nep-res New Economics Papers
on Resource Economics
Issue of 2023‒11‒20
four papers chosen by
Maximo Rossi, Universidad de la República

  1. Environmental policy stringency and CO2 emissions: Evidence from cross-country sector-level data By Erik Frohm; Filippo Maria D’Arcangelo; Tobias Kruse; Mauro Pisu; Urban Sila
  2. Divestment and Engagement: The Effect of Green Investors on Corporate Carbon Emissions By Matthew E. Kahn; John Matsusaka; Chong Shu
  3. Natural world preservation and infectious diseases: Land-use, climate change and innovation By William Brock; Anastasios Xepapadeas
  4. The fiscal implications of stringent climate policy By Richard S.J. Tol

  1. By: Erik Frohm; Filippo Maria D’Arcangelo; Tobias Kruse; Mauro Pisu; Urban Sila
    Abstract: This paper provides empirical evidence on the short and long-term sectoral effect of environmental policy stringency on CO2 emissions, exploiting longitudinal data covering 30 OECD countries and more than 50 sectors. The analysis relies on the OECD Environmental Policy Stringency (EPS) index, a composite index tracking climate change and air pollution mitigation policies. Estimates obtained from panel regressions suggest that more stringent environmental policies are associated with lower emissions, that the effect builds over time and differs across sectors depending on their fossil fuel intensity. A one unit increase in the EPS index (about one standard deviation), is associated with 4% lower CO2 emissions in the sector with median fossil fuel intensity after two years and by 12% after 10 years. For sectors in the top decile of the fossil fuel intensity distribution, the estimates point to a decline in emissions by 11% after two years and 19% after ten years. Environmental policies targeted at energy, manufacturing and transport sectors have the largest potential impact on emissions. Illustrative policy scenarios based on these results indicate that achieving emission reductions consistent with net-zero targets will require raising the stringency of environmental policies more drastically and rapidly than in the past.
    Keywords: climate change, CO2 emissions, cross-country regression, Environmental Policy Stringency
    JEL: Q54 Q58 C23
    Date: 2023–11–06
  2. By: Matthew E. Kahn; John Matsusaka; Chong Shu
    Abstract: This paper studies whether green investors can influence corporate greenhouse gas emissions through capital markets, either by divesting their stock and limiting polluters’ access to capital, or holding polluters’ stock and engaging with management. We focus on public pension funds, classifying them as green or non-green based on which political party controlled the fund. To isolate the causal effects of green ownership, we use exogenous variation caused by state-level politics that shifted control of the funds and portfolio rebalancing in response to returns on non-equity investment. Our main finding is that companies reduced their greenhouse gas emissions when stock ownership by green funds increased and did not alter their emissions when ownership by non-green funds changed. We find evidence that ownership and constructive engagement was more effective than confrontational tactics such as voting or shareholder proposals. We do not find that companies with green investors were more likely to sell off their polluting facilities (greenwashing). Overall, our findings suggest that (a) corporate managers respond to the environmental preferences of their investors; (b) divestment in polluting companies may be counterproductive, leading to greater emissions; and (c) private markets may be able to address environmental challenges without explicit government regulation.
    JEL: G11 G12 Q54
    Date: 2023–10
  3. By: William Brock; Anastasios Xepapadeas
    Abstract: Scientific evidence suggests that anthropogenic impacts on the environment, such as land use changes and climate change, promote the emergence of infectious diseases (IDs) in humans. We develop a tworegion epidemic-economic model which unifies short-run disease containment policies with long-run policies which could control the drivers and the severity of IDs. We structure our paper by linking susceptible-infected-susceptible and susceptible-infected-recovered models with an economic model which includes land-use choices for agriculture and climate change and accumulation of knowledge that supports landaugmenting technical change. The contact number depends on shortrun containment policies (e.g., lockdown, vaccination), and long-run policies affecting land use, the natural world and climate change. Climate change and land-use change have an additional cost in terms of IDs since they might increase the contact number in the long run. We derive optimal short-run containment controls for a Nash equilibrium between regions, and long-run controls for climate policy, land use and knowledge at an open loop Nash equilibrium and the social optimum and unify the short- and long-run controls. We explore the impact of ambiguity aversion and model misspecification in the unified model and provide simulations which support the theoretical model.
    Keywords: infectious diseases, SIS and SIR models, natural world, climate change, land use, containment, Nash equilibrium, OLNE, social optimum, land-augmenting technical change
    JEL: I18 Q54 D81
    Date: 2023–11–08
  4. By: Richard S.J. Tol (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom)
    Abstract: Stringent climate policy compatible with the targets of the 2015 Paris Agreement would pose a substantial fiscal challenge. Reducing carbon dioxide emissions by 95% or more by 2050 would raise 7% (1-17%) of GDP in carbon tax revenue, half of current, global tax revenue. Revenues are relatively larger in poorer regions. Subsidies for carbon dioxide sequestration would amount to 6.6% (0.3-7.1%) of GDP. These numbers are conservative as they were estimated using models that assume first-best climate policy implementation and ignore the costs of raising revenue. The fiscal challenge rapidly shrinks if emission targets are relaxed.
    Keywords: climate policy
    JEL: O44 Q54
    Date: 2023–07

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