Progressively adjusting climate policies will entail adjustment costs for society. This paper develops a conceptual model and numerical example that illustrate the risk associated with exposure to the high costs of complying with future emissions controls and how this risks trades off against that from potentially premature investment into abatement. We then highlight the potentially unique role of tropical forest protection in helping to manage these risks by providing a cost-effective “buffer” of near term emissions reductions at a globally significant scale. This buffer would provide insurance against the risk of suddenly tightening targets, as well as providing other critical environmental benefits. We further examine how a version of a private finance instrument in the form of long-dated ‘call’ options on verified reductions in emissions from deforestation and forest degradation (i.e. REDD +) can help to operationalize this risk-hedging buffer creation. Options on REDD + could aid both regulated businesses and tropical nations to manage their respective risks. REDD + options could deliver sufficient abatement to significantly hedge exposure of regulated entities to potential corrections in climate policy while channeling financial resources to defer deforestation even as climate policies continue to evolve.
Focus areas: environmental and natural resource economics, climate change, carbon markets, carbon pricing, international climate policy, conservation policy, econometric analysis of land-use change, economics of tropical deforestation, reducing emissions from deforestation, and forest degradation (REDD+).
Ruben Lubowski teaches environmental and natural resource economics, with a focus on carbon pricing policies. He specializes on carbon market design, the economics of land-use change, and incentive-based policies and financing approaches to reduce deforestation and other land-based emissions. He is the Chief Natural Resource Economist at the Environmental Defense Fund (EDF), a nonprofit environmental advocacy group working to find pragmatic science-based solutions to environmental problems. He overseas research efforts on climate policy and works with researchers and policy practitioners around the world to apply economic analysis to help design and implement strategies to conserve forests, promote sustainable agriculture, and reduce greenhouse gas emissions.
Lubowski was a lead author of the World Bank and International Carbon Action Partnership (ICAP) handbook on emissions trading system design, which policymakers in various countries are using to develop carbon market programs. He has provided expert testimony at Congressional and regulatory hearings and briefings in the US and overseas, and is invited often to serve on technical advisory groups and speak to diverse audiences worldwide. In addition to his teaching at Columbia, he has also taught as an Adjunct Professor at New York University’s Stern School of Business.
He has served as an economist and land-use expert at the United States Department of Agriculture. He also developed and managed environmental projects in Latin America at the United Nations Development Program. He conducted research at the World Bank and the Harvard Institute for International Development, including a two-year study in Sri Lanka to quantify the contribution of tropical forest products to the livelihoods of rainforest communities.
Lubowski received his Ph.D. and master’s degree in Political Economy and Government as well as his bachelor’s degree from Harvard University.