Working Papers
Working Papers
Do citizens support policy instruments because they appreciate their effects or because they are convinced by their objectives? We administered a large-scale, pre-registered, representative survey with randomised video treatments to test how different policy frames - time savings, health and environment - affect citizens' attitudes towards urban tolls, an instrument justifiable on all three grounds simultaneously, in two large European metropolitan areas. Presenting urban tolls as a solution to air pollution increases support by up to 11.4%p, presenting them as a climate change or congestion relief measures increases support by 7.1 and 6.5%p, respectively. Open-ended associations indicate that each frame markedly activated its own policy objective, while beliefs about the toll's effects moved far less and by similar amounts across frames. A mediation analysis further suggests that belief updating plays a limited role. Emphasizing different policy objectives within an otherwise identical policy design can therefore lead citizens to evaluate the same instrument in systematically different ways.
[Working Paper] [Submitted]
Registered as AEARCTR-0010783.
Video Treatments: Time [DE, FR], Air Pollution [DE, FR], Climate Change [DE, FR], Control [DE, FR]
Press coverage: Weekendavisen (in Danish).
This paper studies the efficiency of using uniform fuel taxes as a second-best instrument for reducing urban traffic congestion. We use GPS data on three million car trips in the four largest German cities to estimate the price elasticity of vehicle-kilometres travelled across differently congested hours of the day. We identify price responses using a panel gravity equation, exploiting city-day variation in gasoline prices across trips between the same origin-destination pairs taken during differently congested hours. We find that trips taken during congested hours are less price responsive, yet contribute more to the congestion externality. This negative correlation implies that the second-best uniform fuel tax is lower than a naive Pigouvian congestion charge equal to the average externality. A policy simulation shows that the second-best fuel tax outperforms the naive congestion charge, but still leaves 61% of the welfare loss from congestion in place, against 65% under the naive charge. Thus, targeted congestion pricing remains preferable, but an optimally calibrated uniform fuel tax can improve on a flat congestion charge when targeted pricing is not feasible.
[Working Paper] (old version)
Well-chosen policies to support geological carbon dioxide removal (CDR) are vital to reaching net zero goals. We construct a taxonomy of market- and non-market-based policy instruments to support geological CDR and evaluate them against four criteria rooted in the economics of instrument choice: ability to deliver CDR, efficiency, administrative feasibility and distributional burden, and strategic fit. We also assess the sequencing of policy along technology readiness and illustrate our framework using the EU and the US as examples. No single instrument performs well on all criteria, indicating the presence of trade-offs. Instruments that deliver removals most reliably tend to sacrifice efficiency, and the investment certainty that attracts private capital conflicts with the flexibility to adjust policy and reduce support as technologies mature. Our analysis highlights the need for both mandatory and complementary policy bundles that evolve as CDR technologies develop, with expenditure-based support receding as compliance mechanisms take over. This sequencing curbs fiscal costs and gradually shifts the incidence of removal costs from taxpayers towards emitters.
[Working Paper] [Submitted]
Green industrial policy has become a central tool for accelerating the deployment of clean technologies in hard-to-abate sectors, yet there is little economic guidance on how governments should choose among alternative policy instruments. This paper develops a unified framework to compare green industrial policy designs when clean investment is irreversible, learning-by-doing and market formation generate dynamic spillovers, and private returns are uncertain. We show that instrument choice is irrelevant in deterministic environments: conditional on inducing the same deployment, alternative instruments are equivalent in welfare terms. Under uncertainty, however, irreversible investment creates an option value of waiting that delays socially desirable deployment. Policy instruments differ in how they reshape the distribution of returns, reduce downside risk, and accelerate investment timing. Using the marginal value of public funds as a welfare metric, we show that state-contingent price stabilization instruments dominate deterministic subsidies, and that symmetric contracts weakly dominate one-sided guarantees by achieving similar deployment with lower expected fiscal cost. A quantitative framework illustrates the magnitude of these effects.
We study how climate policy shapes the transmission of monetary policy to bank credit. %In our model, emission allowances allocated to firms under a cap-and-trade scheme are liquid, registry-verifiable assets that provide banks with collateral-like protection in default. A theoretical framework shows how carbon pricing design can affect bank credit through freely allocated emission allowances, whose liquidity and registry verifiability give them collateral-like properties in bank lending. When a funding shock raises the cost of unsecured credit risk, banks reduce lending overall but reallocate credit toward regulated firms holding more allowances. Using confidential German credit registry data matched with firm and bank balance sheets and EU Emissions Trading System (ETS) compliance data, we exploit the ECB's introduction of negative policy rates in June 2014 as a funding shock to deposit-reliant banks. We find that affected banks increase lending to ETS firms relative to non-ETS firms, reduce collateralization, and report lower probabilities of default on these exposures. Consistent with the proposed mechanism, the reallocation is concentrated among firms whose free allocation covers their emissions and is absent among firms facing an allowance shortage. This novel financial channel is particularly relevant amid the EU's ongoing phase-out of free allocation alongside the Carbon Border Adjustment Mechanism.
Carbon Leakage and the EU ETS: Evidence from German Manufacturing Firms (with Stefan Goldbach, Axel Jochem and Nicolas Koch)