Climate Policy
Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures
Sebastian Rausch, Gilbert Metcalf, John Reilly & Sergey Paltsev
NBER Working Paper, June 2010
Abstract:
We analyze the distributional and efficiency impacts of different allowance allocation schemes for a national cap and trade system using the USREP model, a new recursive dynamic computable general equilibrium model of the U.S. economy. We consider allocation schemes applied to a comprehensive national cap and trade system that limits cumulative greenhouse gas emissions over the control period to 203 billion metric tons. The policy target approximates national goals identified in pending legislation. We find that the allocation schemes in all proposals are progressive over the lower half of the income distribution and proportional in the upper half of the income distribution. We also find that carbon pricing by itself (ignoring the return of carbon revenues through allowance allocations) is proportional to modestly progressive. This striking result follows from the dominance of the sources over uses side impacts of the policy and stands in sharp contrast to previous work that has focused only on the uses side. Lower income households derive a large fraction of income from government transfers and, reflecting the reality that these are generally indexed to inflation, we hold the transfers constant in real terms. As a result this source of income is unaffected by carbon pricing, while wage and capital income is affected.
-----------------------
The Effects of Domestic Climate Change Measures on International Competitiveness
Hiau Looi Kee, Hong Ma & Muthukumara Mani
World Bank Working Paper, May 2010
Abstract:
Under the Kyoto Protocol, industrialized countries (called Annex I countries) have to reduce their combined emissions to 5 percent below 1990 levelsin the first commitment period of 2008-12. Efforts to reduce emissions to meet Kyoto targets and beyond have raised issues of competitiveness in countries that are implementing these policies, as well as fear of leakage of carbon-intensive industries to non-implementing countries. This has also led to proposals for tariff or border tax adjustments to offset any adverse impact of capping carbon dioxide emissions. This paper examines the implications of climate change policies such as carbon tax and energy efficiency standards on competitiveness across industries, as well as issues related to leakage, if any, of carbon-intensive industries to developing countries. Although competitiveness issues have been much debated in the context of carbon taxation policies, the study finds no evidence that the energy intensive industries' competitiveness is affected by carbon taxes. In fact, the analysis suggests that exports of most energy-intensive industries increase when a carbon tax is imposed by the exporting countries, or by both importing and exporting countries. This finding gives credence to the initial assumption that recycling the taxes back to the energy-intensive industries by means of subsidies and exemptions may be overcompensating for the disadvantage to those industries. There is, however, no conclusive evidence that supports relocation (leakage) of carbon-intensive industries to developing countries due to stringent climate change policies.
-----------------------
An adaptability limit to climate change due to heat stress
Steven Sherwood & Matthew Huber
Proceedings of the National Academy of Sciences, 25 May 2010, Pages 9552-9555
Abstract:
Despite the uncertainty in future climate-change impacts, it is often assumed that humans would be able to adapt to any possible warming. Here we argue that heat stress imposes a robust upper limit to such adaptation. Peak heat stress, quantified by the wet-bulb temperature TW, is surprisingly similar across diverse climates today. TW never exceeds 31 °C. Any exceedence of 35 °C for extended periods should induce hyperthermia in humans and other mammals, as dissipation of metabolic heat becomes impossible. While this never happens now, it would begin to occur with global-mean warming of about 7 °C, calling the habitability of some regions into question. With 11-12 °C warming, such regions would spread to encompass the majority of the human population as currently distributed. Eventual warmings of 12 °C are possible from fossil fuel burning. One implication is that recent estimates of the costs of unmitigated climate change are too low unless the range of possible warming can somehow be narrowed. Heat stress also may help explain trends in the mammalian fossil record.
-----------------------
Scott Armstrong, Kesten Green & Willie Soon
University of Pennsylvania Working Paper, May 2010
"The alarming forecasts of dangerous manmade global warming are not the product of proper scientific evidence-based forecasting methods. Furthermore, there have been no validation studies to support a belief that the forecasting procedures used were nevertheless appropriate for the situation. As a consequence, alarming forecasts of global warming are merely the opinions of some scientists and, for a situation as complicated and poorly understood as global climate, such opinions are unlikely to be as accurate as forecasts that global temperatures will remain much the same as they have been over recent years. Using proper forecasting procedures we predict that the global warming alarm will prove false and that government actions in response to the alarm will be shown to have been harmful."
