Empirical Environmental Economics

Objectif

This course will examine current issues in environmental economics, with a focus on how micro-econometric methods can be used to answer research questions in that field. It will provide students with an overview of the recent literature, the challenges of using applied microeconomics and policy evaluation methods in environmental economics, and some practical tools to overcome these challenges.

We will draw on the recent empirical literature in environmental economics to better understand:
i) what are the key challenges in tackling environmental issues, in particular climate change, from the perspective of both developed and developing countries
ii) what answers the recent environmental economics literature has provided on these issues
iii) how to conduct empirical research on these questions.

Coursework and examination

Students are expected to have read the compulsory academic paper before each lecture, and are encouraged to read the recommended one. We will have an open discussion of the paper at some point in the lecture. Negative points (up to 0.5 per lecture) will be given to students who evidently didn’t read the mandatory paper, and positive points (up to 0.5 per lecture) will be given to students who demonstrate that they have read the recommended paper.

The examination will be based on a group assignment (groups of 2 or 3 students) in which the students will use statistical software to analyze data and answer a research question, based on a list of proposed topics and published papers. The assignment will take the form of a short research paper including a literature review and a data analysis, along with the code used to analyze the data.

The final grade will be made of the grade at the group assignment, plus any negative and positive points from reading or not the mandatory and recommended papers.

Pre-requisites
The course combines theory and empirics and has a strong applied focus. In particular, it is assumed that students will have followed a course in micro-econometrics and policy evaluation methods such as the Microeconometric Evaluation of Public Policies course given by Bruno Crépon. Having followed the Introduction to Environmental Economics course given by François Bareille in 2A will help, but is not a pre-requisite.

Intended Learning Outcomes
Upon successful completion of the course, students will:
- have knowledge and understanding of the major debates of environmental economics (including those related to the design of environmental and climate regulation, the valuation of environmental externalities, the interplay between inequalities and the environment and the roles of social norms, behavioral failures and political economy factors in accelerating or slowing down the implementation of environmental policies)
- understand how to use key empirical tools from econometrics and data analytics to critically assess the effectiveness of environmental policies in different settings
- be able to think critically about the available evidence on different policy interventions and use it to formulate nuanced policy recommendations

Plan

Format and Structure

The course will consist of 6 three-hour lectures. The course reading list consists entirely of academic papers and is extensive. It includes one compulsory academic paper per lecture, one recommended paper, as well as a list of other readings, which lectures may refer to but which won't go into in detail. Students are strongly encouraged to read at least the abstracts of all these other papers.

The course will cover five topics:
1) Climate change and climate policy (2 lectures): in the first lecture we will examine how micro econometrics tools can be used to estimate the causal impact of climate policies and the magnitude of climate damages, while accounting for adaptation. In the second lecture, we will discuss how to empirically examine different fairness issues related to climate change, and how to account for trade and leakage in the design of climate policies.
2) Local pollution (air, water, soil): while carbon emissions generate a global externality, other environmental pollutants generate local damages. We will examine the empirical challenges related to measuring local pollution and its impacts on individuals and firms, and discuss the empirical strategies commonly used in the literature to circumvent endogeneity issues.
3) Deforestation, ecosystem services and biodiversity: we will cover the recent literature on the causes and solutions to deforestation, with a special focus on the use of satellite data to monitor deforestation outcomes. Then we will discuss recent papers estimating the value of ecosystem services and of biodiversity.
4) Environment and development: we will examine the potential trade-offs and complementarities between environmental conservation and economic development. Then we will review the literature highlighting the challenges of environment regulation and clean technology adoption in developing countries, where enforcement can be low, corruption high, and credit constraints widespread.
5) Political Economy and determinants of Environmental Attitudes: a recent but growing empirical literature studies the political economy, institutional and behavioralfactors hindering the implementation of environmental and climate policies. We will review this literature, with a specific focus on the use innovative empirical methods such as text analysis and information treatments in surveys.

The syllabus will mainly be focused on applied microeconomic topics and leverage students' knowledge of empirical methods from previous training in econometrics.

