From Green to Gold
Flexible Data Centers and the Grid: Lower Costs, Higher Emissions?
Christopher Knittel, Juan Ramon Senga & Shen Wang
NBER Working Paper, July 2025
Abstract:
Data centers are among the fastest-growing electricity consumers, raising concerns about their impact on grid operations and decarbonization goals. Their temporal flexibility -- the ability to shift workloads over time -- offers a source of demand-side flexibility. We model power systems in three U.S. regions: Mid-Atlantic, Texas, and WECC, under varying flexibility levels. We evaluate flexibility's effects on grid operations, investment, system costs, and emissions. Across all scenarios, flexible data centers reduce costs by shifting load from peak to off-peak hours, flattening net demand, and supporting renewable and baseload resources. This load shifting facilitates renewable integration while improving the utilization of existing baseload capacity. As a result, the emissions impact depends on which effect dominates. Higher renewable penetration increases the emissions-reduction potential of data center flexibility, while lower shares favor baseload generation and may raise emissions. Our findings highlight the importance of aligning data center flexibility with renewable deployment and regional conditions.
The Hole in the Doughnut: Formalizing and Testing a Key Model of Degrowth
Ashruta Acharya, Vincent Geloso & Aleksander Psurek
George Mason University Working Paper, July 2025
Abstract:
The doughnut model, proposed by Kate Raworth, has become the most influential model in degrowth studies. It posits that an ecological ceiling above a social foundation creates boundaries within which humans must stay for sustainable economic activity. These boundaries are the doughnut's doughy part. One key claim that is tied to that model is that capitalism/neoliberalism structurally generate imbalances, producing unsustainable and unjust outcomes (i.e., outside the doughnut). We formalize the doughnut model using index numbers bounded between 0 and 1 across environmental and social indicators, and use the coefficient of variation as a measure of structural imbalance. We then test whether higher levels of capitalism -- proxied by the Fraser Institute’s Economic Freedom of the World Index -- are associated with greater imbalance. Across multiple datasets (HDI, IHDI, EPI, HPI, Raworth's list), specifications (panel and cross-section), and variable transformations (linear and convex), we find no empirical support for the model’s core prediction. If anything, the sign is often the opposite of the one predicted. Our results do not point to specific policy solutions for environmental or social issues, but they do eliminate one set of proposals from serious consideration: those grounded in the doughnut model. It fails on its own terms and the doughnut is stale.
Why Did Air Conditioning Adoption Accelerate Faster Than Predicted? Evidence from Mexico
Lucas Davis & Paul Gertler
NBER Working Paper, August 2025
Abstract:
A common theme in the vast literature on climate change is the estimation of models using historical data to make predictions many decades into the future. Although there is a large and growing number of these types of studies, researchers rarely return later to check the accuracy of their predictions. In this paper, we perform such an exercise. In Davis and Gertler (2015), we used household-level microdata from Mexico to predict future air conditioning adoption as a function of income and temperature. Revisiting these predictions with 12 years of additional data, we find that air conditioning in Mexico has accelerated, significantly exceeding our predictions. Neither errors in predicting income growth or rising temperatures, nor migration patterns, nor an overly restrictive model can explain the large prediction gap. Instead, our results point to the failure to account for falling electricity prices and technological changes in air conditioner efficiency as key drivers of the prediction gap.
Misperceptions About Air Pollution: Implications for Willingness to Pay and Environmental Inequality
Matthew Tarduno & Reed Walker
NBER Working Paper, August 2025
Abstract:
This paper explores whether misperceptions about air pollution contribute to environmental inequality in the United States. We use a two-part survey experiment to elicit respondents' beliefs about local air quality and pollution's effects on life expectancy. We document how misperception differs across demographic groups and then how this misperception affects willingness to pay (WTP) for cleaner air. Since misperception or beliefs may be correlated with other unobservable determinants of WTP, we randomly show selected participants customized information about their actual air pollution. This allows us to trace out how experimentally induced changes in beliefs affect WTP for air quality. Our results suggest significant misperceptions about air pollution in the US. Respondents, on average, overestimate both their air pollution exposure and its impact on life expectancy. Beliefs about relative air pollution are not systematically biased but are noisy. Despite some differences in misperceptions between Black and White respondents, counterfactual exercises do not suggest that rectifying these misperceptions would meaningfully close the observed gap in WTP and/or pollution exposure.
Deforestation: A Global and Dynamic Perspective
Farid Farrokhi et al.
NBER Working Paper, August 2025
Abstract:
We study deforestation in a dynamic world trade system. We first document that between 1990-2020: (i) global forest area has decreased by 7.1 percent, with large heterogeneity across countries, (ii) deforestation is associated with expansions of agricultural land use, (iii) deforestation is larger in countries with a comparative advantage in agriculture, and (iv) population growth causes deforestation. Motivated by these facts, we build a model in which structural change and comparative advantage determine the extent, location, and timing of deforestation. Using the model, we obtain conditions under which reductions in trade costs and tariffs reduce global deforestation. Quantitatively, eliminating global agricultural tariffs has limited impacts on global forest area, leads to substantial forest reallocation across countries, and results in net welfare benefits.
The Social Lifecycle Impacts of Power Plant Siting in the Historical United States
Karen Clay et al.
