SWEEET

Andrew J. Plantinga, Professor, Bren School of Environmental Science and Management, University of California, Santa Barbara, USA

"Environmental Markets: Is the Promise Fulfilled?"

Abstract :

It has long been recognized that common-pool resources, if left unmanaged, tend to be inefficiently over-extracted. This “problem of the commons" remains pervasive today as many natural resources around the world deplete at unprecedented rates. Environmental markets are a promising solution. By assigning property rights to resources, incentives for over-extraction can be curtailed and welfare increased through more efficient use. These appealing predictions have led to the adoption of environmental markets for nearly every common-pool resource - from fisheries, forests, water, to the global climate. Nevertheless, the effectiveness of environmental markets is predicated on a number of stylized theoretical assumptions, many of which are violated in practice. Thus, it is an empirical question whether environmental markets will be effective under real-world conditions. In this talk, I will review the empirical literature on the performance of environmental markets, emphasizing identification challenges and solutions. I will conclude with a detailed discussion of my recent paper on groundwater markets (Ayres, A.B., Meng, K.C., and A.J. Plantinga. 2021. Do Environmental Markets Improve on Open Access? Evidence from California Groundwater Rights. Journal of Political Economy 129(10):2817-2860).

Does merging public utilities save money? The case of water in France

Alexandre Mayol (BETA - Université de Lorraine) et Stéphane Saussier (IAE de Paris - Université Paris 1 Panthéon-Sorbonne)

Abstract:

The public policies aim to merge the different public utilities hoping to save money and gain an economy of scale. In France, the municipalities are responsible for water provision. The French government incentivizes them to merge their different local public utilities such as water, transport, and energy. However, the majority of the municipalities don’t accept this. We can question the motivations to merge (or not): political opportunism, efficiency, fiscally. From an exhaustive panel database (2008-2018), we analyze the merging of water in France to understand their reasons and the impact. This paper is relevant to question the economies of scale in utilities.

Zakaria Moussa and Arthur Thomas

"Identifying oil supply news shocks and their effects on the global oil market​"

Abstract

This paper uses a new empirical strategy to identify oil supply news shocks within a Non- Causal VAR model of standard global oil market variables. These shocks explain most of the movements in oil production over a long but finite time horizon. Our findings highlight the prominent role of expectations in propagating shocks. Negative oil supply news shocks cause abrupt and permanent reactions in global oil production, global economic activity and in oil inventory. However, an oil supply shock has only a limited effect on oil price. Finally, a news shock regarding oil supply shortfalls has macroeconomic consequences, causing a substantial decline in US industrial production.

Kelly Coboum

Forest Dynamics and Ecosystem Collapse: Delaying Tipping Points in the Face of Decision Making Myopia

Abstract

Across the developing world, the deforestation of primary, native forests supports economic activity at the cost of environmental degradation with global, long-term consequences. Events like record-setting wildfires in the Amazon highlight the potential for deforestation to drive ecosystems past potentially irreversible tipping points, such as a shift from tropical forest into grassy savanna. Investments in reforestation with secondary forests are one potential tool to avert or delay tipping points, but the success of this strategy may depend on the degree to which secondary and primary forests are substitutes in the production of ecosystem services. We develop a dynamic optimization model and numerical simulation to explore how deforestation, reforestation, and the degree of substitutability between forest types affects the likelihood that a forest system will cross a tipping point. In the context of the Brazilian Amazon, we find that efforts to ensure secondary forests better mimic primary forests only yield a small improvement in terms of avoiding or delaying ecosystem collapse. Rather, the most significant effects on tipping points arise from an increase in the relative costs of clearing primary forests and/or a decrease in the tenure costs associated with protecting secondary forest investments. Our results highlight in particular the importance of tenure costs as a policy target to reduce the risk of ecosystem collapse.

Guy Meunier and Jean-Pierre Ponssard

" Extending the limits of the abatement cost "

Abstract

The paper examines the relevant cost benefit framework for state agencies investigating

the potential of local projects to mitigate climate change. While these projects are typically limited in time and space, continuation paths need be introduced for capturing the benefits provided by the project. It is a particularly acute issue in the case of the transition toward carbon neutrality, because one day or the other emissions need be abated. The relevant question is not whether to decarbonate or not an activity but when to do so, and how. We propose a new metric that incorporates into the analytical framework the dynamic interactions between the project and its continuation. It is defined as the annual overall discounted cost divided by the long term annual abatement. The new metric is a non trivial extension of the standard cost of abatement. It precisely determines when to launch a given project. It solves the question of comparing competing projects using their on going emissions up to their respective optimal launching dates. Two illustrations make clear the novelty of our approach: the choice of the optimal mix of technologies for the electricity sector and the comparison between competing green technologies for mobility.

