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Climate Change

Paper Session

Sunday, Jan. 9, 2022 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: Marc Conte, Fordham University

Climate Royalty Surcharges

James H. Stock
,
Harvard University
Brian Prest
,
Resources for the Future

Abstract

Concerns about climate change have led to calls for reforming or eliminating the extensive US federal fossil fuel leasing program. One proposed reform is adding a climate surcharge to the existing royalty rate, but what precisely that surcharge should be is unclear. We consider determining this surcharge by maximizing revenue, maximizing welfare, or setting royalties to achieve 80% of the emissions reductions of an outright leasing ban. We estimate that all three approaches would lead to meaningful declines in global emissions, and the first two would substantially increase royalty receipts, which are split with the state of production.

Introduction to the U.S. Global Change Research Program for the Economics Community

Austin Scheetz
,
U.S. Global Change Research Program
Fredric Lipschultz
,
U.S. Global Change Research Program

Abstract

The U.S. Global Change Research Program (USGCRP) is a federal program mandated by Congress to coordinate federal research and investments in understanding the forces, especially climate change, that shape the global environment and impact society. USGCRP also leads the National Climate Assessment (NCA), a Congressionally mandated quadrennial assessment that evaluates the effects of climate change on regions and sectors of the United States and reports on trends in global change for the next 25 to 100 years.

This paper will introduce USGCRP to the AEA community and highlight past and ongoing activities relevant to the field of economics. These activities include economics information in prior NCAs (and related research gaps), the provision of climate information and data, and interagency conversations surrounding the economics of climate change adaptation.

We invite the AEA community to learn about the activities of USGCRP, as well as the status of the upcoming Fifth NCA and integration of economic information.

The Effects of Climate Change on Labor and Capital Reallocation

Jacopo Ponticelli
,
Northwestern University
Paula Bustos
,
CEMFI
Christoph Albert
,
CEMFI

Abstract

We study the effects of climate change on labor and capital reallocation across regions, sectors and firms. We use newly digitized administrative reports on extreme weather events occurred in Brazil during the last two decades and a metereological measure of dryness relative to historical averages to estimate the effects of abnormal dryness on the local economy of affected areas, on the magnitude and direction of factor movements, and on the allocation of labor and capital in destination regions. We document two main results. In the short run, local economies insure themselves against negative weather shocks via financial integration with other regions. However, in the long run, affected regions experience capital outflows, driven by a reduction in loans, consistent with a permanent decrease in investment opportunities. Second, we find that abnormal dryness affects the structure of both the local economy and the economy of areas connected via migrant networks. Directly affected areas experience a sharp reduction in population and employment, concentrated in agriculture and services. While local manufacturing absorbs part of the displaced workers, these regions experience large out-migration. Regions receiving climate migrants expand employment in agriculture and services, but not in manufacturing. Using social security data, we provide evidence that labor market frictions direct migrants to firms connected to migrant social networks, which are mostly disconnected from manufacturing firms at destination. This affects the composition of economic activity and the firm size distribution in destination regions.

Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel

Per Strömberg
,
Stockholm School of Economics
Gustav Martinsson
,
Royal Institute of Technology
Laszlo Sajtos
,
Stockholm School of Economics
Christian Thomann
,
Royal Institute of Technology and Stockholm School of Economics

Abstract

Sweden, as one of the first countries in the world, introduced a carbon tax in 1991. In our study, we assemble a unique and comprehensive dataset tracking all CO2 emissions from the Swedish manufacturing sector between 1990 and 2015, then estimate the impact of carbon pricing (through taxes and traded emission rights) on firm-level emissions. We first document that the vast majority of manufacturing CO2 emissions can be attributed to a few sub-sectors, in which, due to the design of the carbon tax, firms were often taxed at low or zero marginal tax rates. In panel regressions, spanning twenty-six years and around 4,000 manufacturing firms, we find a statistically robust and economically meaningful inverse relationship between CO2 emissions and carbon pricing. We estimate the CO2 emissions-to-carbon pricing elasticity to be 3-3.4% for the manufacturing sector. Aggregate manufacturing CO2 emissions decreased by about 31% between 1990 and 2015. Our estimated elasticities imply that the reduction in emission intensities due to carbon pricing accounted for 8 percentage points of this decrease.
JEL Classifications
  • Q5 - Environmental Economics