Références

Syllabus (mandatory and recommended papers indicated in bold)

Lecture 1: Climate change and climate policy: mitigation and adaptation

 1.      The effectiveness of different policy instruments in tackling climate change

Papers:

-          (Mandatory) Colmer, Jonathan & Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner. (2022). Does Pricing Carbon Mitigate Climate Change? Firm-Level Evidence From the European Union Emissions Trading Scheme. Working paper

-          Andersson, Julius J. "Carbon Taxes and CO2 Emissions: Sweden as a Case Study." American Economic Journal: Economic Policy, vol. 11, no. 4, Nov. 2019, pp. 1-30, doi:10.1257/pol.20170144

-          Calel, R., Colmer, J., Dechezleprêtre, A., & Glachant, M. (2021). Do Carbon Offsets Offset Carbon? doi: 10.2139/ssrn.3950103

-          Allcott, H., & Rogers, T. (2014). The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation. American Economic Review, 104(10), 3003–37. doi: 10.1257/aer.104.10.3003

2.      Climate change impacts and the Social Cost of Carbon

Papers:

-          (Recommended) Carleton, T., Jina, A., Delgado, M., Greenstone, M., Houser, T., Hsiang, S., ...Zhang, A. T. (2022). Valuing the Global Mortality Consequences of Climate Change Accounting for Adaptation Costs and Benefits. Quarterly Journal of Economics, 137(4), 2037–2105. doi: 10.1093/qje/qjac020

-          Somanathan, E., Somanathan, R., Sudarshan, A., & Tewari, M. (2021). The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing. Journal of Political Economy. doi: 10.1086/713733

-          Burgess, R., Deschenes, O., Donaldson, D., & Greenstone, M. (2017). "Weather, climate change and death in India." Working Paper.

3.      Adaptation

Papers:

-          Moscona, J., & Sastry, K. A. (2023). Does Directed Innovation Mitigate Climate Damage? Evidence from U.S. Agriculture. Quarterly Journal of Economics, 138(2), 637–701. doi: 10.1093/qje/qjac039

-          Aragón, F. M., Oteiza, F., & Rud, J. P. (2021). Climate Change and Agriculture: Subsistence Farmers' Response to Extreme Heat. American Economic Journal: Economic Policy, 13(1), 1–35. doi: 10.1257/pol.20190316

-          Burke, M., & Emerick, K. (2016). Adaptation to Climate Change: Evidence from US Agriculture. American Economic Journal: Economic Policy, 8(3), 106–40. doi: 10.1257/pol.20130025

Lecture 2: Climate change and climate policy: fairness issues and trade

1        Inequality and Climate change

Papers:

-          (Mandatory) Park, J., Pankratz, N. M. C., & Behrer, A. (2021). Temperature, Workplace Safety, and Labor Market Inequality. IZA Working paper. doi: 10.2139/ssrn.3892588

-          Chancel, L. (2022). Global carbon inequality over 1990–2019. Nature Sustainability, 5(11), 931–938. doi: 10.1038/s41893-022-00955-z

-          Cronin, J. A., Fullerton, D., & Sexton, S. (2019). Vertical and Horizontal Redistributions from a Carbon Tax and Rebate. Journal of the Association of Environmental and Resource Economists. doi: 10.1086/701191

-          Douenne, T. (2020). The Vertical and Horizontal Distributive Effects of Energy Taxes: A Case Study of a French Policy. Energy Journal, 41(3), 231–254. doi: 10.5547/01956574.41.3.tdou

-          Drupp, M. A., Kornek, U., Meya, J., & Sager, L. (2021). Inequality and the Environment: The Economics of a Two-Headed Hydra. doi: 10.2139/ssrn.3979352. Working Paper

-          Lyubich (2023). The Role of People vs. Places in Individual Carbon Emissions, Working Paper

-          Sager, L. (2019). Income inequality and carbon consumption: Evidence from Environmental Engel curves. Energy Economics, 84, 104507. doi: 10.1016/j.eneco.2019.104507

2        Climate policy and trade

Papers:

-          (Recommended) Barrows, G., & Ollivier, H. (2021). Foreign demand, developing country exports, and CO2 emissions: Firm-level evidence from India. Journal of Development Economics, 149, 102587. doi: 10.1016/j.jdeveco.2020.102587

