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on Resource Economics |
| By: | Pablo Garcia Sanchez; Olivier Pierrard |
| Abstract: | While a sustained contraction of global production could lower emissions, it would hamper economic development in poorer countries, reduce living standards for low-income households in advanced economies, and heighten the risk of social unrest. Therefore, reducing carbon intensity emissions per unit of output appears to be the most viable and sustainable path forward. We make two contributions: one empirical and one theoretical. Empirically, we show that the distribution of carbon intensities across major economies has followed a path since 1995 that is well approximated by the transport equation, a basic differential equation from physics. Theoretically, we show that in an extended Solow model with abatement capital, the distribution of carbon intensity across a continuum of economies also follows the dynamics described by the transport equation. This theoretical result remains empirically plausible under standard parameter values. Unlike its empirical counterpart, the calibrated model can provide projections of emissions and temperature increases under various policy scenarios, with results aligning closely with forecasts by leading institutions. |
| Keywords: | Carbon intensity; Transport equation; Solow model. |
| JEL: | O44 Q50 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp198 |
| By: | Lukas Hofmann (University of Amsterdam and Tinbergen Institute); Martijn Dröes (University of Amsterdam); Marc Francke (University of Amsterdam and Tinbergen Institute) |
| Abstract: | This paper examines the effect of land subsidence -- the gradual sinking of the Earth's surface -- on property values. Subsidence can negatively affect real estate by damaging building foundations and increasing vulnerability to flooding. Using detailed property transaction data from the Netherlands, combined with high-resolution geospatial data on both current and projected subsidence and flood risk, we find that properties currently experiencing subsidence sell at a 0.8% discount when built on foundations susceptible to damage. Additionally, flood-prone properties projected to experience future subsidence sell for 1.5% less. Compared to the actual costs and occurrence of these risks, our findings suggest that homeowners tend to underestimate the risks associated with foundation damage while overestimating the threat of future flooding. |
| Keywords: | Land subsidence, property prices, climate risk, risk perception |
| JEL: | G10 Q54 R30 |
| Date: | 2025–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20250040 |
| By: | Ringstad, Ingrid Emilie Flessum (Dept. of Business and Management Science, Norwegian School of Economics); Benini, Giacomo (Dept. of Business and Management Science, Norwegian School of Economics); Dotti, Valerio (Dept. of Economics, Ca’ Foscari University of Venice); Tselika, Kyriaki (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | We study how uncertainty about future climate policy affects the valuation of oil resources. Using a structural model of extraction and exploration applied to field-level data from the Norwegian Continental Shelf, we estimate the impact of climate policy uncertainty (CPU) on the shadow prices of both discovered and undiscovered oil. We find that higher CPU lowers these marginal values, especially after the 2015 Paris Agreement, reducing incentives to extract and explore. This decline translates into an implicit carbon cost of $15–$38 per tonne of carbon dioxide emitted. Unlike a Pigouvian tax, this shadow cost does not scale with emissions intensity or generate fiscal revenue. As a result, it reduces production and emissions in a diffuse and economically inefficient manner, without rewarding low emitters or financing green transition policies. |
| Keywords: | Oil Industry; Climate Policy; Decision-Making under Risk and Uncertainty |
| JEL: | C51 D81 Q35 Q58 |
| Date: | 2025–07–10 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2025_022 |
| By: | Taco Prins (University of Amsterdam); Frederick van der Ploeg (University of Amsterdam and Tinbergen Institute); Ton S. van den Bremer (University of Amsterdam and Tinbergen Institute) |
| Abstract: | We analyse optimal investment in one of the most important forms of climate adaptation: flood protection. Investments to build and heighten dykes and surge barriers involve considerable adjustment costs, so that their construction locks in the level of flood protection for some time. Investment decisions must take into account both economic and sea level rise uncertainty over a horizon of several decades, where the latter is to a large extent driven by global warming. We put forward a tractable macro-finance DSGE model that includes flood risk. We obtain solutions for optimal flood protection as a function of these uncertainties, costs, and preferences regarding impatience, risk aversion and intertemporal substitution. Sea level rise uncertainty always leads to more flood protection. Economic uncertainty leads to less (more) protection if the elasticity of substitution is greater (less) than one. We illustrate our results with a calibrated case study for the Netherlands. |
| Keywords: | Sea level rise, flood risk, macroeconomic risk, climate adaptation, discounting, risk aversion, intertemporal substitution |
| JEL: | F64 Q51 Q54 |
| Date: | 2025–04–25 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20250030 |