-----------------------
Views on peak oil and its relation to climate change policy
Aviel Verbruggen & Mohamed Al Marchohi
Energy Policy, forthcoming
Abstract:
Definitions of fossil fuel reserves and resources and assessed stock data are reviewed and clarified. Semantics explain a large stake of conflict between advocate and critical voices on peak oil. From a holistic sources-sinks perspective, limited carrying capacity of atmospheric sinks, not absolute scarcity in oil resources, will impose tight constraints on oil use. Eventually observed peaks in oil production in nearby years will result from politically imposed limits on carbon emissions, and not be caused by physical lack of oil resources. Peak-oil belief induces passive climate policy attitudes when suggesting carbon dioxide emissions will peak naturally linked to dwindling oil supplies. Active policies for reducing emissions and use of fossil fuels will also encompass higher energy end-use prices. Revenues obtained from higher levies on oil use can support financing energy efficiency and renewable energy options. But when oil producers charge the higher prices they can pump new oil for many decades, postponing peak oil to occur while extending carbon lock-in.
-----------------------
Capitalistic Agency: The Rhetoric of BP's Helios Power Campaign
Karl Smerecnik & Valerie Renegar
Environmental Communication, June 2010, Pages 152-171
Abstract:
In this essay, we use rhetorical analysis to examine how British Petroleum's (BP) Helios Power media campaign both encourages and embodies capitalistic agency as the means to enact pro-environmental behavior. This form of agency limits the scope of environmentalism. Capitalistic agency can be conceptualized as the capacity to enact, or the process of enacting, capitalistic ends as well as the inherent constraining of agency that is not oriented toward the production of capital. Helios Power, launched in 2007, is BP's most recent American television, radio, internet advertising, and branding campaign. We examine the campaign website which heavily incorporates green marketing, including background images of wind turbines, environmental buzzwords throughout the text, green color schemes, and a section dedicated to conservation advocacy. By rhetorically aligning BP with environmentalism, providing customers a means of participation with environmentalism, and constraining profit-hindering conservation behaviors, Helios Power provides a vivid illustration for understanding the impact of capitalistic agency on society's perception of and progress toward environmental sustainability.
-----------------------
The language of US corporate environmental disclosure
Charles Cho, Robin Roberts & Dennis Patten
Accounting, Organizations and Society, May 2010, Pages 431-443
Abstract:
We rely on prior work in environmental disclosure and corporate impression management to investigate whether there are self-serving biases present in the language and verbal tone used in corporations' environmental disclosures. Specifically, we argue that the degree of bias in these narratives varies systematically based on firm environmental performance, hypothesizing that disclosures of worse environmental performers exhibit significantly more "optimism" and less "certainty" than their better-performing counterparts. We test our two hypotheses using a cross-sectional sample of corporate environmental disclosures contained in US 10-K annual reports. Utilizing the content analysis software DICTION to determine "optimism" and "certainty" scores for the disclosures, we find empirical support for both hypotheses. Our study contributes significantly to research in environmental disclosure by investigating bias in the use of language and verbal tone as a tool for managing stakeholder impressions and by finding empirical support for this role. Thus, the language and verbal tone used in corporate environmental disclosures, in addition to their amount and thematic content, should be considered when investigating the relation between corporate disclosure and performance.
-----------------------
Michael Greenberg & Heather Truelove
Socio-Economic Planning Sciences, September 2010, Pages 130-140
Abstract:
Surveys in 2008 and 2009 asked almost 6000 United States residents to indicate their knowledge about the use of nuclear and other sources of energy, and the disposition of nuclear waste. Less than 10% of respondents knew where spent commercial nuclear fuel is stored. With regard to knowledge about fuel for electrical energy, respondents overestimated solar and wind use and underestimated coal use. These responses are consistent with mass media coverage of these issues. The mass media were the source of information for the vast majority of respondents. However, the likelihood of right answers to our questions increased as reliance on the mass media decreased, and it increased with use of books, magazines, personal contacts and the web. Educated affluent white males with strong preferences for nuclear energy disproportionately were knowledgeable. These observations demonstrate the daunting challenge of providing information about subjects that are largely distant and disconnected from the public's lives. The Department of Energy, Nuclear Regulatory Commission, state and local health, environmental and energy agencies, and facility owners and operators have huge domestic political, national security and economic stakes in improving the factual grounding of public reactions to energy production and waste management choices.
