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on Energy Economics |
| By: | Martin Dhaussy (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Nandeeta Neerunjun (Univ. Grenoble Alpes, CNRS, INRAE, Grenoble INP, GAEL, 38000 Grenoble, France); Hubert Stahn (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | The expansion of intermittent electricity increases supply variability and requires greater flexibility from consumers. This results in welfare losses for these agents, which can nevertheless be mitigated by energy storage. Our model analyzes these welfare consequences in the context of short-term variability in renewable energy given fixed dispatchable and storage capacities. We explore an optimal control problem that determines a welfare-maximizing electricity consumption path by adjusting dispatchable and stored energy throughout the short-term production cycle of renewables. This optimization problem identifies three regimes (no storage and active storage, with or without capacity constraints) and provides the associated consumer welfare over this cycle. Under all three regimes, a certain degree of consumer flexibility is part of the optimal solution and entails welfare losses. Active storage reduces these losses but cannot eliminate them completely due to the energy conversion losses induced by this activity. However, when storage capacity is constrained, a proactive adjustment of this capacity can offset the losses. |
| Keywords: | intermittent renewable, energy storage, electricity consumption, welfare analysis, optimal control |
| JEL: | D61 Q40 Q42 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2525 |
| By: | Silke Johanndeiter; Jonas Finke; Justus Heuer |
| Abstract: | Weather, technological and regulatory uncertainties expose actors in highly renewable electricity markets to substantial price and volume risks. Two-way Contracts for Difference (CfDs) can mitigate these risks. They stipulate payments between the government and generators of renewable electricity based on the difference of a strike and a reference price, whose definition and unit of payment differ between CfD designs. We study the effect of three different CfD designs on wind power profit and consumer price volatility under the consideration of uncertain market outcomes in a highly renewable, sector-coupled electricity market. First, we analytically derive optimal strike prices under uncertainty. Second, we numerically determine optimal strike prices based on market expectations retrieved from optimising a set of 36 market scenarios in an energy system model. Third, we study the distribution of ex post market revenues, CfD payments and consumer prices across all 36 scenarios. Compared to purely market-based consumer prices and investor profits, we find all CfDs to significantly reduce volatility. For consumer prices, results show no substantial differences between CfD designs. For investor profits, we identify the highest volatility reduction under a capacity-based CfD with a reference price similar to power plants' individual market revenues. Since such a CfD design is known to diminish the effect of price signals on investment decisions, our results reveal a trade-off between incentivising system-friendliness and reducing investor risk. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.17508 |
| By: | Javier Gonzalez-Ruiz; Carlos Rodriguez-Pardo; Iacopo Savelli; Alice Di Bella; Massimo Tavoni |
| Abstract: | Electricity systems are key to transforming today's society into a carbon-free economy. Long-term electricity market mechanisms, including auctions, support schemes, and other policy instruments, are critical in shaping the electricity generation mix. In light of the need for more advanced tools to support policymakers and other stakeholders in designing, testing, and evaluating long-term markets, this work presents a multi-agent reinforcement learning model capable of capturing the key features of decarbonizing energy systems. Profit-maximizing generation companies make investment decisions in the wholesale electricity market, responding to system needs, competitive dynamics, and policy signals. The model employs independent proximal policy optimization, which was selected for suitability to the decentralized and competitive environment. Nevertheless, given the inherent challenges of independent learning in multi-agent settings, an extensive hyperparameter search ensures that decentralized training yields market outcomes consistent with competitive behavior. The model is applied to a stylized version of the Italian electricity system and tested under varying levels of competition, market designs, and policy scenarios. Results highlight the critical role of market design for decarbonizing the electricity sector and avoiding price volatility. The proposed framework allows assessing long-term electricity markets in which multiple policy and market mechanisms interact simultaneously, with market participants responding and adapting to decarbonization pathways. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.17444 |
| By: | Fumany, Malene; Nguyen-Tien, Viet; Li, Nanxi; Elliott, Robert J.R.; Lander, Laura |
| Abstract: | Lithium-ion batteries (LIBs) are central to the European Union's (EU) Net Zero strategies. Yet, rising regulatory pressures and geopolitical tensions have increased the risk of supply chain bottlenecks for strategic and critical materials such as nickel and cobalt, posing threats not only to the EU's decarbonisation agenda but also to global Net Zero ambitions. In response, EU policymakers have accelerated efforts to develop local battery ecosystems including the recycling of end-of-life LIBs. However, the potential impact of these interventions on material dependencies and battery economics is not well understood. This paper introduces a novel policy-economic framework to assess the prospective evolution of the LIB recycling sector in response to policy changes introduced by the EU Battery Regulation (Regulation (EU) 2023/1542). In particular, drawing on an industry-led survey, the framework evaluates the impact of the mandated minimum recycled content on material flow and battery costs. The results reveal that the Battery Regulation may increase battery cell costs by up to 15 %. While this study is EU-specific, its findings carry broader relevance for international battery policy and market dynamics and provides new evidence on how international policies may impact the future of the battery sector. |
| Keywords: | policy-economic framework; battery recycling; battery costs; critical minerals; EU battery regulation |
| JEL: | R48 Q53 Q58 |
| Date: | 2026–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130801 |
| By: | Louise Bernard; Andy Hackett; Robert D. Metcalfe; Luca Panzone; Andrew Schein |
| Abstract: | Understanding how to effectively influence electric vehicle (EV) charging behavior is critical for managing electricity grids powered by high levels of variable renewable generation. We present results from a large-scale natural field experiment conducted in the United Kingdom, involving approximately 110, 000 EV customers and 60% of the country’s public charging infrastructure. Within this network, we applied a price decrease to approximately one-fifth of chargers to bring their prices closer to the marginal cost of electricity in low-cost hours in Great Britain. Customers were randomly assigned to different price levels, allowing us to estimate the causal effect of price on charging demand and derive elasticities of short-run behavioral responses. Customers were highly responsive to price: a 40% reduction in charging costs increased platform-wide charging activity by 117%, while a 15% price cut led to a 30% increase. Decomposing the increase in charging, we estimate that approximately half reflected substitution between charging apps. Our findings suggest that dynamic pricing for public EV charging generated large consumer welfare gains. |
| JEL: | Q4 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34600 |
| By: | Bach, Amadeus; Onori, Simona; Reichelstein, Stefan; Zhuang, Jihan |
| Abstract: | In response to growing economic and environmental concerns, companies in a range of industries seek to repurpose products (assets) that retain functional capacity beyond their initial first life. This paper examines a generic valuation model for used capacity assets that can either be recycled immediately or repurposed for a second life application. We apply our model framework to lithium-ion batteries retired from electric vehicles, as these assets typically retain substantial energy storage capacity at the end of their first life. Our analysis focuses on two battery chemistries: lithium-iron-phosphate (LFP) and nickel-cobalt-based (NCX).We project their future fair market values in the United States and China. Our findings indicate that repurposing LFP batteries will be economically viable in both countries for the coming decade. In contrast, for most NCX batteries immediate recycling will soon be preferable due to their more valuable raw material content and shorter usable lives. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:333927 |
| By: | Hardman, Scott PhD; Karanam, Vaishnavi PhD |
| Abstract: | California has ambitious electrification goals which include the electrification of 100% of off-road vehicles and equipment “where feasible.” While light duty vehicle electrification is progressing—25% of new car sales are now electric and the charging infrastructure is expanding—progress on electrifying off-road equipment, such as construction machinery, has been much slower. To better understand the barriers and opportunities, we conducted interviews with 16 stakeholders, including construction firms, equipment manufacturers, rental companies, public agencies, other researchers, and nonprofits. Their insights highlight the technical, economic, and social challenges facing this sector, as well as potential strategies to accelerate adoption. |
