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SUSTAINABLE ECONOMIC AND FINANCIAL DEVELOPMENT SEMINAR 2015-2016

Mardi 17 mai 2016

15 – 16h30

Bibliothèque rez-de-chaussée – Département d’Economie

Juan-Pablo MONTERO (PUC – Chile) (with Guy Meunier and Jean-Pierre Ponssard)

«Output-based allocations in pollution markets with uncertainty and self-selection»

We study pollution permit markets in which a fraction of permits are allocated to firms based on their output. Output-based allocations, which are receiving increasing attention in the design of carbon markets around the world (e.g., Europe, California, New Zealand), are shown to be optimal under demand and supply volatility despite the output distortions they may create. In a market that covers multiple sectors, the optimal design combines auctioned permits with output-based allocations that are specific to each sector and increasing in its volatility. When firms are better informed about the latter or must self select, the regulator resort to some free (i.e., lump-sum) allocations to sort firms out. Numerical exercises illustrate the policy relevance of our results: the gains from considering output-based allocations can be substantial.

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Mardi 15 mars 2016

15 – 16h30

Bibliothèque rez-de-chaussée – Département d’Economie

Antonin POTTIER (CERNA, MINES Paris Tech)

«Growth uncertainty and sequential abatment decision»

We study a simple model of optimal climate change mitigation. We investigate the effect of growth uncertainty in a sequential decision framework, in particular the possibility of zero growth. We show that this possibility tends to diminish the Social Cost of carbon. With zero growth, less mitigation is warranted, even if future generations are poorer than with positive growth. We trace this feature back to the form commonly adopted for the climate damage function.

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Mardi 19 janvier 2016

15 – 16h30

Bibliothèque rez-de-chaussée – Département d’Economie

Matti LISKI (Aalto University)

«Carbon prices for the next hundred years»

This paper examines the socially optimal pricing of carbon emissions over time. Climate-change impacts are unknown, potentially high-consequence events. The carbon price tends to increase with income. But learning about impacts, or their absence, decouples the carbon price from income growth. The price should grow faster than the economy if the past warming is not substantial enough for learning the true long-run social cost. It grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so. A quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years.

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Mardi 8 décembre 2015

15 – 16h30

Bibliothèque rez-de-chaussée – Département d’Economie

Fanny HENRIET (PSE)

«Unilateral cap on CO2 emissions and coal-to-gas substitution : is the cure worse than the disease?»

Shale gas is hoped to effectively help gas producing regions meet their emission reduction commitments. We examine an open economy that produces both shale gas and another, more carbon intensive fuel like coal. We find that imposing a domestic emission cap may in fact contribute to increase global emissions. This may happen if the emission commitment, implemented through a cap and trade system or a carbon tax, leads to increase domestic shale gas extraction. Indeed, shale gas releases coal that is exported instead of being consumed domestically, increasing emissions in the rest of the world. Our two-resource setting thus contradicts the standard analysis of emissions’ leakage with a single resource. We establish testable conditions under which (1) governmental emission commitments warrant the domestic exploitation of shale gas, and (2) imposing a cap on domestic emissions increases global emissions.

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Mardi 10 novembre 2015

15 – 16h30

Bibliothèque rez-de-chaussée – Département d’Economie

Eric STROBL

«The Inflationary Costs of Externe Weather»

We examine the inflationary costs of extreme weather. To this end we construct a monthly panel data set of destruction indices for hurricanes and floods and combine these with price data for 15 Caribbean islands. Our econometric model shows that the impact of these extreme weather events can be large, affecting both aggregate inflation as well as that of product sub-categories. Using Jamaica as a case study, we then evaluate potential welfare losses due to these extreme weather events. We combine estimates of a demand system, derived from household budget shares with probabilities of extreme weather events to compute compensating variations. We find that while for more frequent events expected losses are relatively small, more damaging but rarer extreme weather can cause large falls in monthly welfare due to the subsequent inflationary pressures.