Classroom/ Laboratory activity: Climate Mitigation and Willingness to Pay

A classroom/laboratory activity based on data on citizens’ willingness to pay to reduce carbon emissions as a method of mitigating climate change. This data is collected through an online survey by the German government and is available for download in Excel, R, and Google Sheet formats.

Students will be able to analyse the data to construct indices for measuring attitudes or opinions. They will also learn to use Cronbach’s alpha and Likert scale. Additionally, they will use mean, standard deviation, correlation/correlation coefficient, and confidence interval to analyze the results. Through this activity, they will be able to compare the measures of willingness to pay with climate policymaking. 

Use this tool to help your students find answers to: 

  1. What is ‘willingness to pay’?
  2. How to measure willingness to pay for non-market goods like abatement to pollution?
  3. What is Cronbach’s alpha? How is it used to assess indices for internal consistency?

About the tool

Tool NameMeasuring Willingness to Pay for Climate Change Mitigation
DisciplineEconomics
Topic(s) in DisciplineWillingness to Pay (WTP), Likert Scale, Cronbach’s Alpha, Value of Abatement, Contingent Valuation, Climate Change Economics
Climate Topic Climate Mitigation and Adaptation; Energy, Economics and Climate Change; Policies, Politics and Environmental Governance
Type of tool Classroom/ Laboratory Activity  
Grade LevelUndergraduate
LocationGlobal, Germany
LanguageEnglish 
Translation
Developed byCORE Project
Hosted atCORE Project Website
Linkhttps://www.core-econ.org/doing-economics/book/text/11-01.html
AccessOnline/Offline
Computer SkillsIntermediate

Reading: The Social Cost of Carbon

A reading titled ‘The Social Cost of Carbon and the Shadow Price of Carbon’ by Richard Price, Simeon Thornton and Stephen Nelson  Department for Environment, Food and Rural Affairs (Defra), London, that discusses the topics of social cost of carbon (SCC) and shadow pricing of carbon (SPC) when formulating appraisals and climate change policies. This resource uses the United Kingdom (UK) as the area of study but can also be used for other regions. The reading introduces the concepts of shadow prices and market prices and explains the link between them. It includes discussions  on the benefits of calculating both the SCC and the SPC to reflect the overall cost of greenhouse gas emissions to determine a well-informed stabilisation goal. It further includes discussions to understand the importance of climate informed policies in the economic assessment of a country.

Students will learn about the social cost of carbon and the shadow price of carbon. They will learn how to  compare the marginal abatement costs and social costs of carbon for different stabilization goals as determined by the Stern Review. Students will further learn the application of the SCC and the SPC when determining cost-effectiveness of resources, the concepts of discounting and discount rates for calculating carbon prices

Use this tool to help your students find answers to: 

  1. Carbon pricing is used as an instrument for making climate policies. Explain.
  2. What is the difference between market prices and shadow prices?
  3. What is the importance of shadow pricing in evaluating the costs of greenhouse gases?

About the tool

Tool NameThe Social Cost of Carbon and the Shadow Price of Carbon: what they are, and how to use them in economic appraisal in the UK 
DisciplineEconomics
Topic(s) in DisciplineEnvironmental Economics, Social Cost of Carbon, Shadow Price of Carbon, Carbon Pricing, Cost-Benefit Analysis, Market Price, Stabilization Goals, Marginal Abatement Cost, Emissions 
Climate Topic Energy, Economics and Climate Change 
Type of tool Reading 
Grade LevelUndergraduate, Graduate
LocationUnited Kingdom 
LanguageEnglish 
Translation
Developed byRichard Price, Simeon Thornton and Stephen Nelson
Hosted atMunich Personal RePEc Archive (MPRA)
Linkhttps://mpra.ub.uni-muenchen.de/74976/1/MPRA_paper_74976.pdf
AccessOnline/Offline 
Computer SkillsBasic