| Keywords: | Engineering |
| Date: | 2026–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:itsdav:qt7f3415ks |
| By: | Alem, Yonas (University of Cape Town); Woldemichael, Leulseged L. (Addis Ababa University) |
| Abstract: | We use nationally representative panel data from rural areas and small towns in Ethiopia, matched with fine‑resolution weather data, to investigate the impact of drought on energy poverty. Energy poverty is measured using the Multidimensional Energy Poverty Index (MEPI) and a multidimensional poverty status indicator. Fixed‑effects regression estimates show that experiencing drought in the previous production year increases a household’s MEPI score by 0.019 points and raises the probability of being multidimensionally energy poor by 3.8%. We further demonstrate that the primary pathway through which drought affects energy poverty is through its adverse effect on per‑capita income: experiencing drought in the previous production period reduces per‑capita income by 33.7%. In contrast, we find that the energy poverty of households participating in Ethiopia’s major safety‑net intervention—the Productive Safety Net Program (PSNP)—is not significantly affected by drought, suggesting that the program effectively buffers participants from these shocks. Overall, our findings contribute to the growing literature on the economic costs of drought and underscore the critical role of well‑targeted safety‑net programs in mitigating climate‑related vulnerabilities. |
| Keywords: | Income shock; Energy Poverty; Ethiopia |
| JEL: | I32 O13 Q40 Q54 |
| Date: | 2025–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:gunefd:2025_014 |
| By: | Yahaya, Shaibu |
| Abstract: | This paper investigates the causal impact of Ghana’s 2007 oil discovery on economic growth and structural transformation. Using the Synthetic Control Method (SCM) and a donor pool of 24 non-oil-producing Sub-Saharan African countries, I estimate the counterfactual trajectory of Ghana’s economy in the absence of the oil boom. The results reveal that the discovery generated a substantial positive income shock: real GDP per capita increased by an average of $361.42 (28.64%) between 2008 and 2021 relative to the synthetic counterfactual. Crucially, the divergence begins in 2008, two years prior to commercial production, providing empirical support for an anticipatory "news shock" driven by investment expectations. However, a sectoral decomposition uncovers significant structural distortions consistent with Dutch Disease. While the industrial sector expanded dramatically, the agricultural and service sectors contracted relative to their counterfactual potentials, providing robust evidence of a "Resource Movement Effect" that crowded out traditional economic activities. These findings suggest that while oil wealth successfully accelerated aggregate growth and provided a fiscal buffer during the COVID-19 pandemic, it simultaneously induced a "two-speed" economy that threatens long-term diversification. |
| Keywords: | Natural Resources, Dutch Disease, Synthetic Control Method, Structural Transformation, News Shocks, Ghana |
| JEL: | C23 O13 O55 Q32 Q33 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127064 |
| By: | Mathai, Manu V. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:gluwps:334527 |
| By: | Saadaoui, Jamel; Smyth, Russell; Vespignani, Joaquin; Wang, Yitian |
| Abstract: | Geopolitical tensions between the United States and China pose significant risks to global critical-mineral supply chains, particularly because refining capacity for most critical minerals, including aluminium, copper, nickel, tin and zinc, is overwhelmingly concentrated in China. Using monthly data from 1995–2025 and a structural VAR-local projection framework, we estimate the dynamic effects of exogenous shocks to the US-China Political Relations Index (PRI) on mineral markets. We find that geopolitical deterioration systematically induces significant precautionary stockpiling. We then construct a multidimensional friend-shoring index incorporating reserves, alignment, regime type and distance, showing that only a narrow set of United States partners, primarily Australia and Canada, offer feasible pathways for refining diversification. The policy recommendation stemming from our findings is that the United States should make strategic stockpiling of refined critical minerals, rather than raw ores, the centerpiece of its strategy to build supply chain resilience, while negotiating long-term bilateral packages for the supply of refined critical minerals with Australia and Canada. |
| Keywords: | Geopolitical risk; Critical minerals; Friend-shoring |
| JEL: | F51 Q34 Q37 |
| Date: | 2025–12–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127188 |
| By: | Miller, Hugh; Martinez Martinez, Juan Pablo |
| Abstract: | The digital and energy transitions, together with renewed rearmament, are driving up demand for critical minerals such as lithium, cobalt, copper and rare earth elements. These materials are vital for low-carbon energy, digital infrastructure and defence systems. Supplies are highly geographically concentrated and exposed to geopolitical tensions; their scale-up has been slow. Governments are therefore seeking greater security of supply, including through stockpiling schemes as a buffer against disruption. |
| JEL: | N0 R14 J01 |
| Date: | 2025–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130736 |
| By: | Zhang, Zhi Min; Yu, Chengzheng; Deng, Yang |
| Abstract: | The low-carbon city pilot policy (LCCP) is an important measure for China toad-dress climate change and promote low-carbon transformation under the goals of carbon peaking and carbon neutrality. Based on the LCCP, this study uses the difference-in-differences method to explore the impact of the policy on the real carbon emissions, the carbon emissions transferred by enterprises along the industrial chain to down-stream enterprises (i.e., carbon out sourcing), and green invention and innovation of enterprises by quantifying the changes of enterprises’ comprehensive carbon emissions, carbon outsourcing, and green patent applications before and after the implementation of the low-carbon pilot policy. The results show that the pilot policy significantly inhibits the real carbon emissions (1.85%) and carbon outsourcing (44.46%) of enterprises and significantly enhance green invention and innovation of enterprises. The effect of the pilot policy on carbon emissions and the incentive effect on green invention and innovation both exhibit significant heterogeneity between heavily polluting and non-heavily polluting industries, as well as between the eastern and western regions. This paper provides a quantitative basis for the government to formulate incentive policies to strengthen green innovation, and regulate carbon emission. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360768 |
| By: | Xuqian Ma; Michelle N. Layvant; Edward Miguel; Eric Ochieng; Ajay Pillarisetti; Michael W. Walker |
| Abstract: | We estimate the short-term cognitive effects of fine particulate matter (PM2.5) exposure using highly time-resolved, individual-level data collected during cognitive testing in Kenya. By linking real-time portable monitor readings to Harmonized Cognitive Assessment Protocol (HCAP) scores, we identify acute impacts of pollution on general and domain-specific cognition. Higher PM2.5 exposure during testing is associated with lower cognitive performance, particularly in memory, executive function, and visuospatial tasks. Nonlinear models suggest threshold effects, with larger declines at higher exposure levels. Notably, effects are significantly larger among more educated individuals, possibly due to greater task demands or lower chronic exposure that limits physiological adaptation. Given that cognitive impairment is evident even at PM2.5 levels below Kenya’s annual regulatory threshold of 35 μg/m³, the findings suggest that short-term exposure may impose underappreciated human capital costs that current regulatory standards fail to mitigate. The results highlight the potential cognitive and economic returns to interventions that reduce air pollution exposures in low-resource settings. |
| JEL: | I10 Q53 Q56 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34557 |
| By: | Hoffmann, Bridget; Suárez, Nicolás; Rud, Juan Pablo |
| Abstract: | This paper uses high-frequency data on fine particulate matter air pollution (PM 2.5) to study the effects of high pollution on health outcomes in Mexico City. We combine hourly monitoring station data on air pollution and weather conditions with a rich dataset of 10 million health episodes between 2003 and 2019, including deaths, hospitalizations, and urgent care visits. We disaggregate daily mean concentrations of PM 2.5 using the daily share of hours with PM 2.5 concentration above each WHO threshold to uncover a positive non-linear and convex relationship between hourly air pollution concentrations and same-day respiratory health outcomes of all severities. Specifically, a 1% increase in the share of hours with PM 2.5 concentrations above the highest WHO interim threshold (IT1) increases the number of respiratory deaths, hospitalizations, and urgent care visits per 1 million inhabitants by 0.001, 0.0008, and 0.024, respectively. We find that hours above IT1 have effects on respiratory health outcomes that are 20 to 30 times greater than those of additional hours above the air quality guideline, the most restrictive (i.e. lowest) WHO threshold. Furthermore, one additional hour a day with PM 2.5 above IT1 has the same effects on respiratory health outcomes as does increasing the daily average concentration of PM 2.5 in Mexico City by 41 µg/m3. We find that the effects of PM 2.5 on respiratory mortality and morbidity are distributed differently across ages and that the effect of PM 2.5 on respiratory deaths is driven by individuals with lower educational attainment. |
