Conference Agenda

Anthropogenic climate change is one of the most pressing global issues today and finding means of mitigation is of utmost importance. To this end, we investigate whether carbon taxes on their own and coupled with revenue recycling schemes (symmetric or asymmetric carbon dividends) improve cooperative behavior in a modified threshold public goods game of loss avoidance. We implement a randomized controlled trial on a large sample of the U.S. population and measure the portion of groups who successfully remain below a critical consumption threshold. We find that a carbon tax with symmetric dividends reduces harmful consumption levels, but coupling the tax with asymmetric dividends not only enhances consumption reduction but also significantly improves group cooperation in avoiding simulated climate change. Our results show that the application of a carbon tax and asymmetric carbon dividends reduces the failure rate to about one-fourth (6%), compared to the 22% observed in a baseline condition. We find that environmental attitudes, conservatism, education, and gender are significantly associated with success rates in staying below the threshold.

Today's environmental challenges prompt many individuals to take personal actions to address them. Those intrinsically concerned about the environment should focus on maximizing the impact of their actions. Yet, it is observed that individuals often engage in pro-environment behaviors (PEBs) that are relatively inefficient in terms of their cost-benefit ratio.We examine if this is because individuals trade off efficient PEBs for inefficient, but visible ones. We conduct a representative online experiment in Germany to investigate this trade-off between efficient and visible PEBs, using contributions to carbon-offset initiatives. Our findings reveal three key insights: First, when considered independently, individuals display a preference for efficient PEBs. Second, in scenarios where efficiency and visibility dimensions are in conflict, visible PEBs crowd out efficient alternatives, indicating a willingness among respondents to prioritize being seen as green over environmental impact. Finally, we disentangle two motivations driving this preference for visible actions: social image concerns (a self-oriented motive) and role model aspirations. Notably, the latter motivation exerts a stronger influence, leading individuals more frequently to choose visible PEBs over efficient ones.

This paper compares the efficiency of different corrective tax instruments in a general equilibrium model with externalities and transaction cost. Our model not only allows for separability between inputs and abatement but also for both upstream and downstream firms. We derive a simple general formula that allows to evaluate social welfare impacts of different corrective tax instruments or combinations of tax instruments on their own tax base as well as other (indirect) tax bases in the presence of administrative costs. This formula guides Pigovian rules for specific taxes in a second best setting as well as cost-effectiveness of marginal tax reform of specific taxes on emissions, inputs or outputs, in the presence of other taxes. The paper contains important lessons for tax design of environmental externalities such as carbon pricing. We find that life cycle consumption taxes nor input taxes are good substitutes for emission taxes if linkage between emission and inputs is relatively weak and administrative cost are not too large. Mixed systems are also evaluated. Also upstream input taxes are not always a good substitute for emission taxes, in particular if abatement for downstream firms is easier relative to the associated administrative costs.

We analyse optimal investment in one of the most important forms of climate adaptation: flood protection. Dykes and surge barriers have considerable fixed costs, so that their construction effectively locks in the level of flood protection for some time. This means that investment decisions need to take into account both economic and climate uncertainty over a horizon of several decades. We put forward a tractable macro-finance DSGE model and extend it for flood risk. We obtain a rule for optimal flood protection as a function of these uncertainties and of fundamental preference parameters such as impatience, risk aversion and intertemporal substitution. Calibrating our framework to the Netherlands, we find that ignoring economic uncertainty leads to too strict flood protection standards. Conversely, ignoring climate uncertainty leads to too loose standards.