-          Aichele, R., & Felbermayr, G. (2012). Kyoto and the carbon footprint of nations. Journal of Environmental Economics and Management, 63(3), 336–354. doi: 10.1016/j.jeem.2011.10.005

-          Campolmini A, Fadinger, H., Forlati, C, Stillger, S, & Wagner, Ulrich J. (2024). Designing Effective Carbon Border Adjustment with Minimal Information Requirements. Theory and Empirics. Working Paper

-          Shapiro, J. S. (2016). Trade Costs, CO2, and the Environment. American Economic Journal: Economic Policy, 8(4), 220–54. doi: 10.1257/pol.20150168

-          Shapiro, Joseph S. (2021). The Environmental Bias of Trade Policy. Quarterly Journal of Economics, vol. 136, no. 2, pp. 831-86, doi:10.1093/qje/qjaa042.

-          Jakob, M., Afionis, S., Åhman, M., Antoci, A., Arens, M., Ascensão, F., ...Willner, S. (2022). How trade policy can support the climate agenda. Science, 376(6600), 1401–1403. doi: 10.1126/science.abo4207

-          Costinot, A., Donaldson, D., & Smith, C. (2016). Evolving Comparative Advantage and the Impact of Climate Change in Agricultural Markets: Evidence from 1.7 Million Fields around the World. Journal of Political Economy.

-          Grubb, M., Jordan, N. D., Hertwich, E., Neuhoff, K., Das, K., Bandyopadhyay, K. R., ...Oh, H. (2022). Carbon Leakage, Consumption, and Trade. Annual Review of Environment and Resources, 47(1), 753–795. doi: 10.1146/annurev-environ-120820-053625

Lecture 3: Local Pollution

 1.      Estimating local pollution damages

Papers:

-          (Recommended) Deryugina, T., Heutel, G., Miller, N. H., Molitor, D., & Reif, J. (2019). The Mortality and Medical Costs of Air Pollution: Evidence from Changes in Wind Direction. American Economic Review, 109(12), 4178–4219. doi: 10.1257/aer.20180279

-          Schlenker, W., & Walker, W. R. (2016). Airports, Air Pollution, and Contemporaneous Health. Review of Economic Studies, 83(2), 768–809. doi: 10.1093/restud/rdv043

-          Isen, A., Rossin-Slater, M., & Walker, W. R. (2017). Every Breath You Take—Every Dollar You’ll Make: The Long-Term Consequences of the Clean Air Act of 1970. Journal of Political Economy. doi: 10.1086/691465

-          Gazze, L., Persico, C. L., & Spirovska, S. (2022). The Long-Run Spillover Effects of Pollution: How Exposure to Lead Affects Everyone in the Classroom. Journal of Labor Economics. doi: 10.1086/723175

-          Holland, S. P., Mansur, E. T., Muller, N. Z., & Yates, A. J. (2016). Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors. American Economic Review, 106(12), 3700–3729. doi: 10.1257/aer.20150897

-          Aragón, F. M., & Rud, J. P. (2016). Polluting Industries and Agricultural Productivity: Evidence from Mining in Ghana. Economic Journal, 126(597), 1980–2011. doi: 10.1111/ecoj.12244

2.      The effectiveness of anti-pollution regulations

Papers:

-          (Mandatory) Barwick, P. J., Li, S., Lin, L., & Zou, E. (2019). From Fog to Smog: the Value of Pollution Information. NBER Working Paper. doi: 10.3386/w26541

-          Klauber, H., Holub, F., Koch, N., Pestel, N., Ritter, N., & Rohlf, A. (2023). Killing Prescriptions Softly: Low Emission Zones and Child Health from Birth to School. American Economic Journal: Economic Policy. doi: 10.1257/pol.20210729

-          Barahona, N., Gallego, F. A., & Montero, J.-P. (2020). Vintage-Specific Driving Restrictions. Review of Economic Studies, 87(4), 1646–1682. doi: 10.1093/restud/rdz031

-          Shapiro, J. S., & Walker, R. (2018). Why Is Pollution from US Manufacturing Declining? The Roles of Environmental Regulation, Productivity, and Trade. American Economic Review, 108(12), 3814–54. doi: 10.1257/aer.20151272

