On the surface
Vertical and Horizontal Redistributions from a Carbon Tax and Rebate
Julie Anne Cronin, Don Fullerton & Steven Sexton
NBER Working Paper, March 2017
Abstract:
Because electricity is a higher fraction of spending for those with low income, carbon taxes are believed to be regressive. Many argue, however, that their revenues can be used to offset the regressivity. We assess these claims by employing data on 322,000 families in the U.S. Treasury’s Distribution Model to study vertical redistributions between rich and poor, as well as horizontal redistributions among families with common incomes but heterogeneous energy intensity of consumption (different home heating and cooling demands). Accounting for the statutory indexing of transfers, and measuring impacts on annual consumption as a proxy for permanent income, we find that the carbon tax burden is progressive, rising across deciles as a fraction of consumption. The rebate of revenue via transfers makes it even more progressive. In every decile, the standard deviation of the change in consumption as a fraction of consumption varies around 1% or 2% and is larger than the average burden (about 0.7%). When existing transfer programs are used to rebate revenue, the tax and rebate together increase that variation to more than 3% within each decile. The average family in the poorest decile gets a net tax cut of about 1% of consumption, but 44% of them get a net tax increase. Relative to no rebate, every type of rebate we consider increases this variation within most deciles.
Julie Anne Cronin, Don Fullerton & Steven Sexton
NBER Working Paper, March 2017
Abstract:
Because electricity is a higher fraction of spending for those with low income, carbon taxes are believed to be regressive. Many argue, however, that their revenues can be used to offset the regressivity. We assess these claims by employing data on 322,000 families in the U.S. Treasury’s Distribution Model to study vertical redistributions between rich and poor, as well as horizontal redistributions among families with common incomes but heterogeneous energy intensity of consumption (different home heating and cooling demands). Accounting for the statutory indexing of transfers, and measuring impacts on annual consumption as a proxy for permanent income, we find that the carbon tax burden is progressive, rising across deciles as a fraction of consumption. The rebate of revenue via transfers makes it even more progressive. In every decile, the standard deviation of the change in consumption as a fraction of consumption varies around 1% or 2% and is larger than the average burden (about 0.7%). When existing transfer programs are used to rebate revenue, the tax and rebate together increase that variation to more than 3% within each decile. The average family in the poorest decile gets a net tax cut of about 1% of consumption, but 44% of them get a net tax increase. Relative to no rebate, every type of rebate we consider increases this variation within most deciles.
On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution
Rabah Arezki, Thiemo Fetzer & Frank Pisch
Journal of International Economics, forthcoming
Abstract:
This paper provides novel empirical evidence of the effects of a plausibly exogenous change in relative factor prices on United States manufacturing production and trade. The shale gas revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world reflecting differences in endowment of difficult-to-trade natural gas. Guided by economic theory, empirical tests on output, factor reallocation and international trade are conducted. Results show that U.S. manufacturing exports have grown by about 10 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.
Jobs and Climate Policy: Evidence from British Columbia's Revenue-Neutral Carbon Tax
Akio Yamazaki
Journal of Environmental Economics and Management, forthcoming
Abstract:
This paper examines the employment impact of British Columbia's revenue-neutral carbon tax implemented in 2008. While all industries appear to benefit from the redistributed tax revenues, the most carbon-intensive and trade-sensitive industries see employment fall with the tax, while clean service industries see employment rise. By aggregating across industries I find the BC carbon tax generated, on average, a small but statistically significant 0.74 percent annual increases in employment over the 2007-2013 period. This paper provides initial evidence showing how a revenue-neutral carbon tax may not adversely affect employment.
