Conference Agenda

In this article, we investigate the role of borrowing constraints in the context of climate policy. We improve our understanding of how income and support for climate policy are interrelated in a two-period model of two dynastic agents with different income levels. Binding borrowing constraints reduce preferred levels of carbon emission mitigation. They alone can account for positive yet inefficiently low levels of climate policy. With our analysis, we highlight the importance of the climate policy dilemma – the long time horizon between the bulk of cost and benefits of climate policy – in a setting where all agents are intergenerational altruists. We thus provide an alternative to the canonical overlapping generations model that assumes agents to be (intergenerationally) egoistic in order to explain inefficiently low climate policy. Furthermore, we show how public debt and redistributive tax policies can help raising the ambition level of climate policy and provide conditions for which these transfer schemes are Pareto-improving.

There exist substantial heterogeneities in household exposure to climate policy. In particular, energy price increases especially impact those spending proportionally more in energy-goods, whereas individuals employed in carbon-intensive industries are likely more at risk of unemployment and wage decreases. Common wisdom suggests that such high-exposure households would be less likely to support climate policies. We combine Dutch household microdata and survey data to document heterogeneities in household-level exposure to climate policy, and assess the effects of exposure on climate policy support. We establish that households with a higher energy cost share of income, and those employed in more carbon-intensive industries, are less likely to support climate policy. The latter applies particularly to low-educated households, whose jobs, empirically, are most likely affected by climate policies. The results suggest that support for climate policies could be increased when considering the varying costs households incur due to climate policies.

This paper investigates the capitalization of energy prices in the housing market. To identify the causal effect of energy prices, I use the gas price shock in 2022 and the war in Ukraine as a quasi-experimental setting. In a difference-in-differences (DiD) framework, I estimate the effect of an increase in gas-based heating costs on rental prices, comparing gas-heated and renewable district heating apartments. Time on market and clicks are used as demand measures. In addition, local gas price data are used to identify the local magnitude of the gas price shock and to estimate treatment effects conditional on local shock intensities in a continuous DiD setting. Housing data on rental apartments are obtained from ImmobilienScout24.de. The results reject a capitalization of energy prices in rents, but find energy price sensitive demand. After the gas price increase, the time on market of gas-heated apartments increases by 6.6% to 9.8%. The effect varies with the size of the local gas price shock, and an additional €100 increase in annual heating costs increases the time on market by 0.4% to 0.3%.

Achieving the goals of the Paris Agreement requires deep decarbonization across all sectors, including the basic materials industry, which is a major contributor to global CO2 emissions. While technological pathways such as carbon capture and storage and hydrogen-based steel production are available, structural challenges hinder progress. A critical challenge is the need for coordinated investments between upstream and downstream firms to enable successful decarbonization.

In this paper we develop a stylized theoretical model to analyse coordination challenges in the basic materials industry, incorporating indirect network effects that lead to multiple equilibria. We evaluate the effectiveness of the standard environmental economics policy toolkit, including carbon pricing and non-discriminatory subsidies, and show that while these instruments can achieve local optima, they are insufficient to achieve the coordinated equilibrium. We then explore discriminatory subsidies, assessing their potential to achieve the first-best outcome under both perfect and imperfect government ability to target firms. Our findings emphasize the critical role of targeted policies in overcoming coordination failures and align with socio-technical transitions literature advocating for selective industrial policy to achieve deep decarbonization in hard-to-abate sectors.