-----------------------
Corbett Grainger & Charles Kolstad
Environmental and Resource Economics, July 2010, Pages 359-376
Abstract:
We use the 2003 Consumer Expenditure Survey and emissions estimates from an input-output model based on the 1997 US economy to estimate the incidence of a price on carbon induced by a cap-and-trade program or carbon tax in the context of the US. We present results on how much different income deciles pay for a carbon tax as well as which industries see the largest increase in costs due to a carbon tax. We illustrate the main determinant of the regressivity: consumption patterns for energy-intensive goods. Furthermore, on a per-capita basis a carbon price is much more regressive than calculations at the household level. We discuss policy options to offset the adverse distributional effects of a carbon emissions policy.
-----------------------
Antony Millner, Simon Dietz & Geoffrey Heal
NBER Working Paper, June 2010
Abstract:
Economic evaluation of climate policy traditionally treats uncertainty by appealing to expected utility theory. Yet our knowledge of the impacts of climate policy may not be sufficiently high quality to justify probabilistic beliefs. In such circumstances, it has been argued that the axioms of expected utility theory may not be the correct standard of rationality. Several axiomatic frameworks have recently been proposed to account for ambiguous beliefs. We apply static and dynamic versions of the smooth ambiguity model of Klibanoff et al, (2005, 2009) to climate policy. We illustrate via comparative statics the conditions under which an increase in ambiguity aversion increases the optimal level of mitigation in some simple examples. We then extend our analysis to a dynamic setting and adapt the well-known DICE model of the climate-economy system to show that the value of emissions abatement increases as ambiguity aversion increases. We also find that the value of abatement is more sensitive to risk aversion than to ambiguity aversion because, according to our data, the inter-model spread in average consumption growth is small relative to its mean value. However this is an empirical matter and we show that under some conditions ambiguity aversion can have a significant effect on the value of abatement.
-----------------------
Heat Waves, Droughts and Preferences for Environmental Policy
Ann Owen, Emily Conover, Julio Videras & Stephen Wu
Hamilton College Working Paper, May 2010
Abstract:
Using data from a new household survey on environmental attitudes, behaviors, and policy preferences, we find that current weather conditions affect preferences for environmental regulation. Individuals who have recently experienced extreme weather (heat waves or droughts) are more likely to support laws to protect the environment even if it means restricting individual freedoms. We find evidence that the channel through which weather conditions affect policy preference is via perceptions of the importance of the issue of global warming. Furthermore, individuals who may be more sophisticated consumers of news are less likely to have their attitudes towards global warming changed by current weather conditions.
-----------------------
Dora Costa & Matthew Kahn
NBER Working Paper, May 2010
Abstract:
We use detailed microeconomic data to investigate why aggregate residential electricity consumption in California has been flat since 1980. Using unique micro data, we document the role that household demographics and ideology play in determining electricity demand. We show that building codes have been effective for homes built after 1983. We find that houses built in the 1970s and early 1980s were energy inefficient relative to houses built before 1960 because the price of electricity at the time of construction was low. Employing our regression estimates, we construct an aggregate residential electricity consumption time series index from 1980 to 2006. We show that certain micro determinants of household electricity consumption such as the phase in of building codes explain California's flat consumption while other factors (such as rising incomes and increased new home sizes) go in the opposite direction. Because homes are long-lived durables, we have not yet seen the full impact of building codes on California's electricity consumption.
-----------------------
Recent U.S. offshore oil and gas lease bidding: A progress report
Philip Haile, Kenneth Hendricks & Robert Porter
International Journal of Industrial Organization, July 2010, Pages 390-396
Abstract:
We describe an ongoing research project, in which we examine recent trends in bidding for offshore oil and gas leases, and the exploration and development of leases after they are sold. We review empirical findings regarding bidder participation and bidding for the period 1954 through 1982. In 1983, the MMS adopted Area Wide Leasing (AWL), which dramatically changed the bidding environment. We provide an initial analysis of the post-1982 data, documenting a number of significant changes in behavior and outcomes. Bidding has been much less aggressive recently in comparison with the early years of the leasing program, in terms of both the number of bids submitted and the level of the submitted bids. This descriptive evidence leads to a number of questions, and we discuss a number of changes in the bidding environment since 1982, which may offer partial explanations of the observed changes.