This paper analyses the distributional effects of fuel subsidy reforms in four countries of the Andean region: Bolivia, Colombia, Ecuador and Peru. We combine tax-benefit microsimulation techniques with input-output analysis to estimate the direct and indirect distributional effects of reducing to the point of fully removing such subsidies, and explore how recycling the proceeds towards greater social protection can alleviate the burdens placed on society. Our results shows that the removal of fuel subsidies has a negative impact on household income, particularly for those at the bottom of the distribution which increases poverty. Recycling the revenue saved from the removal of subsidies to enhance the generosity of existing social protection programs mitigates the increase in poverty but to different extents across countries. The latter reflects differences in targeting of current social protection programmes in the countries under study.

The increase in natural disasters has spawned the creation of multilateral risk management facilities that offer sovereign parametric insurance contracts that provide governments with budgetary support for infrastructure replacement and excess social protection payments that accumulate in the wake of hurricanes and droughts. While the argument for pre-arranged financing is compelling, there is a paucity of economic analysis concerning how much coverage a government should optimally purchased taking into account the fact that parametric insurance may over- or under-predict true losses. Using a formal model, we show that optimal insurance coverage is sensitive to the predictive accuracy of the parametric disaster index and the pricing of the insurance relative to its actuarially fair level. Using realistic parameters drawn from a scheme designed to insure Kenya’s social protection program for its drought-prone regions, we further show that while the optimal amount of insurance is positive, it is lower than typically imagined.

The UK’s Climate Change Act mandates an 80% cut in CO2 emissions by 2050 relative to 1990. Although emissions have already fallen by about 45%, further structural changes are essential for decarbonising the UK economy. This study examines the impact of this transformation on labour productivity, firm demographics and energy consumption. We assess the implications of the transition so far, as well as of the transformation ahead of us. Our investigation employs both empirical and structural approaches. The empirical strategy involves analysing aggregate data, progressing to the division level, and concluding with an examination of individual firm behaviour.

Results indicate that two sectors drove the decarbonisation so far, electricity production and manufacturing. Shifting from coal to gas and renewables reduced emissions in electricity production, while the shrinking of the manufacturing sector reduced emissions in the latter. Reductions in energy intensity and increases in energy efficiency broadly balanced each other out.

This paper argues that adaptation to climate change should be part of a holistic development strategy involving both private and public sector responses. Governments can prioritize public investment in adaptation programs with positive externalities, address market imperfections and policies that make private adaptation inefficient, and mobilize revenues for, and distribute the benefits of, adaptation. Although the choice of what should be done and at what cost ultimately depends on each society’s preferences, economic theory provides a useful framework to maximize the impact of public spending. Cost-benefit analysis, complemented by the analysis of distributional effects, can be used to prioritize adaptation programs as well as all other development programs to promote an efficient and just transition to a changed climate. While compensations may be needed to offset damages that are either impossible or too expensive to abate, subsidies for adaptation require careful calibration to prevent excessive risk taking.