-          Fowlie, M., Holland, S. P., & Mansur, E. T. (2012). What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program. American Economic Review, 102(2), 965–93. doi: 10.1257/aer.102.2.965

-          Hernandez-Cortes, D., & Meng, K. C. (2023). Do environmental markets cause environmental injustice? Evidence from California’s carbon market. Journal of Public Economics, 217, 104786. doi: 10.1016/j.jpubeco.2022.104786

-          Hanna, R., Duflo, E., & Greenstone, M. (2016). Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves. American Economic Journal: Economic Policy, 8(1), 80–114. doi: 10.1257/pol.20140008

Lecture 4: Deforestation, Ecosystem services and Biodiversity

 1.      Deforestation: drivers and mitigation options

 Papers:

-          (Mandatory) Burgess, R., Hansen, M., Olken, B. A., Potapov, P., & Sieber, S. (2012). The Political Economy of Deforestation in the Tropics*. Quarterly Journal of Economics, 127(4), 1707–1754. doi: 10.1093/qje/qjs034

-          Assunção, J., McMillan, R., Murphy, J., & Souza-Rodrigues, E. (2022). Optimal Environmental Targeting in the Amazon Rainforest. Review of Economic Studies, rdac064. doi: 10.1093/restud/rdac064

-          Assunção, J., Gandour, C., & Rocha, R. (2023). DETER-ing Deforestation in the Amazon: Environmental Monitoring and Law Enforcement. American Economic Journal: Applied Economics, 15(2), 125–56. doi: 10.1257/app.20200196

-          Baragwanath, K., & Bayi, E. (2020). Collective property rights reduce deforestation in the Brazilian Amazon. Proceedings of the National Academy of Sciences, 117(34), 20495–20502. doi: 10.1073/pnas.1917874117

-          Kraus, S., Liu, J., Koch, N., & Fuss, S. (2021). No aggregate deforestation reductions from rollout of community land titles in Indonesia yet. Proceedings of the National Academy of Sciences, 118(43), e2100741118. doi: 10.1073/pnas.2100741118

-          Alix-Garcia, J., & Millimet, D. (2022). Remotely Incorrect? Accounting for Nonclassical Measurement Error in Satellite Data on Deforestation. Journal of the Association of Environmental and Resource Economists. doi: 10.1086/723723

 2.      Ecosystem services and the social cost of biodiversity losses

 Papers:

-          (Recommended) Taylor, C. A., & Druckenmiller, H. (2022). Wetlands, Flooding, and the Clean Water Act. American Economic Review, 112(4), 1334–63. doi: 10.1257/aer.20210497

-          Dasgupta, Partha. (2021). The Economics of Biodiversity: The Dasgupta Review. Abridged Version.

-          Frank, E., & Sudarshan, A. (2023). The Social Costs of Keystone Species Collapse: Evidence from the Decline of Vultures in India. Working Paper. doi: 10.2139/ssrn.4318579

-          Fezzi, C., Ford, D. J., & Oleson, K. L. L. (2023). The economic value of coral reefs: Climate change impacts and spatial targeting of restoration measures. Ecological Economics, 203, 107628. doi: 10.1016/j.ecolecon.2022.107628

-          Moore, F. C., Stokes, A., Conte, M. N., & Dong, X. (2022). Noah’s Ark in a Warming World: Climate Change, Biodiversity Loss, and Public Adaptation Costs in the United States. Journal of the Association of Environmental and Resource Economists. doi: 10.1086/716662

Lecture 5: Environment and Development

 1.      Trade-offs and complementarities between environmental & climate objectives and development goals

Papers:

-          (Recommended) Jack, B. Kelsey, et al. (2022). Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning. NBER Working Paper, doi:10.3386/w30690.

-          Jayachandran, Seema. (2022). "How Economic Development Influences the Environment." Annual Review of Economics, vol. 14, no. 1, pp. 229-52, doi:10.1146/annurev-economics-082321-123803.

-          Jayachandran, S. (2023). The inherent trade-off between the environmental and anti-poverty goals of payments for ecosystem services, Environmental Research Letters, 18: 025003.

