Environment

Michele Cascarano, Filippo Natoli, Andrea Petrella, 18 May 2022

The question of whether firms are able to adapt to a changing climate is central to understanding the long-run economic effects of climate change. This column presents evidence from Italy showing that high temperatures affect firm demography by reducing the entry of newborn firms in the market and increasing business closures, while relocation to colder areas plays a minor role. Balance sheet data reveal a dichotomy between large firms, which successfully adapt improving their profitability, and smaller ones for which negative temperature spillovers become entrenched.

Thomas Douenne, Adrien Fabre, 01 May 2022

While many economists are in favour of carbon taxation, the public often opposes this climate policy. This column uses data from a survey of 3,000 people in France to show that rejection of a carbon tax is driven by pessimistic beliefs regarding the properties of the tax. Even when revenues from the tax are redistributed to households so as to make the policy progressive, most people think that they and low-income households would lose out, and that the policy would not be effective at reducing emissions. Public investments and standards could help foster support for an ambitious climate policy.

Salvatore Di Falco, Anna B. Kis, Martina Viarengo, 30 April 2022

A high dependence on agriculture has left rural households in sub-Saharan Africa particularly vulnerable to the adverse effects of climate change. This column combines a multi-country panel dataset with precipitation records to re-examine the growing season in five sub-Saharan African countries, and the impact of frequent and extreme drought on a household’s decision to migrate. While the effects of recent weather shocks were modest, the cumulative impact of persistent exposure to drought over several years led to a significant increase in the probability of migrating.

Céline Grislain-Letrémy, Bertrand Villeneuve, 27 April 2022

The costs of natural disasters have risen dramatically over the last decades. Besides the escalating climate crisis, this rise in costs is largely explained by urbanisation in exposed, often flood-prone, areas. This column examines how land-use and insurance policies can limit urbanisation and explains how insurance policies shape real estate prices. Simple observed policies, with a prohibited red zone and a zone without insurance-tariff differentiation, are relatively efficient. Red zones must be redefined as climate risks or population pressures change.

Luiz de Mello, João Tovar Jalles, 25 April 2022

Attitudes towards the environment have evolved over time, in part due to greater awareness about the challenges posed by climate change. Policy plays a part in this process, including through the decentralisation of policy responsibilities to the regional and local governments. This column shows that there is a link between policy decentralisation and attitudes towards the environment, with evidence from individual-level survey-based and aggregate national accounts data pointing to the potential for decentralisation to foster environmentally friendly attitudes and to influence policymaking.

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