Economics of Climate Change
Friday, Jan. 6, 2017 1:00 PM – 3:00 PM
- Chair: Roberton Williams, University of Maryland
What Explains Participation and Effort in Voluntary Climate Action by Businesses?: Evidence from the Carbon Disclosure Project
AbstractIn parallel with the top down, intergovernmental climate talks at the 2015 Paris Climate Conference, there was a “Climate Solutions Hub,” which showcased concrete climate actions by businesses, cities, states and provinces. According to a Yale University report, 2,138 companies from 145 countries representing $36.6 trillion USD in revenue, roughly equivalent to the combined GDPs of the U.S., China, Japan, Germany, and the UK have pledged climate action. Some businesses “talk a good game”, but which ones are actually contributing to meaningful climate change mitigation? Drawing on the private provision of public goods and the economics of corporate social responsibility literatures, this paper employs the Double-Hurdle model, which accounts for the related and sequential decisions of participation and effort by corporations to uncover the firm-level factors that differentiate leaders from greenwashers in proactive climate action. Based on an analysis of the participation of the Global 500 firms in the CDP (formerly known as the Carbon Disclosure Project) during 2011-2015, preliminary results suggest that the existence of a senior manager or executive-level officer with direct responsibility for climate change is associated with higher participation in voluntary carbon disclosure. Notwithstanding, firms that have integrated climate change risks into their business operations, notably the adoption of emissions reduction targets are associated with higher levels of carbon disclosure: these companies not only voluntarily report their climate change strategies and carbon emissions but have verified their disclosures with third-party audits. By making use of President Obama’s announcement of a series of executive actions on climate change, which increased the likelihood of climate change regulation in the U.S. during the period under study, I find that firms based in the U.S. were more likely to participate and engaged in higher levels of carbon disclosure relative to other firms.
Does Regulating Local Pollution Also Reduce Greenhouse Gas Emissions?
AbstractIn most countries, environmental regulation has focused on local pollution, which causes damages near the emission source, while regulation on global pollutants such as greenhouse gases (GHG) has been slow. In principle, local pollutants can either be substitutes or complements to global pollutants implying that local pollution regulation might either increase or decrease GHG emissions. This relationship, in aggregate and within industry, is a purely empirical question. We use new comprehensive data on all GHG emissions in the United States and exploit variation in local pollution regulation across US counties to estimate this relationship. We find no evidence that more stringent local pollution regulation systematically changes GHG emissions.
Trust and CO2 Emissions: Cooperation on a Global Scale
AbstractIn this paper we show that the within-country cooperative culture sustained by trust positively affects international cooperative behaviour. We focus on the role of social norms shared by trustworthy individuals and demonstrate that such norms can create incentives for trustworthy individuals to cooperate with foreigners even when they are unsure of the trustworthiness of their foreign partners via reputation effects. We then provide empirical evidence in the context of climate change that an increase in trust leads to more global cooperation measured by larger reductions in CO2 emissions. We establish causality by obtaining a time-varying measure of inherited trust from the trust that descendants of US immigrants have inherited from their ancestors. The measure allows us to have country fixed effects and thus to study how the evolution of trust is correlated with the change in CO2 emissions over time. Inherited trust turns out to be a significant factor that explains the changes in CO2 emissions across 26 countries worldwide including most European countries. The results are robust even when we control for economic growth, industrial composition of the economy, trade patterns and political environment. Our findings provide a plausible explanation for the existence of national, regional and local level mitigation efforts in the absence of a global agreement for climate change, which is difficult to reconcile with the conventional theory of collective action.
- Q5 - Environmental Economics