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on Resource Economics |
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Issue of 2021‒06‒14
five papers chosen by |
| By: | Alan Finkelstein Shapiro (Tufts University); Gilbert E. Metcalf (Tufts University) |
| Abstract: | We analyze the quantitative labor market and aggregate effects of a carbon tax in a framework with pollution externalities and equilibrium unemployment. Our model incorporates endogenous labor force participation and two margins of adjustment influenced by carbon taxes: firm creation and green production-technology adoption. A carbon-tax policy that reduces carbon emissions by 35 percent - roughly the emissions reductions that will be required under the Biden Administration's new commitment under the Paris Agreement - and transfers the tax revenue to households generates mild positive long-run effects on consumption and output; a marginal increase in the unemployment and labor force participation rates; and an expansion in the number and fraction of firms that use green technologies. In the short term, the adjustment to higher carbon taxes is accompanied by gradual gains in output and consumption and a negligible expansion in unemployment. Critically, abstracting from endogenous firm entry and green-technology adoption implies that the same policy has substantial adverse short- and long-term effects on labor income, consumption, and output. Our findings highlight the importance of these margins for a comprehensive assessment of the labor market and aggregate effects of carbon taxes. |
| Keywords: | Environmental and Fiscal Policy, Carbon Tax, Endogenous Firm Entry, Green Technology Adoption, Search Frictions, Unemployment, Labor Force Participation |
| JEL: | E20 E24 E62 H23 O33 Q52 Q55 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.17&r= |
| By: | Ulrich Eydam (University of Potsdam) |
| Abstract: | Promoting the decarbonization of economic activity through climate policies raises many questions. From a macroeconomic perspective, it is important to understand how these policies perform under uncertainty, how they affect short-run dynamics and to what extent they have distributional effects. In addition, uncertainties directly associated with climate policies, such as uncertainty about the carbon budget or emission intensities, become relevant aspects. We study the implications of emission reduction schemes within a Two-Agent New-Keynesian (TANK) model. This quantitative exercise, based on data for the German economy, provides various insights. In the light of frictions and fluctuations, compared to other instruments, a carbon price (i.e. tax) is associated with lower volatility in output and consumption. In terms of aggregate welfare, price instruments are found to be preferable. Conditional on the distribution of revenues from climate policies, quantity instruments can exert regressive effects, posing a larger economic loss on wealth-poor households, whereas price instruments are moderately progressive. Finally, we find that unexpected changes in climate policies can induce substantial aggregate adjustments. With uncertainty about the carbon budget, the costs of adjustment are larger under quantity instruments. |
| Keywords: | macroeconomic dynamics, environmental policy, inequality, policy design |
| JEL: | Q52 Q58 E32 E61 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:33&r= |
| By: | Alan Davide Bazzana (University of Brescia, Fondazione Eni Enrico Mattei); Jeremy Foltz (University of Wisconsin-Madison); Ying Zhang (Johns Hopkins University) |
| Abstract: | The study proposes an agent-based model to investigate how adoption of climate smart agriculture (CSA) affects food security. The analysis investigates the role of social and ecological pressures (i.e. community network, climate change and environmental externalities) on the adoption of physical water and soil practices as well as crop rotation technique. The findings reveal that CSA may be an effective strategy to improve the rural populations' well-being for farm households with access to capital, strong social networks and access to integrated food markets. The climate scenario simulations indicate that farmers adopting CSA fare better than non-adopters, although CSA adoption does not fully counterbalance the severe climate pressures. In addition, farmers with poor connections to food markets benefit less from CSA due to stronger price oscillations. These results call for an active role for policy makers in encouraging adaptation through CSA adoption by increasing access to capital, improving food market integration and building social networks. |
| Keywords: | Climate Smart Agriculture, Food Security, Agent-Based Modelling, Externality, Sustainable Development |
| JEL: | C63 O13 Q1 Q15 Q55 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.18&r= |
| By: | Zivin, Joshua Graff (University of California, San Diego); Neidell, Matthew (Columbia University); Sanders, Nicholas (Cornell University); Singer, Gregor (London School of Economics) |
| Abstract: | Influenza and air pollution each pose significant public health risks with large global economic consequences. The common pathways through which each harms health presents an interesting case of compounding risk via interacting externalities. Using instrumental variables based on changing wind directions, we show increased levels of contemporaneous pollution significantly increase influenza hospitalizations. We exploit random variations in the effectiveness of the influenza vaccine as an additional instrument to show vaccine protection neutralizes this relationship. This suggests seemingly disparate policy actions of pollution control and vaccination campaigns jointly provide greater returns than those implied by addressing either in isolation. |
| Keywords: | air pollution, influenza, hospitalizations, vaccines, externalities |
| JEL: | Q53 I12 I11 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14399&r= |
| By: | William D. Nordhaus (Cowles Foundation, Yale University) |
| Abstract: | A proposal to combat free-riding in international climate agreements is the notion of a “climate club†or coalition of countries to encourage high levels of participation. Empirical models of climate clubs in the early stages relied on the analysis of single-period coalition formation. The results suggested that there were limits on the potential strength of clubs and that it would be difficult to have deep abatement strategies in the club framework. The current work extends the single-period approach to many periods and develops an approach analyzing “supportable policies†to analyze multi-period clubs. The major surprise of the study is the interaction between the club structure and rapid technological change. Neither alone will produce incentive-compatible policies that can attain the ambitious objectives of international climate policy. The trade sanctions without rapid technological decarbonization will be too costly to produce highly costly abatement; similarly, rapid technological decarbonization by itself will not induce deep abatement because of country free-riding. But the two together can achieve the international objectives. |
| Keywords: | Climate change, Club, Optimal climate policy, Social cost of carbon |
| JEL: | Q5 Q54 C6 H4 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2286&r= |