ECC3640 Economics of Climate Change
The Complete Exam Bible · S2 2026ECC3640 Overview
- Semester 2 2026
- Monash University
- Level 3 economics
- Closed-book final eExam
ECC3640 Economics of Climate Change examines climate change as a problem of impacts, incentives, uncertainty and collective choice.
- Assessed by Coursework plus a final eExam worth 40%
- Exam format Extended matching across four parts
- Core method Connect mechanism, evidence and policy response
- Quantitative focus Recompute cost-benefit and discounting models
How ECC3640 is assessed
| Component | Weight | Format |
|---|---|---|
| Weekly Discussion Forum | 18% | Individual contributions, assessed at three checkpoints |
| Workshop Contributions | 10% | Individual contributions assessed during class |
| Practice Quizzes | 6% | Individual, with the highest six completed by deadline counting |
| Policy Brief Plan | 2% | Plan completed individually or in a group of up to three |
| Policy Brief | 24% | Evidence-based policy brief of 2,500 words |
| Final E-exam | 40% | Closed-book, fully invigilated extended matching examination |
The numeric rows sum to 100%. The final exam page states that the exam component has no hurdle requirement. The unit summary refers readers to the handbook for unit-level hurdle rules, and the current handbook record publishes no hurdle row.
What ECC3640 covers
Follow the economic chain from climate impacts and damage valuation to cooperation, mitigation, enterprise action and adaptation.
Climate Science and Scepticism
Greenhouse mechanisms, climate evidence, model uncertainty and disciplined evaluation of sceptical claims.Climate Science and Scepticism supplies the physical evidence that later economic analysis treats as an input.
- Greenhouse effect and radiative forcing
- Greenhouse gases and atmospheric concentration
- Observed warming and extreme events
- Equilibrium climate sensitivity
- Anthropogenic influence
- Climate models and scenarios
Impacts, Damages and Economic Costs
Physical impacts, exposure, adaptation, damage functions, non-market valuation and distribution.Impacts, Damages and Economic Costs explains how a physical climate hazard becomes a welfare estimate. Analysts move from hazard to physical impact, exposure and vulnerability, adaptation, market and non-market valuation, and finally residual damage.
- Climate hazards
- Physical impacts
- Exposure and vulnerability
- Autonomous adaptation
- Policy-driven adaptation
- Damage functions
Climate Cost-Benefit Analysis
Marginal damage, marginal abatement cost, optimal concentration, carbon price and sensitivity analysis.Climate Cost-Benefit Analysis joins the damage and mitigation sides of policy.
- Integrated assessment models
- Climate damage costs
- Abatement costs
- Marginal damage
- Marginal abatement cost
- Optimal concentration
Equity, Risk and Uncertainty
Discounting, the Ramsey rule, fat tails, structural uncertainty and intergenerational equity.Equity, Risk and Uncertainty examines how climate policy compares welfare across time, people and possible states of the world.
- Present value
- Discrete discounting
- Ramsey rule
- Pure time preference
- Consumption growth
- Risk and probability
International Climate Agreements
Global public goods, free-riding, strategic cooperation, agreement design and national contributions.International Climate Agreements treats mitigation as a global public good. Benefits are broadly non-rival and difficult to exclude, so each country can hope to free-ride on the effort of others.
- Global public goods
- Vertical demand addition
- Free-riding
- Prisoners' dilemma
- Nash equilibrium
- Kyoto architecture
Carbon Budgets and Stabilisation
Cumulative emissions, stabilisation pathways, energy transition, system costs and stranded assets.Carbon Budgets and Stabilisation connects a temperature objective with cumulative emissions, an emissions pathway and sector transformation.
- Temperature objectives
- Cumulative emissions
- Carbon budgets
- Stabilisation pathways
- Energy transition
- Variable renewables
Choosing Mitigation Instruments
Standards, carbon taxes, subsidies, emissions trading, uncertainty and cost-effective allocation.Choosing Mitigation Instruments compares direct quantity regulation with prices, subsidies and emissions trading. Under certainty, a price and quantity can be calibrated to reach the same emissions outcome.
