Rick van der Ploeg, Armon Rezai, 05 January 2018

Trump’s election has brought climate change deniers to the centre of global policymaking. This column uses Pascal’s wager as a model to explore optimal policy given uncertainty over the fundamental causes of global warming. This agnostic approach finds that assigning even a high probability to climate change deniers being correct has insignificant effects on policy. Pricing carbon is shown to be optimal in either case, and robust to whether policymakers want to maximise global welfare, or minimise regret in the worst case.

Zuzana Irsova, Tomas Havranek, Dominik Herman, 02 December 2017

The original rationale for daylight saving time was energy savings. This column reveals, however, that the modern empirical literature on the topic finds no savings on average. The extent of savings is related to latitude – regions at higher latitude enjoy slightly more savings, but subtropical regions consume more energy because of daylight saving time. Even in Scandinavia, the savings amount to just 0.3% of annual energy consumption. Policymakers must look at other effects of daylight saving time to justify the continued use of the policy.

Reda Cherif, Fuad Hasanov, Aditya Pande, 24 September 2017

The motor vehicle was very quick to replace horses in the early 20th century, and the advent of the electric car suggests that another profound shift in transportation and energy could be around the corner. This column projects how different rates of electric car adoption will effect oil demand and consumption over the next three decades. In a fast-adoption scenario, oil prices could converge to the level of current coal prices by the early 2040s. Even under a slow adoption scenario, oil could become obsolete before it is depleted.

Daron Acemoğlu, Ufuk Akcigit, Douglas Hanley, William Kerr, 05 July 2017

Substantial headway has been made in the transition to clean technology, but recent political developments threaten this progress. This column examines the transition process using a microeconomic model of competition in production and innovation between clean and dirty technologies. The results suggest that production taxes can deal with dirty emission externalities, while research subsidies are sufficient to redirect innovation towards clean technologies. However, delaying intervention will drastically slow down the overall transition.

Mark Gradstein, Marc Klemp, 23 June 2017

A large literature has argued that natural resources have a negative effect on economic development. The Brazilian data used in this column fail to confirm these findings. Economic activity, as measured using night-time light data, increases more during periods of rising oil prices in localities with better access to oil.  Oil revenue windfalls accruing to oil-rich locations and spillovers to adjacent locations drive this effect. 

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