| JEL: | I10 Q53 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14425 |
| By: | Amado, Lindorf |
| Abstract: | Standard economic models often treat money as a social construct independent of physical laws. This paper proposes a unified thermodynamic theory of value, positing that monetary systems are information protocols evolved to maximize entropy production in dissipative structures (civilizations). By analyzing 10, 000 years of economic history—from the Neolithic era to the Digital Age—we demonstrate a strict linear relationship (R2 = 0:9934) between the Real Cost of Energy (E) and the Granularity of Money (G). We derive the Equation of Value, G / E, where the value of the accounting unit scales directly with the energy cost of labor. This framework resolves historical anomalies such as the collapse of the Roman Denarius and the failure of the 20th-century Gold Standard, interpreting them not as policy errors, but as thermodynamic phase transitions. The theory predicts that the current decline in the marginal cost of energy (via AI and renewables) necessitates a transition to a monetary substrate with near-infinite divisibility and zero friction. |
| Keywords: | Thermodynamics, Monetary Theory, Entropy, Granularity, Econophysics, AI, Gold Standard, Collapse, Deterministic |
| JEL: | B52 C10 E42 N10 O33 |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127378 |
| By: | Pitkäranta, Juho; Raukola, Antti |
| Abstract: | The turbulent first eleven months of Donald Trump's second presidency has been characterized by policy actions and statements that create large uncertainties and sideline multilateral cooperation. The Trump administration has fueled substantial trade policy uncertainty globally, as well as pushed protectionist policies that have induced negative supply shocks to the US economy. Monetary policy is frustrated by inflationary pressures from an elevated federal deficit. Green energy projects are proactively sidelined in favor of a return to fossil fuels. Stricter immigration policy and deportation of undocumented migrants threatens to reduce US economic output, adding to price pressures. The eventual push-back from the general public, courts and lawmakers has yet to materialize, so the Trump administration continues to move ahead on deregulation of financial markets, including the easing of capital and stress testing, as well as a modifying the laws and regulations affecting bank mergers and crypto currencies. |
| Keywords: | tariffs, trade war, fiscal policy, federal deficit, green energy, fossil fuels, deportations, financial deregulation, small open economies |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitb:334517 |
| By: | Bhapta, Kritima; Martinez Martinez, Juan Pablo; Yusuf, Alia; Kohli, Renu; Feyertag, Joe |
| Abstract: | In May 2025, the Department of Economic Affairs (DEA) within India’s Ministry of Finance released a first draft framework of India’s Climate Finance Taxonomy for public consultation. The taxonomy aims to facilitate around US$250 billion per year (Ministry of Finance, 2025) of finance towards climate-friendly technologies and activities and thereby enable India to achieve its interim 2030 and long-term 2070 net zero targets. The draft framework already integrates many positive and encouraging priorities that will ensure that the development of the Climate Finance Taxonomy follows international best practice: • First, the draft taxonomy embraces science-based metrics and internationallybenchmarked technical screening criteria (TSCs). By ensuring credibility, the taxonomy is interoperable with international frameworks such as the EU taxonomy and the EU-China Common Ground Taxonomy (CGT), thereby facilitating the flow of cross-border capital towards climate change mitigation and adaptation investments in India. • Second, it acknowledges that the taxonomy will be designed as a living document, ensuring that it is continuously and regularly updated to reflect technological progress, market developments, and evolving climate science. The tiered structure allows flexibility around the decarbonisation challenges of hard-to-abate sectors (so-called ‘transition finance’). • Third, the draft framework pledges to adopt evidence-based threshold setting, which is crucial for ensuring that the taxonomy contributes towards the 1.5°C target. India will thereby join the likes of Chile, Brazil and Australia in setting TSCs based on scientific evidence or quantitative criteria based on Nationally Determined Contributions (NDCs) or the scenarios of the Intergovernmental Panel on Climate Change (IPCC) (Climate Bonds Initiative, 2021; Secretaria de Política Econômica, 2023). • Fourth, where quantitative criteria are unavailable or where decarbonisation technologies in hard-to-abate sectors are still nascent, it is encouraging that the Ministry of Finance has followed the path set by ASEAN or Brazil’s taxonomies and proposed the integration of qualitative benchmarks such as process-based steps and other hybrid approaches (ASEAN Taxonomy Board, 2024). Best-in-class performance can also underpin the TSCs, for instance by setting emission thresholds in relative terms. • Fifth, as described above, the Draft Framework embeds the Do No Significant Harm (DNSH) principle, which explicitly includes social considerations as part of the minimum safeguards that ensure that people are not left behind in the net zero transition. Like other taxonomies, such as the ASEAN taxonomy’s Social Aspects (SAs), these safeguards can be aligned with international labour and human rights frameworks such as the Core Conventions of the International Labour Organization (ILO) or the United Nations’ Guiding Principles on Business and Human Rights (UNGPs) to ensure that climate-friendly investments do not come at the cost of workers’ rights, indigenous communities or other social considerations. Building on this positive momentum, this report aims to inform and guide the DEA’s further development of the Climate Finance Taxonomy by highlighting international best practice. (A version of the report was submitted to the DEA’s Public Consultation on the Draft Framework for India’s Climate Finance Taxonomy in July 2025.) Taking these lessons into consideration can help India to avoid common mistakes, support the DEA in deciding what to include and exclude in the taxonomy, and ultimately smooth the transition towards a low-carbon and climate-resilient economy and financial system. The inclusion of real-world examples strengthens the lessons, helps make them more practical, and facilitates peer-learning. |
| JEL: | F3 G3 N0 |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130794 |
| By: | Wang, Jodi Ann |
| Abstract: | This Policy Insight presents the just transition as sitting at a decisive crossroads, where, after a decade of growing prominence, including in the Paris Agreement, rhetoric has outpaced reality. As geopolitical fragmentation, fiscal strain and political polarisation grow, the space for transformative and durable policies for the just transition and its financing is narrowing. Just transition finance refers to the climate finance flows that shift economies away from carbon-intensive systems built on extractive industries while redistributing power and resources, and protecting communities’ sovereignty over development pathways. Rather than proposing any new financial instrument, in this Policy Insight the author offers a provocation: interrogating how finance mechanisms shape justice narratives, who gets to decide and access funding, what transparency regimes actually serve, and ultimately, what kinds of transitions current finance enables or prevents. The author identifies four near-term headwinds that impede just transition finance, and five deeper structural challenges from which the headwinds emerge. While it may be possible to address headwinds in the near-term, structural challenges are more embedded and systemic, making the headwinds persistent. These headwinds and structural challenges are not entirely new: but they have not yet been grounded in the locus of just transition finance. New institutional arrangements are emerging in response to these challenges but to avoid replicating past problems, we will need to approach these innovations with clear eyes and better interpret existing challenges before directly jumping into searching for solutions. |
| Keywords: | development finance; global; financial instruments and strategies; policy reform |
| JEL: | N0 R14 J01 F3 G3 |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130767 |
| By: | Conesa Martinez, Marina |
| Abstract: | This policy brief explores the role of communication by central banks as they facilitate the operation of green bond markets. It analyses whether the integration of climate considerations into central banks’ communication strategies has had an effect on market behaviour. Summary An estimated US$4.5 trillion in annual investment is needed to meet the Paris Agreement targets and reduce the possibility of a significant drop in global GDP caused by unmitigated climate change. Central banks can play a crucial role in addressing this challenge by incorporating climate-related considerations into their frameworks, including strategic communication. Subject to legal requirements, central banks may also assume a catalytic role in promoting sustainable development. Cross-country evidence suggests that more active messaging from central banks about climate change considerations is positively associated with green bond issuance at the firm level. Green bonds and similar instruments can help channel funding to renewable energy, clean transport and other environmental projects. Overall, analysis of central bank speeches suggests that these communications can serve as a soft tool to bridge the financing gap for a low-carbon economy. By clearly communicating climate-related risks and policies, central banks could reduce uncertainty around their actions, foster confidence among investors and firms, and align market behaviour with long-term sustainability goals, ultimately supporting their objectives such as price and financial stability. Recommendations – central banks could: Regularly report on progress made on climate-related initiatives to strengthen credibility, address concerns about mandate overreach, and strengthen stakeholder trust. Integrate discussion of climate risks and policies into their regular communications wherever relevant, such as monetary policy statements, speeches and reports, to guide market behaviour and foster confidence in sustainable finance. Collaborate with international organisations to standardise taxonomies and verification mechanisms, ensuring credibility and addressing greenwashing. |
