SWEEET

"Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households"

Thomas Douenne,  Albert Jan Hummel and Marcelo Pedroni

Abstract

We study optimal fiscal policy to address climate change and inequality. We theoretically characterize optimal carbon and income taxes, and quantify them for the U.S. economy with the climate model calibrated to DICE. In contrast to the representative-agent setting, we find that (i) the optimal carbon tax is on average equal to the Pigouvian level, and hardly ever deviates from it; (ii) inequality reduces the Pigouvian level, by 4% in our baseline calibration; (iii) the revenue from carbon taxes is optimally split halfway between reducing tax distortions and increasing transfers. Introducing optimal carbon taxation has progressive welfare effects and low-income households benefit even in the short run.

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" Soil Pollution, Animal Contamination and Safe Food Production: The Case of Chlordecone Pollution in the French West Indies"

Pablo Andrés-Domenech, Valérie Angeon, Samuel Bates   and Colombine Lesage

Abstract

This article focuses on the economic and biotechnical consequences of changes in the legal maximum residue limits for pesticides (here chlordecone)on meat production. We model the concentration of this persistent pollutant in livestock meat in the French West Indies and analyse the link between soil pollution,animal contamination and food production. We compute the time required to decontaminate the animals and analyse if it is possible to respect both the health constraints and the current livestock management schedule. We also compute the cost for farmers to adapt to the new regulation and to more stringent health-related targets that are expected in the future.

"The transmission of global climate risks via international trade – Insights from a cross-sectoral impact assessment for Austria"

N. Knittel, B. Bednar-Friedl, M. W. Jury, D. Lincke and J. Hinkel

Abstract

Climate change poses severe risks to vulnerable regions causing substantial economic damages  worldwide. While economic damages to European economies from climate risks within Europe are projected to be lower, the globalisation of markets and supply chains allows impacts to spread across borders and unfold in countries distant from their origin. We study the implications of this phenomenon for Austria, a small open economy with strong trade linkages both within and outside Europe. Employing a global Computable General Equilibrium (CGE) model, we analyse two types of impacts at a global scale until 2050: sea level rise and heat-induced labour productivity losses, both with low and high levels of adaptation. With low adaptation levels macroeconomic effects outside Europe are higher by a factor of 5 compared to high adaptation. This transmits to Austrian trade flows: imports from outside Europe decline by 2.2% with low adaptation compared to 0.7% with high adaptation; extra-European exports decline by 1.2% with low and by 0.5% with high adaptation levels. While intra-European trade can substitute for some of the lost trade flows, economic damages for the Austrian economy remain. Welfare losses are twice as large for low compared to high adaptation levels. The results thus provide an incentive to support adaptation in distant but connected countries, as this can reduce domestic welfare losses too.

"Forest management and natural capital with an application to Mediterranean silvopastoral systems"

Paola Ovando, M. Olivera, C. Rodríguez-Lucatero and G. Atkinson

Abstract:

This paper analyses how efficient forest investment decisions – i.e., those that maximise landowner own benefits – can affect the long−term provision of ecosystem services and how those decisions may affect forest ecosystem asset values over time. We use a detailed forest management decision framework to estimate efficient paths of forest investment decisions, including afforestation and facilitating natural regeneration, in private silvopastoral farms that represent typical agrosilvo-pastoral farms at each province in Andalusia (southern Spain). The model considers annual changes in benefits accrued from timber, cork, pine nuts, firewood, grazing resources, and net carbon sequestration over a 50 years’ time horizon. Our results suggest that using the land for planting a single species is the most efficient decision, though it can lead to a less diverse forests, while maintaining provision services and carbon asset values, and potentially reducing biodiversity, regulating and cultural services that rely upon more diverse landscape structures. Appropriate incentives can promote more diverse forest and the long-term maintenance of forest multi-functionality.

"On the identification of process and product innovations: New insights from text mining techniques and application to the wind power industry"

Marc Baudry, Béatrice Dumont and Valentin Lignau

Abstract:

In the framework of the Green Deal program that seeks to re-orient research and innovation to reach climate neutrality, we study how the type of support (direct and/or indirect) for carbon-free energies can bias R&D efforts towards process or product innovations. To do so, we propose a new methodology to assess in an automatic way the product and/or process character of patents.  More precisely, we use a semantic treatment of patent documents that enables us to generate a continuous measure of the relative position of an innovation between these two polar cases. This leads us to overcome several limitations of the economic literature and thus to improve our understanding of the mechanisms at work, notably how the use of these new techniques can help environmental policies to be better fine-tuned. We apply our methodology to the wind power industry and emphasize the non-neutrality of renewable support policies on the direction and nature of innovation.