Working paper (pdf)

Slides (pdf )

Jean-Pierre Amigues, Gerard van der Meijden, Michel Moreaux and Cees Withagen

"Carbon Capture and Storage with Enhanced Recovery "

Acknowledgements: During the process of writing this paper Michel Moreaux passed away. We miss him. He was a great scholar.

Abstract

Carbon capture and storage (CCS) is an appealing option to meet the ambitious objectives of the Paris Agreement. Whereas CCS refers to injecting CO2 into inert wells, captured CO2 emissions can also be injected in active fossil fuel fields to enhance fossil fuel recovery. This is called CCU: carbon capture and use. We study a dynamic model of CCS and CCU of an economy subject to a cap on the admissible atmospheric CO2 concentration. We show that if the economy implements CCU it must do so immediately at the beginning of the planning period and does not stop doing it before being constrained by the carbon cap.

Maria Eugenia SANIN

"Carbon taxes in a global production network"

Abstract :

Herein we study carbon taxation in the context of an increasingly integrated global production network. With this purpose we characterize how the implementation of a carbon tax in one country/sector can generate sizable fluctuations on global output and emissions through its impact in the structure of global production. We then apply this theoretical characterization to accommodate the structure of an environmental multi-regional input-output database using EXIOBASE. We provide an empirical representation of the network effects that spread globally after the implementation of a local carbon taxation. We are able to identify the sectors that should be taxed to reach the strongest potential for emission reduction as well as welfare maximization. Additionally, we find that synergies between the taxation applied to different sectors are strong, calling for greater harmonization in the application of carbon taxation around the world.

Etienne ESPAGNE and Guilherme MAGACHO

" Impacts of CBAM on EU trade partners: consequences for developing countries "

Abstract :

We analyse the impact of the introduction of the Carbon Border Adjustment Mechanism (CBAM) on the European Union (EU) trade partners, focusing especially on its potential socio-economic and external consequences for developing and emerging economies. We use trade data and Multi-regional Input-Output (MRIO) matrices to investigate the uneven distribution of CBAM's impacts. The introduction of CBAM by the EU is under discussion, and most of the literature on the topic has analysed the consequences for the EU economies. However, this carbon adjustment mechanism, which seeks to reduce the incentives for firms to outsource their carbon emissions and promote a more generalized low-carbon transition, might disproportionally impact some non EU economies. Despite most carbon revenues (> 200 M€) would be generated by Russia, China and Ukraine, the degree of exposition of economies that export the CBAM products to Europe varies substantially, with many developing economies having more than 2% of their exports, and 1% of their production impacted by this measure. East European economies, mainly in the Balkans, as well as Mozambique, Zimbabwe and Cameroon, in Africa, are those where exports are the most exposed. In socio-economic terms, we can also include Morocco and Tajikistan in the group of most exposed economies. CBAM is certainly an important step towards a European pricing carbon dynamics. Its implementation conditions may also promote a global (rather than local) low-carbon transition if the carbon revenues generated by this mechanism are used to support the most impacted developing countries outside the EU.

Julien Daubanes, Shema Mitali and Jean-Charles Rochet

"Why do firms issue green bonds?"

Abstract:

Green bonds allow firms to commit to climate-friendly projects. Equity investors react positively to their announcement. Based on prior empirical studies, we suggest that green bond commitments help managers signal the profitability of their green projects and that they do so because they are sensitive to their firm's stock price. We present a signaling model in which firms undertake green projects not only because of carbon penalties but, additionally, because of managerial incentives, predicting that the role of the former is augmented by the latter. We test this prediction by exploiting both cross-industry differences in the stock-price sensitivity of managers' pay and in stock share turnover, and cross-country variations in effective carbon prices. Our results not only support the role that our theory ascribes to managerial incentives, but also show that this role mainly depends on carbon pricing. Green bonds are not substitutes to carbon pricing. On the contrary, the latter is essential to the effectiveness of the former.