| JEL: | F3 G3 N0 |
| Date: | 2025–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130756 |
| By: | Bhattacharya, Amar; Songwe, Vera; Soubeyran, Éléonore; Stern, Nicholas |
| Abstract: | The Independent High Level Expert Group (IHLEG) on Climate Finance has been supporting the deliberations on the climate finance agenda under successive COP Presidencies since COP26. The group is co-chaired by Amar Bhattacharya, Vera Songwe and Nicholas Stern. Eléonore Soubeyran serves as Executive Secretary and Head of the Secretariat. The full membership is provided at the end of the report. This independent group was tasked to help develop and put forward policy options and recommendations to encourage and enable the public and private investment and finance necessary for delivery of the commitments, ambition, initiatives and targets of the UNFCCC Paris Agreement, reinforced by the Glasgow Climate Pact, the Sharm el-Sheikh agenda, the COP28 Global Climate Finance Framework and the COP29 Baku Climate Unity Pact. This fourth report of the IHLEG has benefitted enormously from the active and highquality participation, guidance and input of the group’s members, and from engagement with a wide range of stakeholders. We are deeply grateful for the guidance and interactions with the COP30 Presidency team under the leadership of Ambassador André Corrêa do Lago and Ana Toni. The preparation of the report was greatly supported by the close engagement with the team in the Brazilian Ministry of Finance led by Vice Minister Tatiana Rosito and Ivan Oliveira and the extensive work that was undertaken in the preparation of the Circle of Finance Ministers report on the Baku to Belém Roadmap. Our report therefore is closely aligned with the Circle of Finance Ministers report. |
| Keywords: | adaptation; Baku to Belem; developing countries; EMDEs; emerging markets; energy transition; finance; IHLEG; just transition; loss and damage; MDBs; natural capital; resilience |
| JEL: | N0 F3 G3 |
| Date: | 2025–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130803 |
| By: | Burda, Michael C. (Humboldt University Berlin); Goeth, Anna-Maria (World Bank); Zessner-Spitzenberg, Leopold (TU Wien) |
| Abstract: | In the context of a green energy transition, capital adjustment costs render effective substitution between clean and dirty energy sources finite and endogenous, despite infinite long-run substitutability. Ramsey optimal paths robustly frontload clean investment before exhaustion of a given carbon budget, but also generally imply some capital stranding. Along the path of emissions reduction, new investment is quantitatively more important than reduced output or labor redeployment. An ambitious climate goal in our benchmark calibration implies modest levels of stranded capital at 1.5% of GDP, but this rises to more than 7% if implementation is delayed by a decade. |
| Keywords: | growth model, energy transition, optimal investment, capital adjustment costs, carbon pricing |
| JEL: | E22 H23 O41 Q43 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18356 |
| By: | Hafstead, Marc (Resources for the Future); Williams III, Roberton C. (Resources for the Future) |
| Abstract: | The energy transition away from fossil fuels toward alternative energy sources will, like every significant economic transition, disrupt existing economic relationships and markets. Disruption in the labor market is of particular concern due to the distributional and political importance of energy jobs and the potential concentration of risks on workers in carbon-intensive sectors and regions that are particularly reliant on fossil-fuel industries. We look at modeling the labor implications of the energy transition. We outline a conceptual framework for analyzing the labor-market risks, focusing on obstacles to labor-market adjustments during the transition. We then review empirical research on such barriers to labor-market adjustments, with a focus on evidence that can inform modeling efforts. We also survey the literature on ex-ante modeling of the effects of the energy transition on labor markets, identifying both the challenges and opportunities for new research in this field. Keywords: Energy Transition, Labor Markets, Jobs |
| Date: | 2026–01–06 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-26-01 |
| By: | Osman, Eliyasu Y.; Bergtold, Jason S.; Sutley, Elaina J.; Graham, Madison; Gaucin, Anexi; Ren, Yongwang; Sharmin, Rumana |
| Abstract: | Energy insecurity affects millions of households across the U.S., with the greatest impact reported on individuals already facing economic and health-related challenges. Global events, including extreme weather events, international conflicts, and inflation, have recently raised awareness of energy security and its effects on the economy and human health. This study analyses the energy insecurity situation in Kansas using survey data and an ordered logit model. The study reveals critical insights into the factors driving household energy insecurity in Kansas, especially regarding financial energy insecurity. The analysis indicates a 4.2% energy burden level in Kansas, with rural areas bearing the highest brunt, with about 7% burden (exceeding the recognized high energy burden of 6%), compared to metropolitan areas of 3% burden. While the majority of the respondents (about 62%) were thriving in terms of their energy needs, a significant number of about 18% of households were either vulnerable or in crisis for home energy services. The regression results reveal that higher energy bills, electric heating, special electricity-dependent medical needs, and demographic traits like nonwhite or female-headed households are linked to a higher probability of experiencing severe energy insecurity levels, while household income, homeownership, and college households are more likely to experience higher levels of energy security. These findings draw attention to stakeholders on the structural and economic barriers to energy services among Kansas households, particularly the rural-urban disparities. |
| Keywords: | Community/Rural/Urban Development |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361117 |
| By: | Talatchanant Tontiwachwutthikul; Kannika Thampanishvong; Kanis Saengchote; Krislert Samphantharak; Jirayu Chandrasakha |
| Abstract: | To mitigate the risk of carbon leakage, the European Union (EU) introduced the Carbon Border Adjustment Mechanism (CBAM) to impose a fair price on the carbon emissions associated with the production of carbon-intensive goods imported into the EU, thereby encouraging cleaner industrial production. This paper combines firm-level exporting activity data and financial data in a difference-in-differences regression framework to examine the impact that the CBAM policy announcement and implementation have on Thai exporting firms. We find that the announcement of the CBAM negatively affected Thai firms' ability to export impacted goods to the EU, and these adverse effects intensified following the CBAM implementation. Treated firms’ total export revenue decreased relative to the control group and were only able to partially mitigate the impact of this shock by increasing exports of non-CBAM goods to countries outside of the EU. |
| Keywords: | Carbon Border Adjustment Mechanism (CBAM); Thailand, exporting firm; International trade |
| JEL: | F14 F18 Q54 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:243 |
| By: | Hickel, Jason |
| JEL: | J1 |
| Date: | 2025–11–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130644 |
| By: | Pranshu Raghuvanshi (India Institute of Science, Bangalore, India); Anjula Gurtoo (India Institute of Science, Bangalore, India) |
| Abstract: | This study investigates the effectiveness of targeted informational interventions on electric vehicle adoption intention. A randomised controlled field experiment with three treatment groups and a control group was used to study the effectiveness of three informational interventions. Participants in each treatment group received a distinct informational intervention: cost-based, range-based, and norm-based. Two of the three interventions (range-based and norm-based), designed to reduce behavioural and psychological barriers, were found to be significant. The cost-based intervention was not significant, suggesting that financial motives alone may not be sufficient to lead to an increase in the adoption of electric vehicles. The significant effect observed for the range-based and norm-based interventions suggests that the discomfort related to the technology must be addressed, and social norms can be effectively utilised to promote electric vehicles at low cost. Although adoption is not guaranteed with self-reported intentions, the findings suggest that carefully framed informational interventions guide behavioural intentions towards sustainable technologies. The most significant contribution of the study is to the literature on demand-side policy instruments, which suggests that financial incentives can be complemented by other informational interventions to accelerate the adoption of sustainable mobility. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.00408 |
