Conference Agenda

This paper examines the equilibrium impacts of emissions regulations on the time path of CO2 emissions for the maritime shipping industry. Notably, it explores the interactions between travel speed, price, and capital turnover: Fleet fuel efficiency improves when larger ships replace existing ones, but the long lifespan of ships makes turnover slow. Regulations that reduce travel speeds lower emissions quickly, but also limit the supply and increase the price of shipping, thereby impacting shipbuilding and scrapping incentives. To quantitatively assess these mechanisms and their time horizons, I construct a dynamic model of the dry bulk shipping industry with endogenous entry, exit, and travel speed, as well as fleet heterogeneity across age and size. Using a rich dataset on the global fleet and its operation, I structurally estimate the model and use it to simulate the dynamic effects of a fuel tax, an efficiency standard that limits speeds, and an entry subsidy. I find that a fuel tax has a persistent impact, while the effect of a speed limit diminishes considerably over time due to induced ship building. Counterintuitively, rather than hastening the exit of older ships, both policies initially suppress exits, even while reducing emissions. An entry subsidy is more effective at removing old ships from service.

Countries around the world use anti-dumping duties, local content requirements and other protectionist measures to promote their low carbon industries, thereby inflating downstream costs. At the same time, they ascribe insufficient climate action to the economic burden of mitigation efforts.

This paper examines the trade-off between temporarily forgoing gains from trade by protecting an infant industry and increasing future gains through fiercer global competition later on. I introduce a strategic model featuring two countries, two time periods, and trade in a clean technology in a set up with differential production costs and imperfect competition.

The findings suggest that when initial differences in production cost surpass a critical threshold, and learning-by-doing facilitates catch-up for the laggard, opting for autarky during Stage 1 can enhance overall welfare for both countries. This result is strengthened when both countries use consumer subsidies.

Furthermore, when both consumer and producer subsidies are available, the Subgame Perfect Nash Equilibrium involves both trade and production subsidies on the part of the laggard country and the same welfare payoffs as perfect competition. The analysis suggests that an environmental trade agreement is most likely to be beneficial if production subsidies for clean technology are permitted.

One of the many effects of Climate Change is increased drought making water availability scarcer in more regions of the world, and primarily affecting the agricultural sector. In this context, we examine the effects of farmers' investments in adaptive measures as a response to climate change on the sustainability and profitability of the resource. To this goal, we develop a two-period model, where the impact of climate change impacts the availability of the groundwater resource in the second period and farmers respond to it by investing in solutions that reduce their marginal extraction costs. Theoretical results show that adaptive investments have different implications depending on the perspective considered. From a strict environmental standpoint, they are detrimental, as they lead to a lower final stock of the natural resource. From the farmers' perspective, adaptive investments are beneficial, as they allow for higher profits. Finally, from the regulator's standpoint, the impact depends on the weight given to sustainability concerns on the welfare function. Furthermore, in cases where adaptation negatively impacts the overall welfare and therefore policy intervention is justified, we assume that the regulator responds by imposing a tax on second-period extraction rates, thereby reducing the effectiveness of adaptive investments. After determining the optimal tax rate, we evaluate its impact by comparing the outcomes of the model with adaptation to those of the model with both adaptation and taxation. The results indicate that, from an environmental perspective, the tax is beneficial as it helps preserve a larger final resource stock. From the farmers' viewpoint, taxation is always detrimental. Finally, from the regulator's perspective, the impact is always positive given the sustainability concerns.

The concept of a “climate club” of countries has emerged as a bottom-up strategy to address weak and non-harmonised climate policies worldwide. This study explores the feasibility of such a club in a geopolitical landscape where non-member countries may retaliate against border carbon adjustments with trade tariffs. To this end, we adapt an existing empirically calibrated agent-based model of a climate club to incorporate the impacts and costs of retaliation. The model describes 31 heterogeneous regions in terms of carbon emissions, abatement costs, domestic carbon prices, and imports and exports. We run the model for 162 scenarios with different initial coalitions, carbon prices, carbon border tariffs, and trade retaliation tariffs, testing the dynamics and convergence of countries towards a stable coalition. Earlier findings indicate that a climate club initiated by the European Union alone or jointly with China or the United States has a high likelihood of achieving global coverage under a sufficiently stringent border tariff, equal to or higher than the club’s carbon price. However, in scenarios with retaliation by China or the United States, the likelihood of success for a club initiated by the European Union is significantly reduced. In contrast, a club jointly launched by the European Union and China can withstand moderate retaliation under the adequate initial conditions, increasing the likelihood of achieving an ambitious global coalition. Meanwhile, a club initiated by the United States and the European Union is more vulnerable to retaliation by China, though expansion remains possible under intermediate carbon prices and a comparable or higher carbon tariff.