Climate change mitigation: comparative assessment of Malaysian and ASEAN scenarios

Abstract

This paper analyses empirically the optimal climate change mitigation policy of Malaysia with the business as usual scenario of ASEAN to compare their environmental and economic consequences over the period 2010–2110. A downscaling empirical dynamic model is constructed using a dual multidisciplinary framework combining economic, earth science, and ecological variables to analyse the long-run consequences. The model takes account of climatic variables, including carbon cycle, carbon emission, climatic damage, carbon control, carbon concentration, and temperature. The results indicate that without optimal climate policy and action, the cumulative cost of climate damage for Malaysia and ASEAN as a whole over the period 2010–2110 would be MYR40.1 trillion and MYR151.0 trillion, respectively. Under the optimal policy, the cumulative cost of climatic damage for Malaysia would fall to MYR5.3 trillion over the 100 years. Also, the additional economic output of Malaysia will rise from MYR2.1 billion in 2010 to MYR3.6 billion in 2050 and MYR5.5 billion in 2110 under the optimal climate change mitigation scenario. The additional economic output for ASEAN would fall from MYR8.1 billion in 2010 to MYR3.2 billion in 2050 before rising again slightly to MYR4.7 billion in 2110 in the business as usual ASEAN scenario.

Appendix 1

A. Mathematical Statement of dual Dynamic non-linear Quantitative Model

$$ {W}_{\mathrm{r}}={\displaystyle \sum_{t=1}^{T \max }{u}_{\mathrm{r}}\left[{c}_{\mathrm{r}}(t),{l}_{\mathrm{r}}(t)\right]}{R}_{\mathrm{r}}(t) $$

(1)

$$ {R}_{\mathrm{r}}\left({t}_{\mathrm{r}}\right)={\left(1+{\rho}_{\mathrm{r}}\right)}^{-t} $$

(2)

$$ {U}_{\mathrm{r}}\left[{c}_{\mathrm{r}}(t),{L}_{\mathrm{r}}(t)\right]={l}_{\mathrm{r}}(t)\left[{c}_{\mathrm{r}}\right.{(t)}^{1-\alpha }/\left(1-\alpha \right) $$

(3)

$$ {Q}_{\mathrm{r}}(t)={\varOmega}_{\mathrm{r}}(t)\left[1-{\varLambda}_{\mathrm{r}}(t)\right]{A}_{\mathrm{r}}(t){K}_{\mathrm{r}}{(t)}^{\gamma }{L}_{\mathrm{r}}{(t)}^{1-\gamma } $$

(4)

$$ {\varOmega}_{\mathrm{r}}(t)=1/\left[1+{\varPi}_{1_{\mathrm{r}}}{T}_{AT_{\mathrm{r}}}(t)+{\varPi}_{2_{\mathrm{r}}}{T}_{AT_{\mathrm{r}}}{(t)}^2\right] $$

(5)

$$ {\varLambda}_{\mathrm{r}}(t)={\pi}_{\mathrm{r}}(t){\theta}_{1_{\mathrm{r}}}(t){\mu}_{\mathrm{r}}{(t)}^{\theta_2} $$

(6)

$$ {Q}_{\mathrm{r}}(t)={C}_{\mathrm{r}}(t)+{I}_{\mathrm{r}}(t) $$

(7)

$$ {C}_{\mathrm{r}}(t)={C}_{\mathrm{r}}(t)/{L}_{\mathrm{r}}(t) $$

(8)

$$ {K}_{\mathrm{r}}(t)={I}_{\mathrm{r}}(t)+\left(1-{\delta}_k\right){K}_{\mathrm{r}}\left(t-1\right) $$

(9)

$$ {E}_{Ind_{\mathrm{r}}}(t)={\sigma}_{\mathrm{r}}(t)\left[1-{\mu}_{\mathrm{r}}(t)\right]{K}_{\mathrm{r}}{(t)}^{\lambda }{L}_{\mathrm{r}}{(t)}^{1-\lambda } $$

(10)

$$ {\mathrm{CCum}}_{\mathrm{r}}\le {{\displaystyle \sum_{t=0}^{T \max }{E}_{Ind(t)}}}_{\mathrm{r}} $$

(11)

$$ {E}_{\mathrm{r}}(t)={E}_{Ind_{\mathrm{r}}}(t)+{E}_{{\mathrm{Land}}_{\mathrm{r}}}(t) $$

(12)

$$ {M}_{AT_{\mathrm{r}}}(t)={E}_{\mathrm{r}}(t)+{\phi}_7{M}_{AT_{\mathrm{r}}}\left(t-1\right)+{\phi}_{11}{M}_{{\mathrm{UP}}_{\mathrm{r}}}\left(t-1\right) $$