NBER Working Paper, August 2025
Abstract:
This paper examines the relative contributions of siting decisions and post-siting demo-graphic shifts to current disparities in exposure to polluting fossil-fuel plants in the United States. Our analysis leverages newly digitized data on power plant siting and operations from 1900-2020, combined with spatially resolved demographics and population data from the U.S Census from 1870-2020. We find little evidence that fossil-fuel plants were disproportionately sited in counties with higher Black population shares on average. However, event study estimates indicate that Black population share grows in the decades after the first fossil-fuel plant is built in a county, with average increases in Black population share of 4 percentage points in the 50-70 years after first siting. These long-run demographic shifts are driven by counties that first hosted a fossil-fuel plant between 1900-1949. We close by exploring how these long-run demographic shifts were shaped by the Great Migration, differential sorting in response to pollution, and other factors. Our findings highlight that the equity implications of siting long-lived infrastructure can differ dramatically depending on the time span considered.
Carbon Taxes and Green Subsidies in a World Economy
Matthew Kotchen & Giovanni Maggi
NBER Working Paper, July 2025
Abstract:
We examine positive and normative questions that arise with the joint use of carbon taxes and green subsidies in an open economy. Moving from autarky to free trade induces countries to introduce green subsidies and reduce carbon taxes, in order to reduce foreign emissions. In contrast to the “leakage” effect of carbon taxes, green subsidies are associated with “reverse leakage,” as they decrease emissions both at home and abroad, and as a consequence, the availability of green subsidies tends to be good for global welfare. International climate agreements (ICAs) seek to increase carbon taxes, but the effect on green subsidies is more nuanced. An ICA removes green subsidies, even though they exert positive international externalities at the noncooperative equilibrium. If, however, policies can only be changed gradually, an ICA may start by increasing subsidies before decreasing them over time. We also consider the welfare implications of lobbying from the fossil and green energy sectors. In a noncooperative setting, we find that pressures from the fossil lobby tend to reduce welfare, whereas pressures from the green lobby tend to increase welfare. We also find that in the presence of lobbying, an ICA can decrease welfare relative to the noncooperative equilibrium, even if it changes carbon taxes and green subsidies toward their efficient levels.
Little-to-no industrial fishing occurs in fully and highly protected marine areas
Jennifer Raynor et al.
Science, 24 July 2025, Pages 392-395
Abstract:
There is a widespread perception that illegal fishing is common in marine protected areas (MPAs) due to strong incentives for poaching and the high cost of monitoring and enforcement. Using artificial intelligence and satellite-based Earth observations, we provide estimates of industrial fishing activity in fully and highly protected MPAs worldwide, in which such fishing is banned. We find little to no activity in most cases. On average, these MPAs had just one fishing vessel present per 20,000 square kilometers during the satellite overpass, a density nine times lower than that of the unprotected waters of exclusive economic zones.
The intensification of the strongest nor’easters
Kevin Chen et al.
Proceedings of the National Academy of Sciences, 22 July 2025
Abstract:
Nor’easters are coastal extratropical cyclones that feed upon both thermal contrasts (meridional and land-ocean) and oceanic latent heat release, causing them to intensify along the U.S. East Coast. With central pressures that sometimes rival those of tropical cyclones, they represent a significant coastal hazard and are often associated with strong winds, heavy snowfall, disruption, and damage. While interest in studying the impacts of climate change on storm behavior is growing, nor’easters have historically received far less attention than tropical cyclones, largely due to challenges in documenting and categorizing these storms combined with the relatively short observational record. Here, we address these challenges by employing a cyclone tracking approach in concurrence with long-term reanalysis data to create a reliable historical database of these storms. We find a significant increasing trend in the maximum wind speeds of the most intense (>66th percentile) nor’easters. We also observe an increasing trend in hourly precipitation rates associated with these storms. Such changes have profound implications for coastal cities and shorelines, increasing the risk of coastal flooding and erosion.
Tropical response to ocean circulation slowdown raises future drought risk
Pedro DiNezio et al.
Nature, forthcoming
Abstract:
Projections of tropical rainfall under global warming remain highly uncertain, largely because of an unclear climate response to a potential weakening of the Atlantic meridional overturning circulation (AMOC). Although an AMOC slowdown can substantially alter tropical rainfall patterns, the physical mechanisms linking high-latitude changes to tropical hydroclimate are poorly understood. Here we demonstrate that an AMOC slowdown drives widespread shifts in tropical rainfall through the propagation of high-latitude cooling into the tropical North Atlantic. We identify and validate this mechanism using climate model simulations and palaeoclimate records from Heinrich Stadial 1 (HS1) -- a past period marked by pronounced AMOC weakening. In models, prevailing easterly and westerly winds communicate the climate signal to the Pacific Ocean and Indian Ocean through the transport of cold air generated over the tropical and subtropical North Atlantic. Air–sea interactions transmit the response across the Pacific Ocean and Indian Ocean, altering rainfall patterns as far as Indonesia, the tropical Andes and northern Australia. A similar teleconnection emerges under global warming scenarios, producing a consistent multi-model pattern of tropical hydroclimatic change. These palaeo-validated projections show widespread drying across Mesoamerica, the Amazon and West Africa, highlighting an elevated risk of severe drought for vulnerable human and ecological systems.