- Quantity regulation
- Carbon taxation
- Abatement subsidies
- Emissions trading
- Price uncertainty
- Quantity uncertainty
Australian Climate Policy
Policy bases, additionality, leakage, distribution, durability and policy-brief evaluation.Australian Climate Policy evaluates changing combinations of targets, renewable support, carbon pricing, purchasing schemes, facility baselines and standards through their implementation mechanisms.
- Policy objectives
- Implementation mechanisms
- Policy bases
- Carbon pricing
- Direct action
- Additionality
Enterprise-Driven Decarbonisation
Operational targets, transition investment, climate bonds, certification and emissions integrity.Enterprise-Driven Decarbonisation examines how organisations turn climate commitments into procurement, investment, operational change and finance.
- Emissions inventories
- Net-zero commitments
- Transition planning
- Microgrid investment
- Power procurement
- Climate bonds
Adaptation Economics
Autonomous and policy-driven adaptation, avoided damage, non-market value and residual risk.Adaptation Economics compares actions that reduce harm from climate impacts that occur despite mitigation.
- Autonomous adaptation
- Policy-driven adaptation
- Hard protection
- Soft protection
- Avoided damage
- Residual risk
The unit moves from the physical evidence needed for economic analysis into damage valuation and integrated assessment, then tests how discounting, risk and equity change a policy recommendation. International agreements are analysed as a global public-good problem. Domestic mitigation is compared across standards, taxes, subsidies and emissions trading, with Australian policy providing the applied setting.
The closing topics consider enterprise-driven decarbonisation, climate finance and adaptation.
The assessment design rewards active reasoning. Weekly discussion, workshop contributions and practice quizzes develop the same analytical moves used in the policy brief and final eExam. The current exam page describes a closed-book, fully invigilated eExam worth 40%.
It contains four extended matching problems, each with five questions. Science and Stabilisation remain part of the course map but are excluded from final-exam coverage under the current notice.
The mathematically important pages are not formula decoration.
The Quiggin framework sets marginal damage equal to marginal abatement cost, discounting changes the present value of future loss, and policy-instrument choice depends on uncertainty and relative slopes. Every worked number in this guide is recomputed from printed steps. Policy answers then widen the boundary to implementation, distribution and evidence quality.
Worked example · free
Find an optimal concentration in a stylised climate model
- +1Write the solution G* = (kA × GBAU + kD × G0) ÷ (kA + kD).
- +1Compute the numerator: 0.20 × 660 + 0.30 × 360 = 132 + 108 = 240.
- +2Compute the denominator: 0.20 + 0.30 = 0.50, so G* = 240 ÷ 0.50 = 480 ppm.
- +1Verify marginal damage: 2 × 0.30 × (480 − 360) = 72.
- +1Verify marginal abatement cost: 2 × 0.20 × (660 − 480) = 72.
Key terms
- Marginal Damage
- The additional climate harm caused by one more unit of the policy variable, such as atmospheric concentration.
- Marginal Abatement Cost
- The additional resource cost of achieving one more unit of emissions reduction.
- Damage Function
- A modelled relationship translating climate change into economic welfare loss under stated assumptions.
- Discount Rate
- The rate used to convert future benefits and costs into a present value.
- Carbon Budget
- A cumulative emissions amount associated with a chosen temperature objective and likelihood.
- Free-Riding
- Benefiting from mitigation supplied by others while avoiding a contribution to its cost.
- Carbon Leakage
- A shift of production or emissions outside a regulated jurisdiction that offsets domestic reductions.
- Additionality
- The requirement that a credited outcome occurred because of the policy or financed intervention.
- Residual Risk
- The climate harm that remains after mitigation or adaptation measures are applied.
- Climate Bond
- A debt security whose proceeds finance assets meeting stated climate criteria and reporting rules.
ECC3640 FAQ
How is the final grade divided?
The published structure is Weekly Discussion Forum 18%, Workshop Contributions 10%, Practice Quizzes 6%, Policy Brief Plan 2%, Policy Brief 24% and Final E-exam 40%. These numeric rows total 100% of the course grade.
What is the final exam format?
The current exam page describes a closed-book, fully invigilated eExam with four extended matching parts. Each part contains five questions, each fully correct answer is worth two marks, and the paper totals forty marks.
Which topics are examinable?
