Derek Parfit, "Against the Social Discount Rate," in Justice Between Age Groups and Generations, 1992 A philosophical argument for a near-zero pure time preference, by a philosopher (Parfit) and an economist (Cowen).

On the IPCC and climate science

IPCC, Sixth Assessment Report (AR6), 2021–2023 The authoritative summary of climate science, impacts, and mitigation options. The "Summary for Policymakers" of each working group report is accessible to non-specialists.

Intergovernmental Panel on Climate Change (ipcc.ch) All IPCC reports are freely available.

On green industrial policy

Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn, and David Hemous, "The Environment and Directed Technical Change," American Economic Review, 2012 A theoretical paper showing that environmental policy can redirect innovation toward clean technologies — the mechanism the IRA is designed to exploit.

Mariana Mazzucato, The Entrepreneurial State, Public Affairs, 2013 Mazzucato argues that government investment in clean energy (and technology more broadly) is not "picking winners" but creating the conditions for private-sector innovation. Controversial but influential.

On just transition

Kate Aronoff, Alyssa Battistoni, Daniel Aldana Cohen, and Thea Riofrancos, A Planet to Win: Why We Need a Green New Deal, Verso, 2019 A progressive case for combining climate policy with economic justice. Useful for understanding the "just transition" framing.

Adele Morris, "Build a Bridge: A Proposal for a US Carbon Tax," Brookings Institution, 2016 A specific proposal for a carbon tax with revenue devoted to compensating workers and communities affected by the transition away from fossil fuels.

On technology costs

International Renewable Energy Agency (IRENA), Renewable Power Generation Costs, annual reports The most comprehensive data on the falling costs of solar, wind, and battery storage. Free online at irena.org.

Lazard, Levelized Cost of Energy Analysis, annual (lazard.com) Lazard's widely cited annual comparison of the cost of electricity from different sources.

A reading order recommendation

If you have time for one of the books above, read Nordhaus's The Climate Casino. It gives you the full framework for thinking about climate economics, including the discount rate debate.

If you want the policy-focused case for carbon pricing, read Metcalf's Paying for Pollution.

If you want to understand the IRA specifically, read the Rhodium Group analysis and the Jesse Jenkins / Princeton REPEAT Project analysis.

Chapter 16 — Information Asymmetry, Adverse Selection, and the Markets That Almost Don't Work — closes Part III. It applies the information-failure concept that was previewed in Chapter 14's healthcare analysis to a broader set of markets, including the 2008 mortgage-backed securities market.