Firms subject to cost-of-service regulation cannot withhold windfall profits associated with free emissions allowances. This paper examines the efficiency and distributional impacts of two approaches to transfer free allowances to consumers: output subsidies and lump-sum payments. We employ an...

We study the effects of greenhouse gas emissions on optimum growth and environmental policy by using an expansion-in-varieties growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally...

Climate physics predicts that the intensity of natural disasters will increase in the future due to climate change. One of the biggest challenges for economic modeling is the inherent uncertainty of climate events, which crucially affects consumption, investment, and abatement decisions. We...

We show that imposition of a state-level environmental tax in a federation crowds out pre-existing federal taxes. We explain how this vertical fiscal externality can lead unilateral state-level environmental policy to generate a welfare gain in the implementing state, at the expense of other...

A country's optimal environmental border policy includes a strategic component that is inconsistent with commitments under the General Agreement on Tariffs and Trade (GATT). We extend the theory to include GATT compliance. Theory supports optimal border adjustments on carbon content that are...

By adopting the Paris Agreement on climate change the world community has agreed on global goals for climate policy. However, by relying on voluntary contributions and respecting "national circumstances" it does not ensure efficient and equitable country policies. To derive guidelines for a fair...

How should governments best allocate their budget to support private research activities? The consensus in the literature is that sector-specific R&D support policies should be increasing in the degree of compatibility of sectoral innovation with the practices of the wider economy. Using a...

We show that OPEC’s market power contributes to global warming by enabling producers of relatively expensive and dirty oil to start producing before OPEC reserves are depleted. We fully characterize the equilibrium of a cartel-fringe model and use a calibration to examine the importance of...

Countries have pledged to stabilize global warming at a 1.5 to 2êC increase. Either target requires reaching net zero emissions before the end of the century, which implies a major transformation of the economic system. This paper reviews the literature on how policymakers can design climate...

We study how the scarcity of non-market goods, such as environmental amenities, affects the economic appraisal of climate policy. To this end, we perform a comprehensive analysis of the change in relative prices of non-market goods in the widespread climate-economy model DICE. We show that DICE...