nep-res New Economics Papers
on Resource Economics
Issue of 2020‒10‒05
three papers chosen by
Maximo Rossi
Universidad de la República

  1. Endogenous Emission Caps Always Produce a Green Paradox By Gerlagh, Reyer; Hejimans, Roweno J. R. K.; Rosendahl, Knut Einar
  2. Sustainable Investing in Equilibrium By Lubos Pastor; Robert F. Stambaugh; Lucian A. Taylor
  3. Trust, Happiness, and Pro-social Behavior By Carattini, Stefano; Roesti, Matthias

  1. By: Gerlagh, Reyer (Department of Economics, Tilburg University); Hejimans, Roweno J. R. K. (Department of Economics, Tilburg University); Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: For any emission trading system (ETS) with quantity-based endogenous supply of allowances, there exists an allowances-demand reducing policy that increases aggregate supply and thus cumulative emissions. We establish this green paradox in a general model and apply the insights to the Market Stability Reserve (MSR) in the EU ETS, implemented in 2018. We show that demand-reducing policies announced in early periods but realized in the future, such as decisions to phase out coal power, can be inverted by the new rules: they may increase cumulative emissions. We provide quantitative evidence of our result for a model disciplined on the price rise in the EU ETS that followed the introduction of the MSR. Our results point to the need for better coordination between different policies in the "European Green Deal" proposed by the European Commission late 2019.
    Keywords: Emissions trading; Green paradox; EU ETS; environmental policy; dynamic modeling
    JEL: D59 E61 H23 Q50 Q54 Q58
    Date: 2020–05–08
  2. By: Lubos Pastor (University of Chicago - Booth School of Business); Robert F. Stambaugh (University of Pennsylvania - The Wharton School and NBER); Lucian A. Taylor (University of Pennsylvania - The Wharton School and NBER; Sustainable Investing in Equilibrium)
    Abstract: We present a model of investing based on environmental, social, and gover- nance (ESG) criteria. In equilibrium, green assets have negative CAPM alphas, whereas brown assets have positive alphas. Green assetsÕ negative alphas stem from investorsÕ preference for green holdings and from green stocksÕ ability to hedge climate risk. Green assets can nevertheless outperform brown ones during good performance of the ESG factor, which captures shifts in customersÕ tastes for green products and investorsÕ tastes for green holdings. The latter tastes pro- duce positive social impact by making firms greener and shifting real investment from brown to green firms. The ESG investment industry is at its largest, and the alphas of ESG-motivated investors are at their lowest, when there is large dispersion in investorsÕ ESG preferences.
    Keywords: sustainable investing, socially responsible investing, ESG, social impact
    JEL: G11 G12
    Date: 2020
  3. By: Carattini, Stefano; Roesti, Matthias
    Abstract: This paper combines several large-scale surveys with different identification strategies to shed new light on the determinants of cooperative behavior. We provide evidence indicating that the well-being maximizing level of trust is above the income maximizing level. Higher trust is also linked to more cooperative and pro-social behaviors, including the private provision of global public goods such as climate change mitigation. Consistent with “warm glow” theories of pro-social behavior, our results show that individuals may enjoy being more cooperative than what would lead them to maximize their income, which is reflected in higher levels of well-being.
    Keywords: Cooperation, generalized trust, pro-social behavior, pro-environmental behavior, well-being
    JEL: Q50 H41 I31 D64
    Date: 2020–09

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