Yongyang Cai, an associate professor and computational and environmental economist in The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES) department of Agricultural, Environmental, and Development Economics (AEDE), is the 2021 recipient of the Erik Kempe Award in environmental and resource economics.
Cai and his co-author, Thomas Lontzek, were honored for their article, “The Social Cost of Carbon with Economic and Climate Risks”, published in the Journal of Political Economy. The award is given every two years to the best paper in the field of environmental and resource economics where at least one author is affiliated with a European research institution.
The social cost of carbon (SCC) is an important measure that puts an estimated dollar-amount on the economic damages caused by every additional ton of greenhouse gas in the atmosphere as it relates to impacts on human well-being, labor productivity and agricultural productivity. Through quantifying extra costs associated with carbon emissions that are not already reflected in market prices, the SCC gives policy makers a clearer idea of the cost and benefits of what might happen if certain climate policies or regulations were enacted. The SCC has been used to guide numerous policies and regulations at the state, federal and international levels. Computational economists like Cai estimate the SCC and model outcomes of potential environmental and climate policies. These potential outcomes and insights give policy makers important information about economic impacts certain policies could have over time.
Previous models utilized to analyze policy did not count for the many uncertainties that exist in both future economic and climate conditions. Cai’s work uses large-scale computing to analyze policies by using more complex and realistic models that introduce these important uncertainties into the mix. “This paper bridges an important gap,” members of the Kempe award nominating committee said in a written statement. “Cai and Lontzek have extended the modelling framework for studying economy-climate interactions in a very useful way as well as presented implications of clear practical relevance for climate policy.”
Cai’s findings indicate that current policy analyses significantly underestimate the SCC and ignore potential abrupt changes to the climate system. “Climate change issues are not just about the expected state of the climate in the future but also about avoiding disasters,” said Cai. “Climate change policy must recognize the uncertainty about the future SCC and be prepared to consider policies, such as geoengineering and carbon capture, that are currently considered to have costs that would never be justified by previous models.” Uncertainties about future economic and climate conditions can substantially impact policy-making decisions, and this new framework can now account for them. The award nominating committee commended Cai and Lontzek for their work, referring to it as a novel and insightful contribution to the development of integrated assessment models.
Known internationally for his work in climate change and computational economics, Cai has published many peer-reviewed papers in leading academic journals and is a sought-after speaker who has been invited to give more than 55 presentations and talks. His work has been cited by the White House and the 2018 Nobel Committee. He is a co-investigator on several research projects funded by the National Science Foundation and USDA-NIFA. He currently serves as an Associate Editor at Climatic Change, and an editorial board member at Computational Economics.