| By: | Brita Bye; Taran Fæhn (Statistics Norway); Lars Gulbrandsen; Kevin R. Kaushal; Christian Wilhelm Mohr; Gunnhild Søgaard; Asbjørn Torvanger; Jørgen Wettestad; Knut Øistad |
| Abstract: | Norway has positioned itself as a climate policy forerunner by aiming to reach net-zero emissions already by 2030. However, the net-zero ambition is not well-defined, not legally binding, nor substantiated by action plans. In a first, interdisciplinary, analysis we scrutinise the net-zero concept and discuss unilateral options. Second, we provide an economic analysis with a global computable model, SNOW, of the costs and macroeconomic impacts of various policy scenarios. It explores how the net-zero ambition interacts with other 2030 goals and quantifies the impacts of emphasising domestic abatement and carbon removal measures vs. paying for emission mitigation abroad. Finally, the 2030 results are revisited to assess how well they align with Norwegian and global climate targets for 2050. The main findings are that pursuing the net-zero ambition, on top of other binding 2030 goals Norway is already committed to, will increase costs by 25-100% depending on the use of domestic measures. On the margin, domestic measures are found to have only small, uncertain, and costly mitigation potential, thus, buying international carbon credits will be inevitable. Besides being significantly cheaper, carbon trading can have the potential benefits of developing the credit markets and the individual projects’ qualities. Even if domestic measures can play but a modest part in the net-zero strategy towards 2030, we identify several steps governments unilaterally can take today to expand abatement opportunities towards mid-century. We also find measures that seem cost-effective in pursuing 2030 goals but look less attractive against a global 2050 backdrop. |
| Keywords: | Net-zero emissions; Climate change mitigation, Abatement policies; Nationally Determined Contributions; Carbon credits; Emissions trading system; Effort-Sharing Regulation; LULUCF |
| JEL: | O44 O52 H23 Q54 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1024 |
| By: | Renaud Coulomb (Mines Paris–PSL University, CEDP, France); France d’Agrain (Mines Paris–PSL University, CEDP, France); Fanny Henriet (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | Despite growing calls to phase it out, oil exploration persists, often justified by the natural decline of existing fields and potential efficiency gains from discoveries. This paper quantifies the global welfare and environmental impacts of restricting oil exploration. We develop a global dynamic model calibrated to a granular dataset of 14, 637 proven oilfields, accounting for heterogeneity in private extraction costs, capacity constraints, life-cycle carbon intensities of oil barrels, along with exploration dynamics and basin-specific estimates of yet-to-find resources. We find that exploration restrictions are an effective second-best climate policy: in the absence of a global carbon tax, a universal ban increases global welfare by$12.5 trillion due to lower social costs of oil production and use (assuming a social cost of carbon of$200/tCO2eq). A partial ban by OECD and BRICS countries alone captures 66% of these gains. Under optimal carbon pricing, however, a global ban yields a modest $0.3 trillion welfare loss, as it precludes access to lower-social-cost deposits and prevents the easing of short-run capacity constraints. |
| Keywords: | Oil exploration, climate change, Carbon tax, Ban, Second-best, Stranded assets |
| JEL: | Q58 Q54 Q31 Q35 Q41 Q38 H23 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2539 |
| By: | Banzhaf, H. Spencer; Mathews, William; Walsh, Randall |
| Abstract: | This study examines the relationship between racial segregation and environmental equity in Pittsburgh from 1910 to 1940. Utilizing newly digitized historical data on the spatial distribution of air pollution in what was likely America’s most polluted city, we analyze how racial disparities in exposure to air pollution evolved during this period of heightening segregation. Our findings reveal that black residents experi- enced significantly higher levels of pollution compared to their white counterparts, and this disparity increased over time. We identify within-city moves as a critical factor exacerbating this inequity, with black movers facing increased pollution expo- sure. In contrast, European immigrants, who were also initially exposed to relatively high levels of pollution, experience declining exposure as they assimilate over this time period. We also provide evidence of the capitalization of air pollution into hous- ing markets. Taken as a whole, our results underscore the importance of considering environmental factors in discussions of racial and economic inequalities. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2024–10–23 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cenrep:347603 |
| By: | Feyertag, Joe |
| Abstract: | Climate change, environmental degradation, and the accelerating transition to a low-carbon economy are reshaping global labour markets. These forces are altering both the demand for and supply of labour, with far-reaching implications for central banks. As institutions that closely monitor labour market dynamics to guide monetary policy, central banks will increasingly need to account for the disruptions caused by environmental pressures. This report addresses a critical gap in current analysis by exploring how environmental risks intersect with central banks’ mandates through the labour market. It aims to equip central banks with the insights needed to integrate these evolving risks into their policy frameworks and operational decisions. |
| JEL: | N0 R14 J01 F3 G3 |
| Date: | 2025–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130735 |
| By: | Chen, Jian; Feng, Hongli; Hoffman, Elizabeth; Seaberg, Luke |
| Abstract: | In the United States, utility-scale solar initiatives face growing local resistance despite their cost-competitiveness and potential in mitigating greenhouse gas emissions. This study investigates the marginal effects of knowledge levels related to solar, information treatments, and their interconnections with peoples’ attitudes toward utility-scale solar energy systems and explores some key drivers of the different knowledge levels. We designed and implemented a survey targeting both public officials and the general population in the U.S. state of Iowa. Among 862 respondents, 79.8% self-reported having a low level of knowledge about solar energy. Additionally, 77.7% expressed at least moderate support for hosting such projects in their community. Our empirical results suggest that individuals with a higher level of knowledge of utility-scale solar energy tend to express a higher degree of support for adopting such projects within their community. Individuals’ attitudes are more responsive to the negative information treatment. Notably, there are significant differences between public officials and the general population in attitudes and responsiveness to information treatments. We also find that landowners’ support for utility-scale solar projects is unlikely to change regardless of knowledge levels, while non-landowners show increased support with higher levels of knowledge. This study provides insights for developing context-specific outreach programs to enhance public awareness and support for utility-scale solar projects and promote future solar development. |
| Keywords: | Resource/Energy Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361226 |
| By: | Wrobel, Ralph |
| Abstract: | Rare earth elements (REEs) are critical for Europe's economic competitiveness, green transition, and national security. Yet the EU remains heavily dependent on China for their supply, particularly in refining and processing. This paper examines Europe's vulnerability to supply disruptions and geopolitical leverage stemming from China's market dominance. Rising demand for REEs in renewable energy, electric vehicles, and defence technologies exacerbates this dependence, while environmental and regulatory constraints hinder European extraction and processing. Case studies, including the 2010 Senkaku crisis and 2024-25 Chinese export restrictions, illustrate how REEs can be used as strategic tools of coercion. The paper evaluates Europe's policy responses, highlighting the Critical Raw Materials Act (CRMA), domestic processing projects, recycling initiatives, and international partnerships aimed at supply diversification. While progress is evident, challenges remain: recycling is nascent, domestic capacity is limited, and EU research programs are bureaucratic and slow. Overall, Europe faces a "geopolitical trap, " requiring urgent action to secure REE supply and technological resilience. |
| Keywords: | Rare earth elements (REEs), China, Europe, geopolitics, supply chain security, strategic autonomy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:opodis:333912 |
| By: | Majeed, Fahd; Khanna, Madhu; Miao, Ruiqing |
