Conference Agenda

Antonio M. Bento, Noah Miller, Mehreen Mookerjee & Edson Severnini

Incidental Adaptation: The Role of Non-climate Regulations - WINNING PAPER

Environ Resource Econ 86, 305–343 (2023)

When a non-climate institution, policy, or regulation corrects a pre-existing market failure that would be exacerbated by climate change, it may also incidentally induce climate adaptation. This regulation-induced adaptation can have large positive welfare effects. We develop a tractable analytical framework of a corrective regulation where the market failure interacts with climate, highlighting the mechanism of regulation-induced adaptation: reductions in the climate-exacerbated effects of pre-existing market failures. We demonstrate this empirically for the US from 1980 to 2013, showing that ambient ozone concentrations increase with rising temperatures, but that such increase is attenuated in counties that are out of attainment with the Clean Air Act’s ozone standards. Adaptation in nonattainment counties reduced the impact of a 1 °C increase in climate normal temperature on ozone concentration by 0.64 parts per billion, or about one-third of the total impact. Over half of that effect was induced by the standard, implying a regulation-induced welfare benefit of $412–471 million per year by mid-century under current warming projections.

Godwin Kwabla Ekpe & Anna A. Klis

Spillover Effects in Irrigated Agriculture from the Groundwater Commons - COMMENDED PAPER

Environmental and Resource Economics 86, 469–507 (2023)

This study examines irrigation spillover effects within the groundwater commons of the San Luis Valley in Colorado. We investigate the common pool competition predicted by a theoretical model of crop production through water-use intensity, acreage size choices, and production intensity among irrigators. By specifying Spatial Probit and regular Spatial Durbin Models, we empirically measure not only the effects of these choices on neighbors, but also the effect of other factors that affect water use and cultivation choices at neighboring farming units. For all three response variables, the results show that irrigators consider neighbors’ responses, with the strength of spatial dependency being highest for production intensity. Additionally, there are significant spillover effects from changes in key covariates, demonstrating the inadequacy of estimating direct effects only. For example, a one-foot increase in depth-to-water has both direct and indirect positive effects on water-use intensity, but the indirect effect constitutes over 81% of the total effect.

Jakob Enlund, David Andersson, and Fredrik Carlsson

Individual Carbon Footprint Reduction: Evidence from Pro-environmental Users of a Carbon Calculator - COMMENDED PAPER

Environmental and Resource Economics 86, 433–467 (2023)

We provide the first estimates of how pro-environmental consumers reduce their total carbon footprint using a carbon calculator that covers all financial transactions. We use data from Swedish users of a carbon calculator that includes weekly estimates of users’ consumption-based carbon-equivalent emissions based on detailed financial statements, official registers, and self-reported lifestyle factors. The calculator is designed to induce behavioral change and gives users detailed information about their footprint. By using a robust difference-in-differences analysis with staggered adoption of the calculator, we estimate that users decrease their carbon footprint by around 10% in the first few weeks, but over the next few weeks, the reduction fades. Further analysis suggests that the carbon footprint reduction is driven by a combination of a shift from high- to low-emitting consumption categories and a temporary decrease in overall spending, and not by changes in any specific consumption category.

Panagiotis Koromilas, Angeliki Mathioudaki, Sotirios Dimos, and Dimitris Fotakis

Modeling Intertemporal Trading of Emission Permits Under Market Power - COMMENDED PAPER

Environmental and Resource Economics 84, 241–278 (2023)

In this work, we examine the effects of inter-temporal trading on the permit price and the existence of market power in the EU ETS. We contribute to the literature by dynamically modeling an emission trading system, taking into account (a) the interplay between dominant firms (leaders) and their competitive counterparts (followers), (b) intertemporal emission trading and (c) linkage between the permit and the output market. We provide equilibrium conditions for both leaders and followers. We conclude that leaders can affect followers’ decisions both in the permit and the output market, since they control the overall emission abatement. Leaders’ dominance may push followers to decrease their business-as-usual emissions and consequently their production levels by adjusting their overall abatement across periods. Further investigation through the actual emission data from the EU Transaction Log (EUTL) supports our theoretical findings. Finally, to examine model’s accuracy, we perform simulations recreating realistic scenarios. The simulation results show that our modeling reproduces the system’s behaviour and captures the changes in price, banking amount and emission levels with respect to variations on the output product and initial allocation.