Energy

Christian Gollier, 06 April 2021

Any global temperature target must be translated into an intertemporal carbon budget and an associated cost-efficient carbon price schedule. This column uses an intertemporal asset-pricing approach to examine the impact of uncertainties surrounding economic growth and abatement technologies on the dynamics of efficient carbon prices. It finds evidence of a positive carbon risk premium and suggests an efficient growth rate of expected carbon prices of around 4% plus inflation. This is lower than the growth rates found in many public reports and integrated assessment models, and justifies a higher carbon price today in order to satisfy the carbon budget.

Ralph De Haas, Ralf Martin, Mirabelle Muûls, Helena Schweiger, 19 March 2021

Many countries are striving for net-zero carbon emissions by 2050, requiring massive investments over the next decades. But many companies, especially smaller ones, will not be able or willing to invest in cleaner technologies. This column explores how organisational constraints can hold back the green transition of firms in less-developed economies. The findings reveal how financial crises can slow down the decarbonisation of economic production and caution against excessive optimism about the potential green benefits of the current economic slowdown, which – like any recession – has led to temporary reductions in emissions.

Gideon Bornstein, Per Krusell, Sérgio Rebelo, 01 March 2021

Oil markets have long been central to discussions of the global economy, and fluctuations in oil prices frequently gain widespread attention. This column explores the impact of the rising use of fracking on how oil markets are best conceived within modern macroeconomic theory. The author's model predicts that as fracking accounts for an increasingly sizeable fraction of the world oil supply, it may herald a new era of lower, more stable oil prices.

Hans Koster, Martijn Dröes, 20 September 2020

Countries that invest in renewable energy production face frequent opposition from local homeowners. Using a detailed housing transactions dataset covering the whole of the Netherlands since 1985, this column compares the overall impact that wind turbines and solar farms have on housing prices. It finds that tall wind turbines (over 150 metres) have a negative effect, and solar farms generate losses as well (2-3% for homeowners within a 1km orbit). This evidence should be factored into finding the optimal allocation of renewable energy production facilities. 

David Popp, Francesco Vona, Joëlle Noailly, 04 July 2020

Many governments worldwide are currently considering fiscal recovery packages to address the Covid-19 crisis. This column analyses the impact of past green fiscal stimulus on employment. Focusing on the American Recovery and Reinvestment Act after the Global Crisis, it finds that that the green stimulus was particularly effective in creating jobs in the long run, but not in the short run. Hence, while green stimulus packages are useful to reorient the economy and direct it onto a green trajectory in the longer run, they are less effective in restarting the economy quickly.

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