Environment

Kevin Bryan, 11 October 2018

The 2018 Nobel Prize in Economic Sciences has been awarded jointly to William Nordhaus for ‘integrating climate change into long-run macroeconomic analysis’, and to Paul Romer for ‘integrating technological innovations into long-run macroeconomic analysis’. This column outlines their work and the connections between them. Both have at their core the longstanding problem of economic growth: why are some places and times rich and others poor, and what is the impact of these differences?

Ralph De Haas, Alexander Popov, 05 October 2018

The environmental Kuznets hypothesis predicts that pollution will increase at early stages of development but then decline once a country surpasses a certain income level. This column examines how banks and stock markets affect the mechanisms behind this hypothesis. Industries which pollute relatively more for technological reasons generate relatively more carbon dioxide in countries with expanding credit markets, whereas stock markets have the exact opposite effect. For middle-income countries in particular, where carbon dioxide emissions may have increased linearly during the development process, stock markets could play an important role in making future growth greener.

Klaus Desmet, Dávid Krisztián Nagy, Esteban Rossi-Hansberg, 02 October 2018

Assessments of the economic cost of a rise in sea-level are often limited to estimating the current value of structures and output in low-lying coastal areas. This column argues that understanding how economic activity will move when faced with flooding is key to correctly evaluating the cost of permanent inundation. When using a high-resolution dynamic spatial model of the world economy, combined with state-of-the-art local projections of sea-level rise for the next 200 years, the cost is substantially lower than when ignoring adaptation through moving. There is huge heterogeneity across space though, with some low-lying coastal areas hit particularly hard. 

Thomas Longden, 09 September 2018

During the last 15 years, various regions around the world have been struck by some very strong heatwaves. This column uses examples of heatwaves in Australia to argue that a lack of acclimatisation is a key factor that influences how deadly these extreme temperature events are, and identifies thresholds for hotter temperatures that capture the temperature-related mortality relationship for such events. 

David Klenert, Cameron Hepburn, 31 July 2018

Political acceptability is the biggest challenge to implementing ambitious carbon pricing schemes. This column argues that behavioural economics and political science provide new insights into the acceptability of carbon pricing which suggest that successful reforms are more likely when the revenues are recycled through lump-sum dividends to citizens. There is no ‘one size fits all’ solution, however, and revenue recycling strategies should account for different social and political contexts and will most likely be mixed in real-world carbon pricing schemes.

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