""Overlapping land rights and deforestation in Uganda: 20 years of evidence"

Abstract:

We examine deforestation trends across three different types of tenure systems in Uganda from 2001-2019. Prior to 2010, trends across tenure types were similar. After 2010, deforestation increased on land with overlapping rights and then began to decrease in these areas after 2017 relative to rates on customary or fully privatized land. The uptick in deforestation resulted from increased uncertainty generated by 2010 amendments to laws that changed owner/tenant relations on land with overlapping rights. The decrease in deforestation rates was consistent with greater tenure security from uptake in permanent certificates of occupancy. This suggests that customary rights can yield conservation outcomes similar to privatized land, and that such outcomes under systems of overlapping rights can be destabilized by well-intentioned reform.

""The political economy of coal: Obstacles to clean energy transitions"

Abstract

In my talk, I will summarize lessons learnt from 15 case studies on the political economy of coal following one integrated framework. It proposes four country categories that show comparable properties to analyze the political economy of coal, including countries that i) phase out coal, ii) phase in coal, iii) are established users and iv) depend on coal exports. Regarding the prevalence of coal investments in many countries, it highlights the role of conflicting societal objectives, e.g. affordable electricity prices being more important than environmental targets. Vested interests are mainly related to locally concentrated job losses, expectations regarding regional development, coal royalties, as well as lobbying by a politically well-connected coal industry. Those factors can be either strengthened or extenuated by structural factors, including multi-level governance issues and the structure of the energy market. Entry points for policy vary for different country categories. De-risking financing of alternatives to coal as well as reforms of energy markets are most important entry points in countries that still invest in coal or plan to phase in coal to their energy systems

" Clean Energy Access: Gender Disparity, Health, and Labour Supply "

Abstract

Women bear a disproportionate share of the health and time burden associated with lack of access to modern energy. In this paper, we study the impact of clean energy access on adult health and labour supply outcomes by exploiting a nationwide rollout of a clean cooking fuel program in Indonesia. We find that access to clean cooking fuel led to an improvement in women's health and an increase in their work hours. We also find an increase in men's work hours and in their propensity to have an additional job, primarily in those households where women accrued the largest program benefits.

Mark Budolfson, Francis Dennig, Frank Errickson, Simon Feindt, Maddalena Ferranna, Marc Fleurbaey, David Klenert, Ulrike Kornek, Kevin Kuruc, Aurélie Méjean, Wei Peng, Noah Scovronick, Dean Spears, Fabian Wagner, Stéphane Zuber

"Climate action with revenue recycling: benefits for poverty, inequality, and wellbeing"

Abstract :

Existing estimates of optimal climate policy ignore the possibility that the revenues from a carbon tax could be used in a progressive way; model results therefore typically imply that near-term climate action must come at some cost to the poor. Here we show that this storyline reverses when progressive revenue recycling is applied. We find that an equal per capita refund of carbon tax revenues implies that a 2°C target can pay large and immediate dividends for improving wellbeing, reducing inequality, and alleviating poverty. In an optimal policy calculation (without a pre-specified temperature constraint) that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern – which is driven by a carbon revenue Laffer curve – prevents runaway warming while also preserving tax revenues for redistribution. Accounting for these dynamics corrects a long-standing bias against strong immediate climate action in the optimal policy literature.

Emanuele Campiglio, Simon Dietz and Frank VENMANS

"Optimal transition to a low-carbon economy in the presence of stranded assets, falling technology costs and uncertainty"

Abstract :

In the long run, greenhouse gas emissions will have to be virtually eliminated for global temperatures to stop rising. But how best to get there remains an open question, as economic models often abstract from key features of the transition to a low-carbon economy. We study a dynamic stochastic general equilibrium model that includes several of these features: (i) capital inertia, slowing the accumulation of clean capital and leaving dirty capital `stranded'; (ii) falling technology costs due to experience/learning; (iii) economic and climatic uncertainties, including Barro-style macroeconomic disasters that can result from crossing climate tipping points. We use recursive dynamic programming methods, so the optimal transition path anticipates and adapts to shocks. We calibrate emissions abatement costs and stranded assets on a large database of detailed energy modelling, using maximum likelihood techniques. We find that on the optimal path carbon prices start high and grow slowly, and more than a trillion dollars of dirty capital assets should be left stranded over the course of this decade, substantially more if a 1.5°C limit is applied.

