Forthcoming in Journal of Economic Geography.

Many environmental externalities occur with time lags that can range from a few days to several centuries in length, and many of these externalities are also subject to uncertainty. In this paper, we examine the key features of an optimal policy to manage environmental externalities that are both lagged and stochastic.We develop a two-period, twopolluter model and obtain closed-form solutions for optimal emissions levels under different combinations of damage functions and stochastic processes.

Outdated capacity and substantial potential for energy conservation are the two main features of energy-intensive sectors in developing countries. Such countries also seek to implement market-based options to further control domestic carbon emissions as well as to promote the withdrawal of outdated capacity and upgrade production levels. This paper presents a quantitative assessment of an emission trading scheme (ETS) for China’s iron and steel industry. The diverse array of normal and outdated capacities are modeled in a two-country, three-good partial equilibrium model.

Abstract: We analyze a typical principal-agent relationship in the context of international climate policy, in which the principals of two countries first decide whether to merge their domestic emission permit markets to form an international market. In the second stage, they delegate the decision on domestic permit supply to an agent. We find that principals have an incentive to select agents who care less for environmental damages than they do themselves.

Climate change has become one of the most important development challenges worldwide. It affects various sectors, with agriculture the most vulnerable. In Ethiopia, climate change impacts are exacerbated due to the economy’s heavy dependence on agriculture. The Ethiopian government has started to implement its Climate Resilient Green Economy (CRGE) strategy, which is planned to foster development and sustainability while limiting GHG emissions by 2030. However, to the best of our knowledge, research on estimating the economic impacts of CO2 emissions are limited.

Natural and artificial ecosystems (such as agricultural ecosystems), confer benefits in the form of provisioning, regulatory, cultural and habitat goods and services to nations and humanity as a whole. Degradation of ecosystems through different threats and drivers compromises their ability of provide these goods and services. In Kenya, just like many African countries, climate change and variability is a driver affecting weather patterns and causing seasonal shifts.

The literature analyzing the effects of extreme weather events on social and economic outcomes has increased significantly in the last few years. Most of these analyses use either self-reported data about whether the storm affected the respondent or aggregated data such as precipitation at municipality level. We argue that these estimates might be biased due to the inclusion of households that are not directly affected but live close enough to be indirectly affected through economic or government assistance spillovers.

When designing schemes such as conditional cash transfers or payments for ecosystem services, the choice of whom to select and whom to exclude is critical. We incentivize and measure actual contributions to an environmental public good to ascertain whether being excluded from a rebate can affect contributions and, if so, whether the rationale for exclusion influences such effects. Treatments, i.e., three rules that determine who is selected and excluded, are randomly assigned.