Potential State-Level Carbon Revenue under the Clean Power Plan
Don Fullerton & Daniel Karney
Contemporary Economic Policy, forthcoming
Abstract:
In 2015, the U.S. Environmental Protection Agency issued the Clean Power Plan under which each state can set a mass-based target to meet its assigned electric power sector carbon dioxide emission reductions. If it proceeds, states can design policies to meet those requirements and also raise revenue via a carbon tax or cap-and-trade program with auctioned permits. We calculate each state's potential revenue and demonstrate its significance. In 13 states, carbon revenue could replace all of corporate tax revenue. In addition, we collect budget projections from six key states to determine if and how carbon revenue can substantially reduce deficits. While such revenue is not free money, we discuss its advantages over use of distortionary taxation. Finally, we consider distributional aspects and potential external fiscal effects on federal revenue.
Does Marcellus Shale Natural Gas Extraction Affect How Much Youth in Rural Pennsylvania Like Their Community?
Diane McLaughlin et al.
Rural Sociology, forthcoming
Abstract:
Prior research on the impacts of boomtowns on youth provides mixed results. Recent qualitative work suggests youth are ambivalent about change associated with extraction of natural gas from the Marcellus Shale. The Rural Youth Education longitudinal study of youth in rural Pennsylvania provides a unique opportunity to examine youth views about their communities before and during development of the Marcellus Shale. We use two waves of data from 10 rural school districts to assess differences in youth reports of how much they liked their community pre-Marcellus (2005) and during Marcellus activity (2009), creating a natural experiment. Youth characteristics, aspirations, perceptions of job and educational opportunities, and views about their community are included in multinomial multivariate logistic regression models to predict how much youth like their community. We find no difference in youth liking their community pre-Marcellus, but a larger share of youth in communities experiencing Marcellus activity by 2009 like their community “a lot” than those in areas not affected. The Marcellus effect strengthens when controls for other factors typically associated with extraction activity and views of community are included in the model, suggesting other, unmeasured aspects of Marcellus-related activity influence how much youth like their community.
Offshoring Pollution while Offshoring Production?
Xiaoyang Li & Yue Maggie Zhou
Strategic Management Journal, forthcoming
Abstract:
We examine the role of firm strategy in the global effort to combat pollution. We find that U.S. plants release less toxic emissions when their parent firm imports more from low-wage countries (LWCs). Consistent with the Pollution Haven Hypothesis, goods imported by U.S. firms from LWCs are in more pollution-intensive industries. U.S. plants shift production to less pollution-intensive industries, produce less waste, and spend less on pollution abatement when their parent imports more from LWCs. The negative impact of LWC imports on emissions is stronger for U.S. plants located in counties with greater institutional pressure for environmental performance, but weaker for more-capable U.S. plants and firms. These results highlight the role of local institutions and firm capability in explaining firms’ offshoring and environmental strategy.
“Cleansing the air at the expense of waterways?” Empirical evidence from the toxic releases of coal-fired power plants in the United States
Xiang Bi
Journal of Regulatory Economics, February 2017, Pages 18–40
Abstract:
Environmental policies in the United States have primarily taken the form of media-specific regulations that emphasize end-of-pipe pollution control. This can lead to the shifting of pollution across environmental media, thereby having the potential to solve one environmental problem by creating a new problem. This study uses data from 228 coal-fired power plants that report to the Toxics Release Inventory to conduct an empirical examination of the extent to which media-specific regulation has caused power plants to shift their toxic air releases to waterways, land, or transfers for offsite recycling facilities. Controlling for plant-level fixed effects, scale of production, and environmental inspections and enforcement under air regulation, this study finds that adopting tougher air pollution regulation that designates counties as being in nonattainment status with the National Ambient Air Quality Standards significantly increased toxic releases to waterways and land.
Breaking Bad: Existential Threat Decreases Pro-Environmental Behavior
Benjamin Buttlar, Marc Latz & Eva Walther
Basic and Applied Social Psychology, forthcoming
Abstract:
Why is it that people do not change their behavior in the face of global threats? We hypothesized that when people who have been encouraged to engage in pro-environmental behavior are threatened, they fall back into their (bad) habits instead of exhibiting behavioral change; existential threats may thereby counteract pro-environmental norms. We tested this hypothesis in two field studies in which participants were encouraged to reduce paper use. Although the requests initially resulted in decreased paper use, this pro-environmental behavior ceased when an existential threat was induced. We discuss theoretical and practical implications for social psychology theorizing and behavioral change.