Gino Baudry (Imperial College)

“Exploring the future of the European agriculture systems between food, energy and greenhouse gas emissions: the AgRI-food SystEm interactive model (ARISE)”

Abstract :

According to the FAO: should we continue to address the challenges of the food and agriculture system with a business as usual approach “the future will not look promising”. The ARISE (AgRIculture and food SystEm interactive) model has been developed to enable the users to explore a wide range of possible future pathways for the European food and agriculture systems. Four alternative pathways have been developed and investigated in which crop-based biofuels are doubled in capacity, while the shifts towards more sustainable lifestyles and alternative production systems are tackled to different extents in the EU. That is to increase our ex-ante understanding of the evolution and interaction of the key drivers of the sustainability of the whole food and agricultural system. We found the pathways to lower the agriculture sector emissions from 70 to 300 MtCO₂eq., compared to 477 MtCO₂eq. in 2017; To use the land-use and land-use change and forestry sequestration potential, from -90 to -727MtCO₂eq., compared to -262 MtCO₂eq. in 2017. And to affect the land dynamics, ranging from a net deforestation for agriculture land expansion, to large amount of spared lands that can be used for biofuels, carbon sequestration, biodiversity, and so on (up to 50 Mha). We found the impact of lifestyle shifts to be disproportionally critical, even compared to the other sectors of the economy and the bioeconomy. Should the policy response be blind or passive to the evolution of the lifestyle patterns, the sustainability of the food and agriculture system would be sub-optimal at best. And it would neither lead to achieve significant GHG mitigation, nor lead to exploit the land carbon sequestration potential in the worst case.

• Slides (pdf)

Philippe Quirion (CIRED)

"Low-carbon options for the French power sector: What role for renewables, nuclear energy and carbon capture and storage?"

Abstract :

In the wake of the Paris agreement, France has set a target of zero net greenhouse gas emissions by 2050. This target can only be achieved by rapidly decreasing the proportion of fossil fuels and accelerating the deployment of low-carbon technologies. We develop a detailed model of the power sector to investigate the role of different ow and negative-emission technologies in the French electricity mix and we identify the impact of the relative cost of these technologies for various values of the social cost of carbon (SCC).

We show that for a wide range of SCC values (from 0 to €500/tCO2), the optimal power mix consists of roughly 75% of renewable power. For a SCC value of €100/tCO2, the power sector becomes nearly carbon neutral while for €200/tCO2 and more it provides negative emissions. The availability of negative emission technologies can decrease the system cost by up to 18% and can create up to 20MtCO2/year of negative emissions, while the availability of new nuclear power stations is much less important. This study demonstrates the importance of an effective SCC value (as a tax for positive emissions and remuneration for negative emissions) in reaching carbon neutrality at moderate cost. Negative emissions may represent an important carbon market which could attract investments if supported by public policies.

Slides (pdf)

Alejandro Capparos (Institute for Public Goods and Policies (IPP), Spanish National Research Council (CSIC))

"Pledge and implement bargaining in the Paris Agreement on climate change"

Abstract:

This paper analyzes a multilateral bargain game motivated by the Paris Agreement on climate change.Countries submit pledges, which can be revoked although this implies reputational costs. Pledges, which do not need to be accepted by other countries, detail intended abatement efforts and can be conditional or unconditional. As the process is repeated, incomplete long-term provisions are also considered. The analysis shows the conditions under which, despite its weakness, the Agreement can bring the world to the first best, or at least closer. It also shows that all countries have incentives to join the Agreement and submit conditional pledges.

• Read the paper (PDF)

Helene Bouscasse (CR INRAE, CESAER) et Rim Rejeb (GAEL).

"What role does the health impact of transport modes play in our transport choices?"

Abstract :

The high modal share of the private car has important environmental and health consequences. With the deterioration of air quality, we see an increase of cardiovascular diseases, pulmonary diseases, cancers, etc. Thus, reducing the car's place in our mobility practices would contribute to reducing these health risks. However, this solution is not simple to implement since we are dealing with a complex behaviour that is a result of a combination of “objective” determinants (eg. Cost, infrastructure, etc.) and more “personal” determinants (eg. Perceptions, norms, habits, etc.). As part of the interdisciplinary project Mobil’Air, two studies try to contribute to a better understanding for these determinants. First, InterMob, a two-year long field controlled intervention aimed at changing durably transportation modes toward more active transport, by including both “hard” and “soft” levers. Second, an online Stated Preference survey focusing on health determinants, which are more difficult to access on the field. In this second study, we evaluate the extent to which information about the impacts of mode choice on public or individual health influences our mobility choices to more active and less polluting modes. Participants made choices in different hypothetical scenarios varying depending on the mode (car, public transport, walking and cycling), travel time, cost and associated individual and public cardiovascular risks.

