Job Market Paper
Welfare-Maximizing Carbon Prices and the Role of International Climate Finance
Link to paper
Abstract:
How should nations price carbon? This paper examines how interregional equity considerations and the availability of international climate finance affect optimal carbon prices—two key policy aspects not reflected in standard estimates. I develop theory to identify the conditions under which accounting for differences in marginal utilities of consumption across countries leads to more stringent global climate policy in the absence of international transfers. In calibrated simulations, I find that this inequality-sensitive approach reduces optimal global emissions, both if carbon prices are allowed to be regionally differentiated and if they are constrained to be globally uniform. I then assess the impact of the Paris Agreement’s $100 billion annual transfer on optimal carbon prices and emissions, finding that it further reduces global emissions if directed toward mitigation projects in developing countries. Accounting for inequality and transfers reduces optimal global emissions by 31% compared to a policy that excludes these factors.
Working Papers
Coase Meets Negishi: A Property Rights Rationale for Welfare Weights in Economies with Public Goods
with Matthew Kotchen and Matthew Gordon
Link to paper
Abstract:
The distributional effects of climate change are at the heart of international climate negotiations. This paper shows how different property rights regimes, ranging from “right to pollute” to “right to no pollution”, rationalize different welfare weights in climate-economic models with heterogeneous regions. Commonly used Negishi weights separate the issues of climate change and global wealth inequality. However, we show that the separation of these issues does not yield a unique Pareto efficient allocation since climate change and climate policies have distributional consequences of their own. As a result, different property rights characterize a set of efficient allocations. In addition to Negishi weights, which implicitly reflect mixed property rights, we define beneficiary pays and polluter pays weights, derived from transfer rules consistent with right to pollute and right to no pollution property rights, respectively. These weights correspond to distinct Pareto efficient allocations that differ only in the distribution of the cost burden of climate damages and abatement, and we show how nations’ characteristics shape their preferences for different property rights regimes. Unlike the Negishi solution, the other efficient allocations involve international transfers for abatement and climate damages, providing theoretically grounded definitions for climate mitigation finance and Loss and Damage payments—both widely discussed in international negotiations. We use calibrated simulations to illustrate the distributional implications of different property rights regimes.
Work in Progress
Estimating the Income Elasticity of Climate Change Impacts
Abstract:
It is often stated that poorer countries will be disproportionately impacted by climate change. This study evaluates whether, and to what extent, this will likely be the case by providing empirically grounded projections of the relationship between income and climate impacts, often characterized as the income elasticity of climate impacts. Most regional and global point estimates of this elasticity fall between 0.5 and 1, indicating that poorer countries are likely to bear a disproportionate share of climate damages. Furthermore, I find that these estimates vary by region, projection year, socioeconomic scenario, and the model underlying the temperature-damage response function. These findings have important implications for determining the optimal stringency of global climate policy in second-best settings and could also inform efforts to address the distributional effects of climate change.
Ranking U.S. Climate Policies to Improve Air Pollution and Health Equity
with Frank Errickson, Mark Budolfson, Maddalena Ferranna, Wei Peng, Noah Scovronick, Jinyu Shiwang, and Vivek Srikrishnan; early-stage
Description:
This project explores the impacts of different climate policies on the distribution of the co-benefits associated with local air pollution reductions and investigates how equity considerations shape policy preferences.