-          Hanna, R., & Oliva, P. (2015). Moving Up the Energy Ladder: The Effect of an Increase in Economic Well-Being on the Fuel Consumption Choices of the Poor in India. American Economic Review, 105(5), 242–46. doi: 10.1257/aer.p20151097

-          Szerman, Dmitri, et al. (2022). Agricultural Productivity and Deforestation: Evidence from Brazil. Working Paper. EliScholar – A Digital Platform for Scholarly Publishing at Yale, elischolar.library.yale.edu/egcenter-discussion-paper-series/1091.

2.      The specificities of environmental regulation in developing countries

Papers:

-          (Mandatory) Berkouwer, S. B., & Dean, J. T. (2022). Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households. American Economic Review, 112(10), 3291–3330. doi: 10.1257/aer.20210766

-          Duflo, E., Greenstone, M., Pande, R., & Ryan, N. (2013). Truth-telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India. Quarterly Journal of Economics, 128(4), 1499–1545. doi: 10.1093/qje/qjt024

-          Greenstone, M., He, G., Jia, R., & Liu, T. (2022). Can Technology Solve the Principal-Agent Problem? Evidence from China's War on Air Pollution. American Economic Review: Insights, 4(1), 54–70. doi: 10.1257/aeri.20200373

-          Oliva, P. (2015). Environmental Regulations and Corruption: Automobile Emissions in Mexico City. Journal of Political Economy. Retrieved from https://www.journals.uchicago.edu/doi/full/10.1086/680936

Lecture 6: Political Economy and determinants of Environmental Attitudes[N4] 

 1.      Norms, beliefs and environmental attitudes

Papers:

-          (Mandatory) Chopra, A. F. &. P. A. &. T. B. &. F. (2021). Fighting Climate Change: The Role of Norms, Preferences, and Moral Values. CESifo Working Paper Series.

-          Douenne, T., & Fabre, A. (2022). Yellow Vests, Pessimistic Beliefs, and Carbon Tax Aversion. American Economic Journal: Economic Policy, 14(1), 81–110. doi: 10.1257/pol.20200092

-          Severen, C., & van Benthem, A. A. (2022). Formative Experiences and the Price of Gasoline. American Economic Journal: Applied Economics, 14(2), 256–84. doi: 10.1257/app.20200407

2.      The political economy of climate and environmental policy

Papers

-          Jarvis, S. (2021). The Economic Costs of NIMBYism - Evidence From Renewable Energy Projects. CRC TR 224 Discussion Paper Series.

-          Fetzer, T (2023). Regulatory Barriers to Climate Action: Evidence from Conservation Areas in England. Cesifo Working Paper

-          Hungerman, D., & Moorthy, V. (2023). Every Day Is Earth Day: Evidence on the Long-Term Impact of Environmental Activism. American Economic Journal: Applied Economics, 15(1), 230–58. doi: 10.1257/app.20210045

-          Gagliarducci, S., Paserman, M. D., & Patacchini, E. (2019). Hurricanes, Climate Change Policies and Electoral Accountability. NBER Working Paper. doi: 10.3386/w25835

-          Anderson, S. T., Marinescu, I., & Shor, B. (2019). Can Pigou at the Polls Stop Us Melting the Poles? NBER Working Paper. doi: 10.3386/w26146

3.      Lobbying, NGOs and the media

Papers:

-          (Recommended) Beattie, G. (2022). Measuring Social Benefits of Media Coverage: How Coverage of Climate Change Affects Behavior. doi: 10.2139/ssrn.4211879

-          Espinosa, R., & Treich, N. (2021). Moderate Versus Radical NGOs†. American Journal of Agricultural Economics, 103(4), 1478–1501. doi: 10.1111/ajae.12156

-          Alé-Chilet, J., Chen, C., Li, J., & Reynaert, M. (2021). Colluding Against Environmental Regulation. CEPR Discussion Papers.

-          Araujo, R., Costa, F., & Garg, T. (2022). Public Attention and Environmental Action: Evidence from Fires in the Amazon. doi: 10.2139/ssrn.4212061  CESifo Working Paper Series.

-          Beattie, G. (2020). Advertising and media capture: The case of climate change. Journal of Public Economics, 188, 104219. doi: 10.1016/j.jpubeco.2020.104219