Martino Pelli (Université de Sherbrooke)

"Childhood Exposure to Storms and Long-Term Educational Attainments in India"

Abstract

This paper examines how exposure to storms over the course of compulsory schooling affects educational attainments and the type of activity performed by individuals in young adulthood. We construct a unique continuous measure of childhood exposure to storms that varies by birth-year cohort and district for young adults in rural and urban India. We find that storms have substantial disruptive impacts on education. In the districts exposed to the most powerful winds, the estimates imply that children are 9% more likely to accumulate an educational delay and 6.5% less likely to obtain higher levels of education (beyond secondary school). In the long run, these delays have an impact on the type of labor market activity that these individuals perform. Using childhood exposure to storms as an instrument, we find that a one-year educational delay leads to a 42.6% drop in the probability of accessing regular salaried jobs. We determine that the impact of storms on education works through a permanent negative income shock.

• Read the paper (PDF)

M. Tivadar et Y. Schaeffer (Univ. Grenoble Alpes)

"FROM SPATIAL SEGREGATION TO ENVIRONMENTAL INEQUALITIES"

Abstract

The environmental inequalities rise from the fact that social groups are differently distributed in space relatively to an environmental variable (natural amenities or environmental hazards). Intuitively, when members of two groups have similar spatial distributions, the environmental inequality should be inexistent. Thus, spatial segregation and environmental inequalities are phenomena linked by a key variable: space. Despite this strong connection, the number of studies interested on the association between spatial segregation and environmental inequality is small and a formal demonstration of the links between these phenomena is missing.

In a previous contribution (Schaeffer and Tivadar, 2019), we adapted existing segregation indices to measure environmental inequalities. We developed two types of measures, based on spatial dissimilarity for the analysis of areal-level environmental data (such as vegetation cover or pollution loads in census blocks) and on relative centralization for the analysis of multiple points environmental data (such as geocoded hazardous sites or urban parks). We also proposed adjusted indices that take into account the impacts of local interactions across spatial units’ boundaries and of the distance to amenities/disamenities selected for analysis. For all these indices, we adapted resampling techniques to test their statistical significance (Monte Carlo permutations tests) and to identify the spatial units that play a significant impact on the index value (outliers’ identification with jackknife techniques). As a complement, we developed the SegEnvIneq R package (Tivadar and Schaeffer, 2020) that provides the functions necessary to compute the different versions of the indices and to make appropriate resampling tests.

In this further work, we demonstrate mathematically that environmental inequality level is bounded by the spatial segregation level. Put differently, spatial segregation is a necessary but insufficient condition for environmental inequality. Finally, we explore this result with an empirical analysis of the relationship between the two phenomena in French urban areas.

• Slides (PPT)

Erica Myers (University of Illinois at Urbana-Champaign)

"Decomposing the Wedge Between Projected and Realized Returns in Energy Efficiency Programs"

Abstract

Evaluations of energy efficiency programs reveal that realized savings consistently fall short of projections. We decompose this `performance wedge' using data from the Illinois Home Weatherization Assistance Program (IHWAP) and a machine learning-based event study research design. We find that bias in engineering models can account for up to 41% of the wedge, primarily from overestimated savings in wall insulation. Heterogeneity in workmanship can also account for a large fraction (43%) of the wedge, while the rebound effect can explain only 6%. We find substantial heterogeneity in energy-related benefits from IHWAP projects, suggesting opportunities for better targeting of investments.

• Read the paper (PDF)

Joseph Shapiro (UC Berkeley)

"Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient?"

Abstract

What is a feasible and efficient policy to regulate air pollution from vehicles? A Pigouvian tax is technologically infeasible. Most countries instead rely heavily on exhaust standards that limit air pollution emissions per mile for new vehicles. These standards differ substantially from fuel economy regulations. We assess the effectiveness and efficiency of these standards and counterfactual policies. We show that the emissions rate of new US vehicles has fallen by more than 99 percent since standards began in 1967. Several research designs applied to a half century of data suggest that exhaust standards have caused a majority of this decline. Yet exhaust standards are not cost-effective in part because they give no incentive to scrap old vehicles, which account for a large share of emissions. To study counterfactual policies, we develop analytical and quantitative models of the new and used vehicle fleets. We find that making ownership fees increase with the mean emissions of a vehicle type would decrease emissions and increase welfare. By contrast, current actual registration and vehicle property taxes (perversely) decrease with a vehicle's emissions.

