Tatyana Deryugina, Nolan Miller, David Molitor, Julian Reif, 13 January 2021

Policies aimed at reducing the harmful effects of air pollution on human health typically focus on improving air quality in polluted areas. This column suggests a shift in focus from targeting the most polluted places to serving the most vulnerable people. Basing air quality regulations on pollution levels may be less valuable than reducing air pollution in regions with vulnerable populations. Programmes that reduce poverty or improve access to health care may also lessen the recipients’ susceptibility to acute pollution exposure.

Alessandro Giovannini, Carl-Wolfram Horn, Francesco Paolo Mongelli, 10 January 2021

The economic fallout from the COVID-19 crisis has been asymmetric across euro area countries, leaving room for risk-sharing channels to operate. This column studies income risk-sharing in the euro area and finds that while it has so far been low, it was resilient throughout the crisis. Initial portfolio investment reverted quickly and intra-euro area cross-border portfolio investment exhibited low volatility. Only cross-border public flows have been limited. This suggests that the provision of unprecedented policy support has prevented private risk-sharing channels from collapsing, reducing the risk of a sudden stop in cross-border financial flows and a further exacerbation of the crisis.

Arik Levinson, Lutz Sager, 05 January 2021

Minimum standards for automobile fuel economy were first set in the US in the 1970s, and have since spread to Europe, Asia, and now Latin America. Regulators claim the rules save car buyers money on average, implying a market imperfection or behavioural anomaly. This column presents new evidence that those averages mask enormous variation. While some drivers could likely save money by spending more upfront for efficient cars, many others overspend for efficient cars they rarely use. Demographics, not economics, determine car choices.

Mattia Di Ubaldo, Steven McGuire, Vikrant Shirodkar, 03 January 2021

The adoption of environmentally friendly production methods matters to both firms and policymakers, as both are concerned with reducing the emissions of greenhouse gases and pollutants. This column studies the effect on emissions of environmental protection provisions in EU free trade agreements, as well as that of private ISO-14001 environmental certifications. Environmental protection provisions in EU trade agreements are associated with lower levels of sulphur dioxide and nitrogen oxide emissions, while ISO-14001 certifications are associated with lower levels of greenhouse gas emissions. For carbon dioxide, ISO-14001 certifications matter only for members of trade agreements with environmental protection provisions, suggesting the existence of complementarities between private and public environmental regulation.

Fabio Antoniou, Manthos Delis, Steven Ongena, Christos Tsoumas, 16 December 2020

Effective environmental policy should consider the behaviour of financiers of polluting firms. In 2013 the EU Emissions Trading System implemented a reform, which translated to higher compliance costs for producers. This column discusses that, in contrast with possible program intentions, loan spreads fell on average by 25% starting in 2013, and this dynamic partly undermined the expected reduction in CO2 emissions. It identifies a key role of permits storage in driving the fall in loan spreads for affected firms. 

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