| Abstract: | Perennial bioenergy crops, such as miscanthus and switchgrass, and crop residues have the potential to scale up Sustainable Aviation Fuel (SAF) production and mitigate carbon emissions. However, high establishment costs, establishment lags, and risk and return profiles with bioenergy crops that differ from those of conventional crops can adversely affect incentives to produce them. We develop an economic model that incorporates spatially varying joint yield and price distributions for the multiple crop choices a farmer faces and apply it to examine the incentives for risk-averse, present-biased, and credit-constrained farmers to produce cellulosic feedstocks under various biomass prices. We link this model to a biogeochemical model to quantify the spatially varying carbon mitigation benefits from these feedstocks in the rainfed region of the United States. We also analyze the cost-effectiveness of two carbon payment policies: annual and upfront. We find that risk-averse, present-biased, or credit-constrained farmers prefer to grow the lower-yielding but less risky switchgrass and harvest corn stover instead of producing the lower carbon, higher-yielding but riskier feedstock miscanthus, resulting in lower SAF production. Upfront carbon payments incentivize higher quantities of less carbon-intensive SAF production by risk-averse, credit-constrained, and present-biased farmers because they offset a part of the establishment costs of miscanthus. We also find that when farmers are credit-constrained, upfront payments are more cost-effective in terms of carbon mitigation per dollar spent. In contrast, annual payments are more cost-effective when farmers can access credit. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360769 |
| By: | Islam, Mujahidul; Klaiber, H. Allen |
| Abstract: | As solar energy infrastructure rapidly expands across the U.S., particularly on agricultural land, it increasingly competes with farmland conservation efforts such as the Agricultural Conservation Easement Program (ACEP). This study investigates whether utility-scale solar development undermines ACEP enrollment, focusing on spatial and temporal substitution patterns between these two land uses. Drawing on a county-level panel dataset spanning 2002 to 2022 across the contiguous U.S., this study employs discrete-time hazard and competing risks models to estimate the timing and probability of ACEP enrollment relative to solar land conversion. Findings reveal that ACEP enrollment and solar development rarely coincide within the same county-year, indicating emerging substitution. While cumulative solar presence may, in some cases, trigger defensive conservation efforts, large-scale solar installations are generally associated with lower ACEP enrollment, especially in high-farmland, rural regions. Urban and high-saturation counties, by contrast, exhibit stronger institutional continuity and peer effects driving conservation. These results suggest a growing land-use conflict between climate mitigation and agricultural preservation goals, calling for integrated policy solutions such as adaptive easement designs or differentiated incentives to reconcile conservation with renewable energy expansion. |
| Keywords: | Resource/Energy Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361206 |
| By: | Daniel H. Karney; Don Fullerton; Kathy Baylis |
| Abstract: | Computational general equilibrium (CGE) models can evaluate detailed tax reforms, trade restrictions, or environmental policy. These models can capture many complexities, but these complexities can make results difficult to interpret. Analytical general equilibrium (AGE) models provide better intuition and interpretation but cannot capture relevant complexities. We propose a method that employs AGE models to understand CGE models – a “model of the model”. We apply this idea to climate policy and carbon leakage – the increase in emissions elsewhere. Our AGE models identify seven key economic determinants of leakage within any one outcome. We then unpack results from three existing CGE models. |
| JEL: | C63 H23 Q58 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34533 |
| By: | Selvaraju, Sangeeth |
| Abstract: | This policy brief analyses draft emissions intensity targets for the iron and steel sector in India, as set out in the recently introduced Carbon Credit Trading Scheme (CCTS), and discusses the implications for the broader trajectory of low-carbon steel policy. The carbon market is one key part of the policy package for low-carbon steel. |
| Keywords: | carbon credit; carbon trading; emissions intensity; India; iron and steel; manufacturing; steel |
| JEL: | N0 R14 J01 L81 |
| Date: | 2025–08–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130523 |
| By: | Stefano Carattini; Ian Fletcher; Chad W. Kendall; Michael K. Price; Arthur Vu |
| Abstract: | Many socially desirable policies are not implemented because of their ex-ante unpopularity, but this unpopularity may be overcome through experience with the policy. In this paper, we examine how opposition to carbon pricing in the state of Washington turned into support after voters experienced a cap-and-trade policy with revenues earmarked for environmental purposes – "cap-and-invest." Analyzing voting behavior at the census block group level, we observe that support varies by political affiliation as expected, but experience consistently increases support across the board. Using a proprietary survey, we further show that the increase in support among voters in Washington state is specific to the cap-and invest policy they experienced; support for carbon pricing or climate policies more generally remained unchanged. |
| JEL: | D72 H23 P0 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34559 |
| By: | Tyson, Judith; Orme, Liam; Charkowska, Zuzanna; Dagnino Contreras, Valeria |
| Abstract: | This report explores approaches taken by multilateral development banks (MDBs) to the just transition and details how private investors seeking to engage in just transition principles and impact can embed the concept within green, social and sustainability (GSS) bonds and other private financial investments. The authors present a methodology for identifying emerging best practice within MDB approaches to the just transition which can be leveraged by private finance. Using the methodology the authors assess all global and regional MDBs that issue GSS bonds, finding that MDBs are committed to the just transition and have been developing sophisticated and complex approaches to embedding it throughout their operations. They have made a coordinated commitment but have also tailored their approaches to their regional contexts. This has been reflected in their GSS bonds, including in their bond frameworks and impact reporting. |
| Keywords: | development finance; global; financial instruments and strategies; policy |
| JEL: | F3 G3 N0 R14 J01 |
| Date: | 2025–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130759 |
| By: | Martin C. Hänsel; Daniel Spiro |
| Abstract: | Addressing the distributional effects of climate policy is one of the key challenges for securing a just and successful transition to carbon neutrality. Leaning on a large body of research, this paper answers four questions pertinent to understanding and counteracting the distributional effects of climate policy: 1) Why are the distributional effects of climate policy important? 2) Why do they arise? 3) What compensatory mechanisms and tools exist? 4) Which compensatory tools should be used? Our focus is on national, intragenerational distributional effects and policy. We demonstrate that, while previous research has primarily examined the distributional effects of carbon pricing, the transition to carbon neutrality, which we refer to as the “climate transition, ” generates numerous other distributional effects that are largely understudied. We further highlight that what makes the climate transition different from other technological transitions is that it affects households’ costs, e.g., via carbon pricing, rather than households’ income through, e.g., job loss. This implies that welfare systems in most countries, which are geared towards handling income shocks, are not well-equipped to handle the distributional effects of climate policy. Our mapping reveals, at least tentatively, that those households and individuals who bear the highest relative costs of climate policy (rural, low-income households) are also those who reap less of its material and health benefits and care the least about mitigating global climate damage for intergenerational sustainability. This observation, along with welfare systems that fail to adjust to cost shocks, may rationalize the political backlash. We conceptually posit three desirable characteristics for compensatory measures: they should be efficient, precisely targeted, and visible. We evaluate the policy toolkit based on these characteristics and illustrate how achieving them may be mutually exclusive. While there exist potent and common tools to compensate low-income households, e.g., progressive income taxes, the tools for compensating for the geographical distributional effects are scarce and may imply inefficiencies. In summary, our review identifies several gaps in the current scientific literature and provides a mapping of available policies to help policymakers decide on when and why to use different measures. |
| Keywords: | climate policy, distributional effects, inequality, welfare |
| JEL: | Q5 R11 D63 H2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12348 |
| By: | Amann, Juergen; Cantore, Nicola |
| Abstract: | We investigate the relationship between energy prices and manufacturing competitiveness at the industry level. Drawing on panel data spanning the mid-1990s to the 2010s from an extensive multi-sector dataset, we shed light on the nonlinear dynamics between energy prices and the sector-level performance of manufacturing industries. Our findings link to ongoing work on the effect of energy prices on firm-level performance by highlighting considerable sector-specific heterogeneity, indicating the complex and intricate relationship between economic performance and the cost of energy. |
| Keywords: | Energy prices; competitiveness; manufacturing |
| JEL: | L6 O4 O5 Q5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127199 |
| By: | Hastreiter, Nikolaus; Begley, Alfie; Dietz, Simon |