The exam page says every topic with a practice quiz is examinable except Science in week 2 and Stabilisation in week 7. Enterprise-driven decarbonisation has no weekly quiz and supports the policy brief.
How much mathematics is involved?
The course uses real quantitative reasoning in cost-benefit models, discounting, cumulative emissions and policy allocation. Revision should emphasise interpretation as well as substitution, units and direction checks.
How should I approach extended matching questions?
Predict the concept from the launch pad, test every option against the exact sentence, count the required selections and remove unsupported extras. A familiar topic word is not enough to justify selection.
What makes a strong policy brief?
Define the policy objective and mechanism, identify affected decisions and entities, use evidence to evaluate efficiency and equity, then propose an implementable amendment written for a policymaker audience.
Is the final exam a hurdle?
The final exam page expressly states that the exam component has no hurdle requirement. The current handbook fetch also publishes no hurdle rows for the unit. The exam still contributes forty percent of the final grade.
Questions students ask in each ECC3640 chapter
- What is natural about the greenhouse effect?
- Naturally occurring greenhouse gases retain heat and make Earth habitable. The climate-policy question concerns the additional forcing and warming associated with higher human-driven concentrations, not whether the natural mechanism exists. Chapter 01 · Climate Science and Scepticism
- Why do equal hazards produce different damages?
- Exposure, sector mix, infrastructure, income and adaptive capacity differ across places. A similar physical hazard can therefore create very different physical impacts, monetary losses and welfare burdens. Chapter 02 · Impacts, Damages and Economic Costs
- Why does the optimum satisfy equal marginal values?
- If marginal damage exceeds marginal abatement cost, tighter policy avoids more harm than it costs. If abatement cost exceeds damage, the proposed tightening is too expensive. Equality marks the interior minimum. Chapter 03 · Climate Cost-Benefit Analysis
- Why does a higher discount rate weaken distant benefits?
- The future amount is divided by a larger compounded denominator. The mathematical effect is clear, while the empirical and ethical justification for the chosen rate remains open to argument. Chapter 04 · Equity, Risk and Uncertainty
- Why is mitigation a global public good?
- A more stable climate benefits countries broadly without one country's benefit substantially reducing another's, and non-contributors are difficult to exclude. That structure creates free-rider incentives. Chapter 05 · International Climate Agreements
- Why are cumulative emissions important?
- Long-lived carbon dioxide accumulates in the atmosphere, so temperature outcomes depend strongly on emissions added over time. One low annual figure cannot offset an excessive earlier path automatically. Chapter 06 · Carbon Budgets and Stabilisation
- When does a price instrument have an advantage?
- When marginal benefits are relatively flat and marginal abatement costs are steep or uncertain, a fixed price can limit the welfare loss from unexpectedly expensive abatement. Chapter 07 · Choosing Mitigation Instruments
- Why must policy comparisons use the same target?
- A policy can appear cheaper because it covers fewer emissions or delivers less reduction. Holding the environmental outcome constant isolates differences in resource and administrative cost. Chapter 08 · Australian Climate Policy
- Why does the emissions boundary matter?
- Outsourcing or reorganising an activity can lower reported direct emissions without lowering total relevant emissions. A stable boundary reveals whether performance improved or merely moved elsewhere. Chapter 09 · Enterprise-Driven Decarbonisation
- How are mitigation and adaptation connected?
- Mitigation changes the future hazard by reducing emissions, while adaptation changes exposure and vulnerability. A lower hazard reduces adaptation needs, and effective adaptation reduces residual loss that mitigation cannot avoid. Chapter 10 · Adaptation Economics
How to study for the exam
Start with the causal map for each topic, then rebuild the worked example and finish with original extended matching. For quantitative topics, keep the formula, substitution, result with units and a direction check on separate lines. For policy topics, identify the objective, implementation mechanism, behavioural response, evidence and distribution before recommending.
Use the official practice quizzes to learn the option-set style, and use the official platform mock to rehearse navigation because the captured folder includes an answer key rather than the full mock paper. In the final revision pass, prioritise the topics inside the published exam boundary and practise rejecting plausible but overbroad options.
For the policy brief, keep the target audience visible, use descriptive headings, support causal claims with appropriate evidence and make the amendment operational rather than aspirational.
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