The effectiveness of incomplete and overlapping pollution regulation: Evidence from bans on phosphate in automatic dishwasher detergent
Alex Cohen & David Keiser
Journal of Public Economics, forthcoming
Abstract:
This paper examines the effectiveness of command-and-control policies in the presence of incomplete and overlapping regulations. We study how recent bans on phosphate in household dishwasher detergent affect pollution loads to waterways, costs at wastewater treatment facilities, and consumer behavior. We show that the effectiveness of the bans in reducing effluent depends critically on regulations at receiving treatment facilities. As cost minimizers, facilities with an emissions standard on phosphorus face no incentive to deviate from the standard. We show that bans have weak effects on effluent, especially in the most polluted waterways. We also use an early, isolated ban in Spokane, Washington to study the effect of the bans on consumers. We find that this ban shifted approximately 40% of dishwasher detergent sales from Spokane to bordering counties until a state-wide ban was implemented. Using these estimates, we find that the welfare loss to consumers from recent bans is likely greater than the cost-savings to treatment plants.
Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?
Mark Agerton & Gregory Upton
Rice University Working Paper, March 2017
Abstract:
Over the past five years the U.S. domestic crude benchmark, WTI, diverged considerably from its foreign counterpart, Brent. Some studies pointed to the crude oil export ban as the main culprit for this divergence, but pipeline capacity was also scarce during this time. To understand the drivers of domestic crude oil discounts, we decompose domestic price differentials for multiple crudes into the contributions of shipping and export constraints. We find that scarce pipeline capacity explains the majority of the deviation of mid-continent crude oil prices from their longrun relationship with Brent crude, while refining changes explain very little. This implies that the deleterious effects of the export ban may have been exaggerated.
Human Gains and Losses from Global Warming: Satisfaction with the Climate in the USA, Winter and Summer, North and South
Jonathan Kelley
Social Indicators Research, March 2017, Pages 345–366
Abstract:
The scientific understanding of the causes of global warming is based on a vast body of rigorous, peer-reviewed research, but there is little systematic empirical evidence on consequences for humans. Using direct questions about satisfaction with winter and with summer weather, I show that warming’s effects on subjective well-being can be reliably estimated from cross-sectional survey data across a broad temperature spectrum and, moreover, that these effects are large. Combining a US national survey (N = 2295) and standard National Oceanic and Atmospheric Administration data on actual month-by-month temperatures at each location over many years, shows that changes to be expected from the widely discussed, allegedly “dangerous”, 2 °C of global warming are both familiar and small, equivalent to moving from Wisconsin to Michigan, or Virginia to North Carolina, or more generally 180 miles south. Such warming will greatly increase Americans’ satisfaction with winter weather, especially in the north, but somewhat decrease satisfaction with summer weather in both north and south. On balance, the nation benefits slightly. Regional differences are large, with northerners’ gains roughly equivalent to a 1–2 % increase in their GDP, while southerners losses are about the same size. These changes are important, about as large as the combined financial implications of all other aspects of global warming. They have important policy implications, suggesting that prompt action to reduce carbon emissions may not be optimal because that would restrict warming both in the summer and in the south (gains) but also in the winter and in the north (losses).
