Environment

Adrien Vogt-Schilb, Guy Meunier, Stéphane Hallegatte, 29 March 2018

Traditional climate economics models recommend capturing the cheapest opportunities to reduce emissions first and keeping the most difficult options for later. This column argues that when the fact that reducing emissions takes time and requires investments in long-lived goods and assets is taken into account, the most cost efficient strategy overall is to act immediately in the sectors that are the most expensive and difficult to decarbonise, even if this means investing in options that have a higher cost right now than available alternatives. Actions on urban planning and urban transport systems are especially urgent.

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.

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.

Eli P Fenichel, Matthew Kotchen, Ethan T Addicott, 20 August 2017

How the future is discounted in cost-benefit analyses is a contested issue, with economists disagreeing on whether approaches to discounting should be prescriptive or descriptive. This column presents a new way to model individuals’ discounting based on a demographic approach. The advantages of a purely mortality-based approach are transparency, an empirical basis, and broad data availability.

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.

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