Glossary

abatement: Practices to limit or reverse environmental damages. See also: abatement policy.
abatement policy: A policy designed to reduce environmental damages. See also: abatement.
adaptation policies: Adjustments in ecological, social, or economic systems in response to actual or expected climate changes and their effects, aimed at moderating harm or exploiting beneficial opportunities.
altruism: Altruism is a social preference: a person who is willing to bear a cost to benefit somebody else is said to be altruistic.
asset price bubble: n asset price bubble is an episode in which the market price of an asset rises substantially and continuously over time, fuelled by expectations of future price increases (that is, people want to hold the asset because they believe that its price will be higher in future). Eventually the bubble bursts and the price drops suddenly.
capacity building: The strengthening of skills, institutions, and governance systems of individuals and organizations so they can design, implement, maintain, and govern climate policies and technologies independently over time.
carbon pricing: An approach to reducing global warming emissions by charging those who emit carbon dioxide for their emissions; this includes carbon taxes and cap-and-trade systems.
climate justice: A framework that recognizes the unequal responsibilities and impacts of climate change across different populations and emphasizes fairness in addressing these inequalities.
climate-resilient development (CRD): Development that integrates climate adaptation and mitigation efforts with sustainable development to enhance systemic resilience across society and ecosystems.
cumulative emissions: The total greenhouse gas emissions produced over a specific time period, often used to assess historical responsibility for climate change.
discount rate: A measure of someone’s impatience: how much the person values an additional unit of consumption now relative to an additional unit of consumption later. It is equal to the slope of the indifference curve for consumption now and consumption later, minus one. Also known as: subjective discount rate.
emissions vulnerability paradox: The situation in which those who contribute least to climate change are often the most affected by its consequences and the least equipped to cope with them, and vice versa.
external cost, negative externality, external diseconomy: A negative external effect: that is, a negative effect of an economic decision on other people, which is not taken into account by the decision-maker. It may be described as an external cost, or a negative externality, or an external diseconomy. See also: external effect.
external effect, externality: An external effect occurs when a person’s action confers a benefit or imposes a cost on others and this cost or benefit is not taken into account by the individual taking the action. External effects are also called externalities.
game: A model of strategic interaction that describes the players, the feasible strategies, the order of play, the information that the players have, and their pay-offs. See also: game theory.
game theory: A branch of mathematics that studies strategic interactions, meaning situations in which each actor knows that the benefits they receive depend on the actions taken by all. See also: game.
Gini coefficient: A measure of inequality of a quantity such as income or wealth, varying from a value of zero (if there is no inequality) to one (if a single individual receives all of it). It is the average difference in, say, income between every pair of individuals in the population relative to the mean income, multiplied by one-half. Other than for small populations, a close approximation to the Gini coefficient can be calculated from a Lorenz curve diagram. See also: Lorenz curve.
government failure: A failure of political accountability. (This term is widely used in a variety of ways, none of them strictly analogous to market failure, for which the criterion is simply Pareto inefficiency.)
intergenerational equity: The principle of equity in the distribution of resources and opportunities between current and future generations.
intragenerational equity: The principle of equity in the distribution of resources and opportunities within the same generation, typically across income or social groups.
Lorenz curve: A graphical representation of the inequality of some quantity such as income or wealth. Taking income as an example, individuals in the population are arranged in ascending order of income. First we calculate the total income of the population. Then for each level of income, we plot the percentage of total income held by people at this income level or lower, against the percentage of people at this income level or lower. The area between the Lorenz curve and the 45-degree line, expressed as a fraction of the total area below the 45-degree line, is a measure of inequality. Other than for small populations, it is a close approximation to the Gini coefficient. See also: Gini coefficient.
marginal social cost, MSC: The marginal social cost (MSC) is the cost of producing an additional unit of output, including both the cost for the producer (marginal private cost) and the costs imposed on others (the MEC). MSC = MPC + MEC.
market failure: If the allocation resulting from market interactions is not Pareto efficient, we describe the situation as a market failure. The term may be used loosely to refer to any interaction resulting in a Pareto-inefficient allocation, whether or not a specific market is concerned.
mitigation policies: Efforts to reduce or prevent the emission of greenhouse gases.
Multilateral Environmental Agreements (MEAs): Treaties between three or more countries aimed at addressing environmental issues with coordinated international action.
Nash equilibrium: A Nash equilibrium is an economic outcome where none of the individuals involved can bring about an outcome they prefer by unilaterally changing their own action. More formally, in game theory it is defined as a set of strategies, one for each player in the game, such that each player’s strategy is a best response to the strategies chosen by everyone else. See also: game theory.
Pareto efficient, Pareto efficiency: An allocation is Pareto efficient if there is no feasible alternative allocation in which at least one person would be better off, and nobody worse off.
Pigouvian subsidy: A government subsidy on activities that generate positive external effects, so as to correct an inefficient outcome. See also: external effect, Pigouvian tax.
Pigouvian tax: A tax levied on activities that generate negative external effects so as to correct an inefficient market outcome. See also: external effect, Pigouvian subsidy.
polluter pays principle: A guide to environmental policy according to which those who impose negative environmental effects on others should be made to pay for the damages they impose, through taxation or other means.
poverty: Lacking the basic income needed to maintain a decent standard of living.
prisoners’ dilemma: A prisoners’ dilemma is a game that has a dominant strategy equilibrium, but also has an alternative outcome that gives a higher pay-off to all players. So in this game, the Nash equilibrium is not Pareto efficient.
public good: A good that, if available to anyone, can be made available to everyone at no additional cost. This characteristic is called non-rivalry. Some economists define public goods more strictly as goods that are both non-rival and non-excludable (non-excludable means that it is impossible to prevent anyone from consuming them).
social cost of carbon (SCC): An estimate of the economic damages associated with a one-ton increase in carbon dioxide emissions in a given year.
social dilemma: A situation in which actions taken independently by individuals in pursuit of their own private objectives result in an outcome which is inferior to some other feasible outcome that could have occurred if people had acted together, rather than as individuals.
social norm: An understanding that is common to most members of a society about what people should do in a given situation when their actions affect others.
technology transfer: The sharing of climate-relevant technologies, knowledge, and technical expertise—such as renewable energy systems, adaptation tools, or early-warning technologies—by actors with greater technological capacity with those with less, enabling effective mitigation and adaptation.
Theil index: An inequality metric derived from information theory that decomposes inequality into within-group and between-group components.
tipping point: A tipping point is an unstable equilibrium at the boundary between two regions. A small movement into either of the regions causes a movement further into the same region, away from the equilibrium. See also: asset price bubble.
tragedy of the commons: A social dilemma in which self-interested individuals acting independently deplete a common resource, lowering the payoffs of all. See also: social dilemma.