Spatial Environmental Economics
Paper Session
Saturday, Jan. 3, 2026 10:15 AM - 12:15 PM (EST)
- Chair: Joseph S. Shapiro, University of California-Berkeley
How General Are Environmental Externalities?
Abstract
How does accounting for a broad set of environmental externalities change answers to important economic questions? Many papers study a single externality. Spatial data on air pollution, drinking water pollution, surface water pollution, extreme temperatures, floods, and wildfires reveal two broad results. First, correlations across externalities are low, sometimes negative, limiting generalizability of analyzing a single externality. Economic and geophysical fundamentals help explain the divergent patterns. Second, answers to important economic questions do not easily generalize across externalities. The Great Recession did not improve all environmental quality; it improved air pollution. Spatial patterns of growth are increasing exposure to extreme heat but decreasing exposure to other externalities. Poor communities do have higher exposure to all externalities, but Black and Hispanic communities do not. A spatial equilibrium model finds that these externalities have costs exceeding 2 percent of income and account for over 10 percent of population in many counties, though patterns vary dramatically across externalities. Overall, analyzing a single externality can provide inaccurate conclusions about broad environmental quality.Harnessing the World Trading System to Fight Climate Change
Abstract
We employ a quantitative trade-and-climate model to explore the role that the WTO might play in facilitating the fight against climate change, considering two carbon-tax scenarios. First, in a world where international climate agreements are not possible, we use our quantitative model to solve for the noncooperative Nash carbon taxes that would be chosen by each country if existing WTO tariff commitments were honored, and we consider a variety of possible WTO rules on allowable carbon border adjustments (CBAs). We find that the details of these rules matter for global emissions. In particular, Nash global emissions would be lowest if countries were allowed to apply CBAs on imports when imposing carbon taxes on their producers but were not allowed to rebate the carbon tax payments on exported production, implying that for purposes of fighting climate change the latter dimension of CBAs should only be allowed by the WTO if political support for carbon taxes requires it. Second, in a world where international climate agreements are possible, we find that a climate agreement involving country-specific carbon tax levels can address the participation constraint while still achieving meaningful global emissions reductions, obviating the need for punitive tariff threats on non-members as in Nordhaus (2015) and implying that the WTO need not be a casualty of saving the planet from climate annihilation as would be implied by the “climate clubs” proposed by Nordhaus. We also explore in this second scenario the possibility that a new multilateral round of WTO market access negotiations could be engineered whereby industrialized countries commit to carbon taxes in exchange for reciprocal tariff cuts from developing countries, and where the subsequent threat of developing-country tariff increases under WTO dispute settlement procedures can then help enforce the carbon-tax commitments made by industrialized countries in the context of the round.The Global Effects of Carbon Border Adjustment Mechanisms
Abstract
We study carbon border adjustment mechanism (CBAM) policies, as currently being implemented by the EU and UK. Policy discussions have cited three motivations and one concern. CBAMs can reduce emissions leakage to unregulated markets, improve domestic competitiveness in regulated markets, and encourage other countries to tax carbon. But CBAMs may also have negative impacts on lower-income trading partners. We evaluate these forces with a quantitative equilibrium model and plant-level data on aluminum and steel production worldwide. Our data cover the most emission-intensive and heavily-traded sectors targeted in the first phase of EU and UK implementation. We find that CBAMs can effectively curb leakage, boost domestic competitiveness, and incentivize green policy abroad, while avoiding disproportionate impacts on lower-income countries.Clearing the Air on the Benefits and Costs of Road Infrastructure
Abstract
Investments in transportation infrastructure can yield sizable trade and commuting cost gains, but may also contribute to damaging local air pollution from vehicle traffic. Accounting for such costs may be especially important in developing country cities, which are making significant investments in expanding transportation systems but where high ambient pollution concentrations contribute to severe health impacts. We develop a quantitative urban equilibrium model that integrates a novel granular atmospheric model of pollution dispersion, in order to estimate the impacts of investing in urban roads accounting for both gains from economic integration and costs from local pollution exposure. We estimate the model using high-resolution data on emissions, pollution transport, commuting and goods trade in Lahore, Pakistan, one of the world's most polluted cities. Counterfactual simulations consider the aggregate and distributional implications of major road infrastructure projects in the city.Discussant(s)
Ben Sprung-Keyser
,
University of Pennsylvania
Jonathan Colmer
,
University of Virginia
Samuel Kortum
,
Yale University
Constanza Abuin
,
Harvard University
Ivan Rudik
,
Cornell University
JEL Classifications
- Q5 - Environmental Economics
- F0 - General