Simone Borghesi (FSR Climate - European University Institute)

"Leave or remain? An evolutionary approach to carbon leakage in Emission Trading Systems"

with Angelo Antoci, Gianluca Iannucci and Mauro Sodini

Abstract

Emissions trading is gaining increasing importance around the world as a suitable instrument to address climate change. In the absence of a global carbon market, however, unilateral carbon policies may end up causing carbon leakage effects, the more so if carbon prices are to increase in the future to achieve more ambitious emissions abatement targets. This paper intends to explore the possible delocalization effects of an Emissions Trading System (ETS) by proposing an evolutionary theoretical model in which regulated firms decide whether to stay (keep their production activities in the domestic country) or leave (move production abroad where no ETS is in place) imitating what other firms do. We investigate how this decision is affected by some key ETS design features, such as the emissions cap, the number of allowances granted for free to ETS firms, the level of a floor price for allowances. Numerical simulations show that the firms' decision on whether to stay or relocate abroad, and on how many allowances to purchase (and/or emissions to abate) for those that stay, are more sensitive to policies that reduce the cost of green technologies than to changes in specific features of the ETS design such as the emissions cap, the floor price and the number of permits granted for free.

Romain Crastes (University of Leeds)

"Using shifted lognormal distributions in order to avoid “exploding” willingness-to-pay distributions in mixed logit models"

Abstract

Discrete choice experiments (also known as stated preference surveys or conjoint analysis) are a popular method for analysing preferences and measuring Willingness-To-Pay for different attributes of a policy or an environmental good. The literature on model specification mainly proposes two approaches for accounting for unobserved taste heterogeneity: (1) the preference space approach, where the distribution of WTP is derived from the distribution of coefficients specified by the analyst in the utility function and (2) the WTP space approach, where the analyst directly specifies the distribution of WTP, from which the distributions of coefficients can be derived. It is generally found that models in preference space fit the data better but models in WTP space provide more reasonable WTP distributions. Train and Weeks (2005) in a seminal paper suggest that further work is needed to identify distributions that either yield better fit in WTP space or deliver more reasonable WTP distributions in preference space.

WTP distributions in preference space are derived by dividing the coefficient of a given non-monetary attribute by the price coefficient. Unreasonable WTP distributions are often found when the price attribute is assumed to be (negative) lognormal or loguniform. This is because the lognormal and loguniform distributions have a point-mass near zero, leading to the issue known as the “exploding implicit price” problem (Giergiczny et al., 2002). At the same time, specifying the price attribute as being lognormal or loguniform in preference space often leads to specifications which outperform their counterparts in WTP space in terms of goodness-of-fit. This is especially true when most of the non-monetary attributes are assumed to be normally distributed.

In this paper, we propose to use a new distribution for the cost attribute, which we call the mu-shifted lognormal distribution, in order to provide more reasonable WTP distributions in preference space. The mu-shifted distribution is inspired from the three-parameter lognormal distribution originally suggested by Cohen and Whitten (1980). The three-parameter distribution features an additional shift parameter which can contribute to move the point mass of the (negative) lognormal distribution away from zero. The mu-shifted distribution simply consists in replacing the shift parameter by the logarithm of the mean of the negative lognormal distribution, which provides two desirable features:

i. It prevents the shift parameter from being positive, which is both behaviourally implausible and leads to WTP distributions with no existing moments given that the distribution of the price spans on both sides of zero

ii. It leads to a model which is more parsimonious in parameters

We test the proposed distribution on 10 datasets and compare it to seven other specifications including WTP space, a lognormal cost, a loguniform cost and a multinomial logit model, leading to a total of 80 models and 414 WTP distributions. The mu-shifted lognormal distribution is found to yield similar results than the lognormal distribution for the cost in terms of goodness-of-fit but provides much more reasonable WTP distributions. More precisely, we find that the WTP estimates derived from lognormal models are between 4.6 and 23 times higher than the WTP estimates derived from WTP space models, while the mu-shifted lognormal models yield WTP estimates which are only between 0.08 and 1.32 times higher than those derived from WTP space models. At the same time, we find no significant differences in terms of goodness-of-fit between the mu-shifted lognormal models and the lognormal models. Both distributional assumptions lead to reductions of the Bayesian Information Criterion comprised between 12% and 0.5% compared to WTP space models.