Communicating the deadly consequences of global warming for human heat stress
Tom Matthews, Robert Wilby & Conor Murphy
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
In December of 2015, the international community pledged to limit global warming to below 2 °C above preindustrial (PI) to prevent dangerous climate change. However, to what extent, and for whom, is danger avoided if this ambitious target is realized? We address these questions by scrutinizing heat stress, because the frequency of extremely hot weather is expected to continue to rise in the approach to the 2 °C limit. We use analogs and the extreme South Asian heat of 2015 as a focusing event to help interpret the increasing frequency of deadly heat under specified amounts of global warming. Using a large ensemble of climate models, our results confirm that global mean air temperature is nonlinearly related to heat stress, meaning that the same future warming as realized to date could trigger larger increases in societal impacts than historically experienced. This nonlinearity is higher for heat stress metrics that integrate the effect of rising humidity. We show that, even in a climate held to 2 °C above PI, Karachi (Pakistan) and Kolkata (India) could expect conditions equivalent to their deadly 2015 heatwaves every year. With only 1.5 °C of global warming, twice as many megacities (such as Lagos, Nigeria, and Shanghai, China) could become heat stressed, exposing more than 350 million more people to deadly heat by 2050 under a midrange population growth scenario. The results underscore that, even if the Paris targets are realized, there could still be a significant adaptation imperative for vulnerable urban populations.
Early benefits of mitigation in risk of regional climate extremes
Andrew Ciavarella, Peter Stott & Jason Lowe
Nature Climate Change, forthcoming
Abstract:
Large differences in climate outcomes are projected by the end of this century depending on whether greenhouse gas emissions continue to increase or are reduced sufficiently to limit total warming to below 2 °C. However, it is generally thought that benefits of mitigation are hidden by internal climate variability until later in the century. Here we show that if the likelihood of extremely hot seasons is considered, the benefits of mitigation emerge more quickly than previously thought. It takes less than 20 years of emissions reductions in many regions for the likelihood of extreme seasonal warmth to reduce by more than half following initiation of mitigation. Additionally we show that the latest possible date at which the probability of extreme seasonal temperatures will be halved through emissions reductions consistent with the 2 °C target is in the 2040s. Exposure to climate risk is therefore reduced markedly and rapidly with substantial reductions of greenhouse gas emissions, demonstrating that the early mitigation needed to limit eventual warming below potentially dangerous levels benefits societies in the nearer term not just in the longer-term future.
Do Plants Decrease Pollution Reduction Efforts During a Recession? Evidence from Upstate New York Chemical Plants During the US Great Recession
Hyunhoe Bae
Environmental and Resource Economics, April 2017, Pages 671–687
Abstract:
US communities often experience economic hardship with plant or business closings contributing to high unemployment rates. In this circumstance, communities and local governments may prioritize economic recovery over environmental improvement, thereby weakening community and government pressure against polluting plants. In an attempt to explore the concern, this study examines the impact of local economic downturn on nearby chemical plants’ toxic release reduction behavior. A total of 351 plants in Upstate New York and their toxic release inventory data were analyzed for 5 years (2006–2010). The results show plants’ toxic release reduction efforts were reduced when unemployment and plant closing rates were high. Therefore, the findings highlight a possible limitation to regulatory approaches that rely on public pressure to motivate better environmental performance.
Understanding the Amenity Impacts of Wind Development on an International Border
Martin Heintzelman, Richard Vyn & Sarah Guth
Ecological Economics, July 2017, Pages 195–206
Abstract:
Wind energy developments are often controversial. Concerns are often raised about negative impacts on local communities, including impacts on property values. Some of these negative impacts may be offset by compensatory payments made by wind developers. Community involvement in the planning and development process may also reduce negative perceptions associated with wind facilities. However, if the development is near a border between municipalities, states, or even countries, it is often the case that one or more jurisdictions will not be involved in the process or receive compensation, but will, nonetheless, face some costs or impacts from the development. We explore exactly this situation at the border between Canada and the United States in the Thousand Islands region where a wind farm is currently operating on the Canadian border island of Wolfe Island. Using a parcel-level hedonic analysis of property sales transactions, we find that properties in New York with a view of and/or in close proximity to the turbines significantly depreciated in value after construction of the turbines while no negative impacts were observed on properties in Ontario. We highlight a number of factors that could contribute to these differences in impacts on property values, which may also explain the variation in results that currently exists in the literature.