Conference Agenda

Climate change mitigation undoubtedly proves a political matter, thereby stalling efficient energy transition. Hence, a natural question seems to arise: are certain political systems more capable than others of conducting effective climate policy? On the one hand, authoritarian governments possess the necessary apparatus to implement unpopular but effective solutions. Yet, in practice, it appears that these tools are not utilised for environmental goals to a degree comparable with democratic states. This paper aims to establish the theoretical impact of such institutional conditions (i.e. level of democracy) on the economics of climate change mitigation. Thus, we rely on a dynamic adaptation of the seminal model of political economy by McGuire and Olson (1996) and introduce a climate externality. The results suggest that lower democratic accountability is associated with fewer cumulative emissions. This is achieved, however, by reduced economic growth and the ability to constrain societal consumption rather than higher investment in renewables. We show that a positive democracy shock contributes to increased investment in renewables, as well as fewer emissions when expressed as a percentage of output. Moreover, democratic policymakers prove more efficient in limiting emissions in the event of a climate shock.

Oil production and use are responsible for nearly a quarter of global greenhouse gas emissions, making them central to climate policy. This paper explores how carbon mitigation policies shape the economic value of oil across deposits with varying carbon intensities and extraction costs, affecting firms’ profits and governments’ fiscal revenues. First, using a theoretical model of intertemporal oil extraction under carbon pricing, we show that carbon taxes can have counterintuitive effects: some high-carbon deposits increase in value, while some cleaner ones decline. We first develop a theoretical framework of intertemporal oil extraction under carbon taxation, demonstrating that such policies can generate counterintuitive effects: high-carbon deposits may appreciate in value, while cleaner ones may decline. We then calibrate a global simulation model using detailed deposit-level data, revealing that carbon taxation produces uneven distributional effects, with weak correlation between carbon intensity and deposit valuation changes as per our theoretical insights into the problem. By integrating detailed tax data, we decompose the changes in oil value into after-tax corporate profits and fiscal revenues, showing that while firms’ profits typically decline, moderate carbon taxes can compensate for lost government revenues in certain low-cost producer countries. Finally, we evaluate second-best policies, sub-optimal carbon taxes, uniform tax on barrel, extraction bans based on barrel’s carbon intensity, finding they impose large welfare losses—up to $14 trillion—compared to optimal carbon taxation and yield distinct distributional impacts.

The energy transition necessitates exploring factors that enable energy-exporting countries to achieve carbon neutrality while maintaining economic stability. This paper examines whether international migration can serve as such a stabilizing factor. We develop a simple Dutch disease model to show that foreign labor mitigates exposure to fluctuations in energy export revenues by reducing the contraction of the non-energy tradable sector during windfall periods. This effect holds when accounting for remittances. Estimating a structural panel vector autoregressive model on GCC countries–positioned at the intersection of global energy markets and migration–we find empirical evidence consistent with our theoretical predictions.

This paper employs a general equilibrium model of firm dynamics to investigate how financial development influences firms’ adoption of clean technologies through two opposing mechanisms. In partial equilibrium, financial development directly facilitates adoption by easing collateral constraints. In general equilibrium, however, financial development tends to impede green transition by crowding out clean investment in technology adoption by financially unconstrained firms. The higher demand for production inputs (i.e., capital and labor) along with financial development raises their prices, reducing unconstrained firms’ profits and slowing their accumulation of internal funds for technology adoption. A numerical exploration of the model indicates that as financial markets become highly developed, the adverse general equilibrium effect outweighs the direct benefits, ultimately hindering green transitions. Furthermore, reducing the upfront costs of clean technologies is shown to alleviate the adverse impacts of financial development on green transition.