| Abstract: | This discussion paper examines the role of production emissions – specifically those arising from materials and manufacturing – in car manufacturers’ carbon footprints and emissions reduction targets. The current Transition Pathway Initiative (TPI) Carbon Performance (CP) methodology for the automotive sector focuses on tailpipe (Scope 3 Category 11) emissions, which remain the largest contributor to lifecycle emissions for internal combustion engine vehicles (ICEs). However, as the industry shifts toward electric vehicles (EVs), a growing share of emissions is associated with upstream activities, including vehicle and battery production. The paper identifies substantial gaps and inconsistencies in how car manufacturers disclose manufacturing-related emissions. While most companies report Scope 1 and 2 emissions – covering direct and energy-related emissions from their own operations – at a group level, data on Scope 3 Category 1 emissions, which cover upstream supply chain activities, is sparse and inconsistent. Disclosure specific to passenger cars is even rarer. This limited data availability poses challenges for external stakeholders seeking to assess companies’ full emissions profiles and decarbonisation strategies. To address this, the paper proposes a preliminary approach to incorporate production emissions into TPI’s current CP methodology. Using IEA global average emissions factors and sales data for four major manufacturers – BMW, General Motors (GM), BYD, and Tesla – the analysis shows that including production emissions in companies’ historical carbon footprints and decarbonisation targets leads to a deterioration in alignment with low-carbon scenarios, particularly over the long term. These findings underscore the materiality of production emissions to car manufacturers’ decarbonisation strategies. They also highlight the narrowing gap between mixed ICE/EV producers and pure EV companies when upstream emissions are considered. A narrow focus on tailpipe emissions therefore may not comprehensively capture companies’ climate actions. The paper concludes with recommendations for investors to engage with companies to improve disclosure, support standardised reporting, and encourage comprehensive target-setting that includes production emissions. |
| JEL: | R14 J01 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130650 |
| By: | Riku Watanabe |
| Abstract: | This study incorporates two heterogeneous industries into an endogenous growth model within the framework of a circular economy. In the model, industries are classified as either brown or green, and each can transition between states through R&D activities related to innovation and greening. Greening R&D is conducted exclusively by firms in the brown industry and enables the transition to the green industry. We analyze the effects of subsidies for greening R&D and show that such subsidies increases labor allocation to both innovation and greening R&D. As a result, the model yields win-win outcome: economic growth is promoted not only by productivity-driven growth acceleration but also by a decline in the share of brown industries that rely on exhaustible resources, which mitigates the negative impact of resource depletion on growth. These findings suggest that advancing a circular economy can be compatible with sustained economic growth. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1286r |
| By: | Scheer, Antonina; Honneth, Johannes; Hizliok, Setenay; Dietz, Simon; Nuzzo, Carmen |
| Abstract: | Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) is an investor-led project to develop a free, publicly available, independent tool that assesses countries on climate change. The ASCOR framework is composed of indicators for the transparent assessment of the progress made by countries in managing the low-carbon transition and the impacts of climate change. ASCOR aims to inform, support and facilitate investors’ decision-making on sovereign bonds and enable a more explicit consideration of climate change. The project hopes to facilitate engagement and dialogue between issuers and investors and drive financing for climate change mitigation and adaptation. ASCOR will also enable countries to showcase their improvements on the transition to a low-carbon and resilient future by providing independent and open-source assessments of their targets and policies. |
| JEL: | N0 F3 G3 R14 J01 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130777 |
| By: | Poensgen, Ira; Beaulieu, Julien; Chamorro, Camila; Chan, Tiffanie; Fulvi, Chiara; Goon, Robin; Goumet, Laudine; Greenslade, Wallis; Hajagos Toth, Akos; Manning, Mark; Scheer, Antonina |
| Abstract: | This report consists of a submission made by CETEx, the TPI Global Climate Transition Centre and the Grantham Research Institute on Climate Change and the Environment in response to the open consultation by the UK Department for Energy Security and Net Zero seeking views on implementation routes for transition plan requirements. Details on the consultation, ‘Climate-related transition plan requirements’, are available here. |
| JEL: | F3 G3 |
| Date: | 2025–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130790 |
| By: | Michele Fabi; Viraj Nadkarni; Leonardo Leone; Matheus X. V. Ferreira |
| Abstract: | We develop an axiomatic theory for Automated Market Makers (AMMs) in local energy sharing markets and analyze the Markov Perfect Equilibrium of the resulting economy with a Mean-Field Game. In this game, heterogeneous prosumers solve a Bellman equation to optimize energy consumption, storage, and exchanges. Our axioms identify a class of mechanisms with linear, Lipschitz continuous payment functions, where prices decrease with the aggregate supply-to-demand ratio of energy. We prove that implementing batch execution and concentrated liquidity allows standard design conditions from decentralized finance-quasi-concavity, monotonicity, and homotheticity-to construct AMMs that satisfy our axioms. The resulting AMMs are budget-balanced and achieve ex-ante efficiency, contrasting with the strategy-proof, expost optimal VCG mechanism. Since the AMM implements a Potential Game, we solve its equilibrium by first computing the social planner's optimum and then decentralizing the allocation. Numerical experiments using data from the Paris administrative region suggest that the prosumer community can achieve gains from trade up to 40% relative to the grid-only benchmark. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.24432 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | Several countries have implemented a carbon tax or cap-and-trade system to establish high carbon prices and create a disincentive for the use of fossil fuels. Essentially, the tax encourages firms to substitute toward low carbon emission energy. Costs also rise for firms down the supply chain that use production inputs with high-emission content, so the total impact of a carbon tax can be large. In practice, however, firms also have an incentive to find an offset to a carbon tax. In this post, based on our recent work, we present evidence of one such adaptation strategy. We show that French firms increased their imports of high-emission inputs from suppliers outside the European Union’s cap-and-trade system, known as the EU Emissions Trading System (EU ETS), reducing the effectiveness of this approach to cutting carbon emissions—an adaptation strategy that leads to “carbon leakage.” To help stop this leakage, the EU is implementing a “carbon tariff” in 2026, which is the topic of a companion post. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102304 |
| By: | Tinnefeld, Vicky; Kesternich, Martin; Werthschulte, Madeline |
| Abstract: | Urged by the European Energy Crisis and the threatening consequences of severe natural gas shortages, energy providers launched gas-saving initiatives incorporating financial incentives to reduce residential natural gas consumption. In collaboration with one of Germany's largest energy providers, we conducted a natural field experiment (N = 2, 598) to evaluate the effectiveness of a behaviorally-guided co-design of such a gas-saving initiative by implementing two established behavioral instruments - reminders of gas saving intentions and descriptive norm feedback. Our findings show limited effectiveness of the behavioural instruments during the high-price period. The feedback risks a "boomerang effect" among households with above-average initial savings, who reduce their conservation efforts in response. The reminder does not significantly enhance savings in our main specifications, yet, realizes 1 percentage point savings in alternate models refining for outliers. Potential mechanisms include a significant intention-action gap and misperceived effectiveness of energy-saving actions, which are not alleviated by the reminder. |
| Keywords: | Residential energy savings, energy crisis, behavioral interventions, survey data, field experiment |
| JEL: | C93 D04 D91 Q41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:333899 |
| By: | Modirzadeh, Seyed Alireza; Abolghasemzadeh, Hossein; Nasseri, Mohsen |