• Read the paper (PDF)

Beat Hintermann (Universität Basel)

"Mobility Pricing in Switzerland"

Abstract:

We report the results from a large-scale randomized control trial in Switzerland that simulated the effect of mobility pricing that varies across time, space and mode of transport. Providing a monetary incentive reduced the overall external costs of transport generated by the study participants. This reduction is a consequence of mode substitution and a shift of departure times. Providing information about the external costs of transport in the absence of pricing also changes behaviour, but this effect is smaller and statistically significant only for subgroups. We do not detect a pronounced heterogeneity of the pricing effect. The average elasticity of external costs with respect to pricing is -0.33.

Marco Percoco (Università Bocconi)

"New Car Taxation and its Unintended Environmental Consequences"

with Angela Bergantino and Mario Intini.

Abstract

In Italy, in 2011 the Superbollo tax was introduced for newly registered cars exceeding 185 kW. Although the aim of the tax was not to reduce CO2 emission as it was actually aimed at increasing government revenues during the economic crisis, we show that it had significant and unexpected impacts on buyers’ behavior. Using data related to the universe of vehicles registered between 2008 and 2017 and by using a difference-in- difference framework, we find that the Superbollo had a significant role in reducing CO2 emissions and in increasing the car share with low CO2 emissions. In particular, we show that the introduction of the Superbollo shifted consumers towards greener cars, not necessarily ecological (e.g. electric), with a subsequent reduction in the emission of CO2 per kilometer traveled of an order of magnitude of 5 to 7%.

Ben Groom (University of Exeter)

" REDD+ as an area based policy: Evidence from the 2011Indonesian Moratorium on Palm Oil, logging and Timber Concessions"

with Charles Palmer and Lorenzo Sileci.

Rainald Borck (University of Postdam)

"Urban pollution: A global perspective"

with Philipp Schrauth.

Abstract

We analyze urban air pollution worldwide using satellite data for over fifteen years. We document basic facts about the distribution of pollution in space and the evolution over time. We find that 70 percent of the population worldwide and 80 percent of city dwellers are exposed to PM2.5-levels exceeding WHO thresholds. We also study how urban pollution is affected by urban population density in contrast to the size of urban agglomerations. Using OLS, within country fixed effects and instrumental variables, we find that the absolute size of an agglomeration is more important than population density for air quality in cities. We study the heterogeneity of this relationship by continents and country-specific income levels, and find that agglomeration size has the strongest effect in Asia and in high income countries.

Sébastien Houde (Grenoble Ecole de Management)

"Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment"

with Kenneth Gillingham and Arthur A. van Benthem

Abstract

A central question in the analysis of fuel-economy policy is whether consumers are myopic with regards to future fuel costs. We provide the first evidence on consumer valuation of fuel economy from a natural experiment that provides exogenous variation in fuel-economy ratings. We examine the short-run equilibrium effects of a restatement of fuel-economy ratings that affected 1.6 million vehicles. Using the implied changes in willingness-to-pay, we find that consumers act myopically: consumers are indifferent between $1 in discounted fuel costs and 16-39 cents in the purchase price when discounting at 4%. This undervaluation persists under a wide range of assumptions.

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Nicolas Treich (Toulouse School of Economics, INRAE, Université Toulouse Capitole)

“An economic model of the meat paradox”

How can individuals care about animals and, at the same time, eat meat? We design a survey study to explore this "meat paradox". Survey participants (N = 3054) underestimate farm animal suffering, and underestimate it more (i.e., are less realistic) when they eat more meat. Building on the literature on cognitive dissonance, we develop a model in which individuals form self-serving beliefs in order to reduce the moral guilt associated with meat consumption. The model characterizes how individuals' beliefs about animal welfare and their attitude towards information are affected by the economic environment (e.g., price of meat, salience of animal welfare), and by individuals' preferences (e.g., taste for meat, moral cost of guilt). Several empirical observations are consistent with our model.

• Read the paper (PDF)

• Slides of the presentation (PDF)