(13)

$$ {M}_{{\mathrm{UP}}_{\mathrm{r}}}(t)={\phi}_{11}{M}_{AT_{\mathrm{r}}}\left(t-1\right)+{\phi}_{11}{M}_{{\mathrm{UP}}_{\mathrm{r}}}\left(t-1\right)+{\phi}_{11}{M}_{LO_{\mathrm{r}}}\left(t-1\right) $$

(14)

$$ {M}_{LO_{\mathrm{r}}}(t)={\phi}_{12}{M}_{{\mathrm{UP}}_{\mathrm{r}}}\left(t-1\right)+{\phi}_{12}{M}_{LO_{\mathrm{r}}}\left(t-1\right) $$

(15)

$$ {F}_{\mathrm{r}}(t)={\eta}_{\mathrm{r}}\left\{{ \log}_2\left[{M}_{AT_{\mathrm{r}}}/{M}_{AT_{\mathrm{r}}}\left(1900\right.\right]\right\}+{F}_{{\mathrm{EX}}_{\mathrm{r}}}(t) $$

(16)

$$ {T}_{AT_{\mathrm{r}}}={T}_{AT_{\mathrm{r}}}\left(t-1\right)+{\zeta}_1\left\{{F}_{\mathrm{r}}(t)-{\zeta}_2{T}_{AT_{\mathrm{r}}}\left(t-1\right)-{\zeta}_3{T}_{AT_{\mathrm{r}}}\left(t-1\right){T}_{LO_{\mathrm{r}}}\left(t-1\right)\right\} $$

(17)

$$ {T}_{LO_{\mathrm{r}}}(t)={T}_{LO_{\mathrm{r}}}\left(t-1\right)+{\zeta}_4\left\{{T}_{AT_{\mathrm{r}}}\left(t-1\right)-{T}_{LO_{\mathrm{r}}}\left(t-1\right)\right\} $$

(18)

$$ {\prod}_{\mathrm{r}}(t)={\varphi}_{\mathrm{r}}{(t)}^{1-{\theta}_2} $$

(19)

B. Variable definitions and Units (Endogenous Variables are Marked with Asterisks)

A(t):

Total Factor Productivity (Productivity Units)

*c(t):

Capita Consumption of Goods and Services (RM per Person)

*C(t):

Consumption of Goods and Services (RM)

E _Land(t):

Emissions of Carbon from Land use (Carbon per Period)

*E _Ind(t):

Industrial Carbon Emissions (Carbon per Period)

*E(t):

Total Carbon Emissions (Carbon per Period)

*F(t), FEX(t):

Total and Exogenous Radiative Forcing

*I(t):

Investment (RM)

*K(t):

Capital Stock (RM)

L(t):

Population and Labour Inputs (Number)

*M _AT(t), M _UP(t), M _LO(t):

Mass of Carbon in Reservoir for Atmosphere, Upper Oceans, and Lower Oceans (Carbon, Beginning of Period)

*Q(t):

Net Output of Goods and Services, net of Abatement and Damages (RM)

T :

Time (Decades from 2010 to 2020, 2021–2030,…)

*T _AT(t), T _LO(t):

Global Mean Surface Temperature and Temperature of Lower Oceans (°C increase from 1900)

*U[c(t), L(t)]:

Instantaneous Utility Function (Utility per Period)

*W :

Objective Function in Present Value of Utility (Utility Units)

*Λ(t):

Abatement Cost Function (Abatement Costs as Fraction of World Output)

*μ(t):

Emission Control Rate (Fraction of Uncontrolled Emissions)

*Ω(t):

Damage Function (Climate Damages as Fraction of World Output)

*φ(t):

Participation Rate (Fraction of Emissions Included in Policy)

*∏(t):

Participation Cost Markup (Abatement Cost with Incomplete Participation as Fraction of Abatement Cost with Complete Participation)

*σ(t):

Ratio of Uncontrolled Industrial Emissions to Output

CCum:

Maximum Consumption of Fossil Fuels (Tons of Carbon)

γ :

Elasticity of Output with Respect to Capita (Pure Number)

δ _k :

Rate of Depreciation of Capital (Per Period)

R(t):

Social Time Preference Discount Factor (Per Time Period)

T _max :

Length of Estimate Period for Model

η :

Temperature-Forcing Parameter (°C Watts per Meter Squared)

ϕ :

Parameters of the Carbon Cycle (Flows per Period)

σ :

Pure Rate of Social Time Preference (Per Year)

θ _1 … 2 :

Parameters of the Abatement Cost Function

ζ :

Parameters of Climate Equations (Flows per Period)

r:

Country/Region