| Abstract: | Companies often prioritize maximizing profits without considering environmental costs, leading to significant ecological damage. This is the rationale behind carbon pricing policies, like carbon taxes or emissions trading schemes, which hold emitters accountable for greenhouse gas emissions by internalizing the costs of climate change. In energy-rich countries like Iran, where energy production is inexpensive, firms are similarly disinclined to improve energy efficiency. This neglect of long-term resource scarcity, social costs, and environmental impacts has contributed to Iran’s energy imbalance, with the government relying on short-term solutions like electricity and natural gas rationing. Despite the substantial potential for energy efficiency and renewable energy development, the availability of cheap fossil fuels continues to hinder progress. Both corporate neglect of environmental harm and Iran's energy inefficiency stem from the same root problem: external costs are not internalised in decision-making. Readily available resources and environmental services are undervalued, while long-term threats like climate change and resource depletion are overlooked. In this context, Iran's energy sector can learn from the global expansion of Emissions Trading Schemes, which limit greenhouse gas emissions through cap-and-trade mechanisms. These schemes encourage firms to either reduce emissions or face penalties, aligning business interests with environmental goals. This paper reviews Iran’s energy sector and examines both market and non-market approaches to reform. We conceptualize designs for revolving funds, energy efficiency and environment market, feed-in tariffs, direct government investment, and the implementation of cap-and-trade mechanism to regulate energy intensity and promote renewable energy. These strategies provide a roadmap for addressing Iran's energy challenges and advancing toward a more sustainable future. |
| Keywords: | cap and trade; Emission Trading Schemes; energy efficiency; greenhouse gas mitigation; Iranian energy market |
| JEL: | R14 J01 |
| Date: | 2025–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126603 |
| By: | Tian, Xiaohui; Tang, Yifang; Guo, Yifeng; Liu, Pengfei |
| Abstract: | As solar photovoltaic (PV) infrastructure expands rapidly across rural China, its economic implications for local communities have attracted increasing attention. This study provides a high-resolution, micro-level analysis of the impact of PV deployment on rural household income and energy use. We link nationally representative household panel data with satellite imaging data on PV sites between 2010 and 2022 to construct a time-varying measure of PV density within a 1–10 km radius of 381 villages. Using two-way fixed effects and a continuous-treatment difference-in-differences design, we find that PV deployment within a 3–5 km radius significantly increases household disposable income by approximately 8% and raises essential fuel expenditure by about 11%. These effects attenuate with distance from the PV sites. Heterogeneity analysis shows that the fuel expenditure effect is more pronounced among poor households, those located in heating regions, and households using clean or electric heating equipment. We find no significant differences in impact by income level, administrative poverty status, or agricultural income dependence, which provide important insights into the distributive consequences of rural energy transitions. The findings offer empirical evidence to support the design of equitable, spatially targeted PV development policies in developing regions. |
| Keywords: | Resource/Energy Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361211 |
| By: | Shakya, Lumana |
| Keywords: | International Development, Environmental Economics and Policy, Consumer/Household Economics |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343824 |
| By: | King, Andy; Sentance, Virginia; Milner, Lauren; Brett, Ellen |
| Abstract: | Decarbonising domestic heating is one of the most challenging elements of the UK’s net zero transition. The largest single challenge is to replace around 23 million gas boilers with low-carbon heating technologies – i.e. those that use electricity generated from renewable sources rather than gas. Heat pumps are the primary tool for low-carbon heating and are central to the sector’s electrification. Although well-established internationally, the proportion of households in the UK with a heat pump is among the lowest in Europe. This policy insight reviews different potential loan models for households purchasing heat pumps, in the context of the UK Government having allocated £5 billion of ‘financial transactions’ to the Warm Homes Plan, exploiting the flexibility offered by its new balance sheet fiscal target. |
| JEL: | R14 J01 E6 |
| Date: | 2025–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130728 |
| By: | Pereira da Silva, Luiz Awazu |
| Abstract: | The transition to net zero cannot be won without a massive redirection of global capital towards emerging markets and developing economies (EMDEs) – encompassing both mitigation and adaptation finance. These countries face annual external financing needs in the order of US$1.3 trillion by 2035, yet international flows remain a fraction of that. This discussion paper sets out a comprehensive, sequenced and politically ambitious agenda of regulatory, policy and institutional reforms to help close that gap. The author outlines a set of reforms to overcome the impediments limiting the flow of climate finance into developing countries. |
| JEL: | N0 F3 G3 E6 |
| Date: | 2025–11–08 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130729 |
| By: | Xuan, Zhichong; Li, Xinrong; Yang, Boqiong; Zhao, Qiran |
| Abstract: | In response to the global push for low‐carbon development and the persistent tension between economic growth and ecological goals in developing countries, China launched the Low-Carbon City Pilot (LCCP) policy in 2010 to explore potential synergies between environmental regulation and economic performance. This study treats the LCCP policy as a quasi‐natural experiment to evaluate its average treatment effect on foreign direct investment (FDI) and to analyze its spatial spillover effects and underlying mechanisms. Using panel data for 282 prefecture‐level cities from 2005 to 2021, we employ staggered difference‐in‐differences and spatial difference‐in‐differences methods. Our findings indicate that the LCCP policy significantly deters FDI in pilot cities, lending support to the pollution haven hypothesis. A mechanism analysis identifies four pathways: induced green technological innovation, strengthened environmental governance, an optimized foreign investment structure, and public behavior-driven. Notably, the LCCP policy generates positive spillovers by stimulating FDI in adjacent cities. Heterogeneity analysis reveals that the negative impacts are more pronounced in growing and mature resource‐based cities, as well as in the eastern and central regions of China. These results suggest that, while environmental regulations may discourage FDI in the short run, they can effectively foster spatial cooperation and industry restructuring that promote sustainable development. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360767 |
| By: | Stefano Maria Corbellini (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | This paper analyzes the monetary policy trade-off between defending purchasing power of consumers and keeping moderate debt cost for borrowers, in the framework of a heterogeneous agent New Keynesian open economy hit by a foreign energy price shock. Raising the interest rate indeed combats the loss in purchasing power due to the energy shock through a real exchange rate appreciation: however, this comes at the expense of higher interest payments for debtors. The trade-off can be resolved by adopting a milder interest rate policy during the crisis in exchange for a prolonged contraction beyond the energy shock time span. This interest rate smoothing approach allows to still experience a real appreciation today, while spreading the impact on debt costs more evenly over time. This policy counterfactual is analyzed in a quantitative model of the UK economy under the 2022-2023 energy price hike, where the loss of consumers’ purchasing power and the vulnerability of mortgage costs to higher policy rates have been elements of paramount empirical relevance. |
| Keywords: | monetary policy, energy, heterogeneity, inequality, household debt |
| JEL: | D14 D31 E52 G21 G51 Q43 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2025014 |
| By: | Simon F. Lang |
| Abstract: | How should nations price carbon? This paper examines how the treatment of global inequality, captured by regional welfare weights, affects optimal carbon prices. I develop theory to identify the conditions under which accounting for differences in marginal utilities of consumption across countries leads to more stringent global climate policy in the absence of international transfers. I further establish a connection between the optimal uniform carbon prices implied by different welfare weights and heterogeneous regional preferences over climate policy stringency. In calibrated simulations, I find that accounting for global inequality reduces optimal global emissions relative to an inequality-insensitive benchmark. This holds both when carbon prices are regionally differentiated, with emissions 21% lower, and when they are constrained to be globally uniform, with the uniform carbon price 15% higher. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.24520 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | The European Union has been an early adopter of carbon policies, with the introduction of the EU Emissions Trading System (ETS) in 2005. This scheme sets a common price for carbon and is applied to the most polluting manufacturing sectors. By increasing the cost of emissions-intensive production, the system incentivizes firms to decrease their use of fossil fuels. However, as we show in a companion post, the policy’s impact was moderated by firms increasing their reliance on high-emissions imports. To eliminate this workaround, the EU will expand the ETS to imports in 2026, through the Carbon Border Adjustment Mechanism (CBAM). The CBAM will essentially put a tariff on imported goods based on their carbon content. Our recent work provides a quantitative analysis of how the ETS and CBAM affect firms’ supply choice decisions, and the resulting changes in domestic prices and emissions. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102305 |