nep-res New Economics Papers
on Resource Economics
Issue of 2023‒07‒17
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Carbon border adjustments, climate clubs, and subsidy races when climate policies vary By Kimberly A. Clausing; Catherine Wolfram
  2. Environmental policy instruments for investments in backstop technologies under present bias - an application to the building sector By Arnold, Fabian; Ashour Novirdoust, Amir; Theile, Philip
  3. Pricing Neighborhoods By Eshaghnia, Sadegh S. M.; Heckman, James J.; Razavi, Goya
  4. The Effect of Air Pollution on Fertility Outcomes in Europe By Stump Árpád; Herczeg Bálint; Szabó-Morvai Ágnes
  5. Policies, Projections, and the Social Cost of Carbon: Results from the DICE-2023 Model By Lint Barrage; William Nordhaus

  1. By: Kimberly A. Clausing (Peterson Institute for International Economics); Catherine Wolfram (University of California, Berkeley)
    Abstract: Jurisdictions adopt heterogeneous climate policies that vary in terms of both ambition and policy approach, with some jurisdictions pricing carbon and others subsidizing clean production. We distinguish two types of policy spillovers associated with diverse policy approaches to climate change. First, when countries have different levels of climate ambition, free riders will benefit at the expense of more committed countries. Second, when countries pursue different approaches, carbon-intensive producers within cost-imposing jurisdictions will be at a relative competitive disadvantage compared with producers in subsidizing jurisdictions. Carbon border adjustments and climate clubs are attempts to respond to these policy spillovers, but when countries have divergent policy approaches, one policy alone will not be able to address both types of spillovers. The authors also consider the policy dynamics that result from carbon border adjustments and climate clubs; both have the potential to encourage upward harmonization of climate policy, but they come with risks. Further, the pressures of international competition in the presence of divergent climate policy approaches may result in subsidy races, which come with their own potential risks and benefits.
    Keywords: carbon border adjustments, climate clubs, Pigovian taxes and subsidies, international competitiveness, trade and environment
    JEL: F18 H23 Q54 Q58
    Date: 2023–05
  2. By: Arnold, Fabian (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Ashour Novirdoust, Amir (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Theile, Philip (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Governments worldwide have set targets to reduce greenhouse gas emissions from the residential sector to zero. Policy instruments, such as carbon pricing or subsidies, are being discussed and implemented to achieve these targets. If individuals exhibit present bias, Heutel (2015) has shown that optimal policies targeting investments in the efficiency state of externality-producing durable goods and their usage consist of two components, one aimed at the externality and one aimed at the present bias. We generalize Heutel’s theoretical model by defining a larger technology set. This allows us to represent the dependence of fuel prices and emission intensities on technologies used in the building sector and to include a zero emission backstop technology. We first examine the effect of this model generalization on Heutel’s main propositions, assuming still that the backstop technology is not optimal. Second, we extend this examination to the case when the backstop technology is optimal. In a stylized case study for a representative building in Germany, we numerically estimate magnitudes of the present bias effect on investment and heating decisions, emissions, policies, and deadweight loss. We show that as long as social costs of carbon and the corresponding CO 2 price are not high enough to make the backstop technology optimal, Heutel’s proposition holds that optimal policies must consist of two components. Contrary to Heutel’s proposition, if the social costs of carbon and the CO2 price are high enough, a single instrument can address present bias. While the level of this single instrument, i.e., a tax or subsidy, depends on the level of present bias, we find that there exists a tax-subsidy combination that is optimal regardless of the level of present bias.
    Keywords: Present bias; policy; heating investments; durable goods; climate neutrality
    JEL: D15 D62 D91 H23 Q48 Q58
    Date: 2023–06–22
  3. By: Eshaghnia, Sadegh S. M. (University of Chicago); Heckman, James J. (University of Chicago); Razavi, Goya (University of Chicago)
    Abstract: Education in Denmark is freely available. Despite near equal teacher salaries and per-pupil school expenditure across districts, there is substantial spatial heterogeneity in school quality as measured by teacher quality and student test scores. We argue that this is due to sorting of teachers and students across neighborhoods. We develop and apply multiple methods for identifying parental evaluations of measured school quality in the presence of strong neighborhood sorting. There is strong concordance in the estimates across diverse methodologies. We estimate a willingness to pay of about 3% more for a house with average characteristics when test scores are one standard deviation above the mean. Controlling for selection into neighborhoods only slightly reduces our estimates. Given that school quality, as measured by monetary resources, is equalized across all neighborhoods, payments for school quality embodied in housing prices are in fact payments for peer, teacher, and neighborhood quality. This evidence challenges the appropriateness of the current emphasis in the literature on Tiebout-based models of neighborhood choice that stress sorting on parental income in order to finance the local public good of school quality. Rather, a model of neighborhood choice to select neighbor and peer quality is more appropriate. Our evidence is consistent with evidence that cash expenditures on classrooms have weak effects on child achievement.
    Keywords: hedonic valuation, amenities, residential sorting, peer effects
    JEL: H0 H4 H7 I2 R0 R2 R3
    Date: 2023–06
  4. By: Stump Árpád (Budapesti Corvinus Egyetem); Herczeg Bálint (HÉTFA Kutatóintézet); Szabó-Morvai Ágnes (Centre for Economic and Regional Studies, Debreceni Egyetem)
    Abstract: This paper studies the effect of ambient air pollution on the number of births in the European Union. We collect air pollution data with web scraping technique and utilize variations in wind, temperature, number of heating, and cooling days as instrumental variables. There are 657 NUTS 3 regions included in the regressions, each with 2 to 6 years of observations between 2015 and 2020. Our results show that an increase in the levels of PM2.5 - PM10 pollution concentration by 1 μg/m3 (appr. 5-10%) would result in a 9% drop in the number of births next year. CO pollution levels also have a significant although smaller effect. If CO pollution concentration increases by 1 mg/m3 (appr. 15%) the number of births next year will fall by about 1%. In the heterogeneity analysis, we find that air pollution is more harmful to fertility in countries with already high pollution levels and lower GDP. This latter suggests that healthcare spending and the general level of living standard could be factors that moderate the negative consequences of ambient air pollution. To our knowledge, this is the first article to study the fertility effects of air pollution using an extended number of countries and years and at the same time including more than one air pollutant. As a result, our results have strong external validity. A remarkable novelty of our study compared to the previous literature is that after taking into account the effect of PM2.5 - PM10 and CO, the rest of the pollutants have much less role in shaping fertility outcomes compared to the findings of the previous literature. This difference is a result of the new method of this study, which examines the pollutants simultaneously instead of examining only one or a few at a time. This result can be important for environmental policies, where the limited resources should target pollution types that have the most detrimental effect on human fertility and health.
    Keywords: ambient air pollution, fertility, instrumental variables
    JEL: Q53 J13 I14
    Date: 2023–05
  5. By: Lint Barrage (ETH Zurich); William Nordhaus (Cowles Foundation, Yale University)
    Abstract: The present study examines the assumptions, modeling structure, and preliminary results of DICE-2023, the revised Dynamic Integrated Model of Climate and the Economy (DICE), updated to 2023. The revision contains major changes in the carbon and climate modules, the treatment of non-industrial greenhouse gases, discount rates, as well as updates on all the major components. The major changes are a significant reduction in the target for the optimal (cost-beneficial) temperature path, a lower cost of reaching the 2 ¡C target, an analysis of the impact of the Paris Accord, and a major increase in the estimated social cost of carbon.
    Date: 2023–02

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