Ivan Rudik

Opportunities for advances in climate change economics

Target carbons costs, policy designs, and developing countries There have been dramatic advances in understanding the physical science of climate change, facilitated by substantial and reliable research support. The social value of these advances depends on understanding their implications for society, an arena where research support has been more modest and research progress slower. Some advances have been made in understanding and formalizing climate-economy linkages, but knowledge gaps remain [e.g., as discussed in (1, 2)]. We outline three areas where we believe research progress on climate economics is both sorely needed, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon (SCC), (ii) improving understanding of the consequences of particular policies, and (iii) better understanding of the economic impacts and policy choices in developing economies.

External Impacts of Local Energy Policy: The Case of Renewable Portfolio Standards

Renewable portfolio standards (RPSs) are state-level policies that require in-state electricity providers to procure a minimum percentage of electricity sales from renewable sources. Using theoretical and empirical models, we show how RPSs induce out-of-state emissions reductions through interstate trade of credits used for RPS compliance. When one state passes an RPS, it increases demand for credits sold by firms in other (potentially non-RPS) states. We find that increasing a state’s RPS decreases coal generation and increases wind generation in outside states through this tradable credit channel. We perform a welfare simulation to evaluate the aggregate avoided damage from RPS-induced reductions in local coal-fired pollutants. Our estimates suggest that a 1 percentage point increase in a state’s RPS results in up to

Costs of Inefficient Regulation: Evidence from the Bakken

100 million in avoided damages over the United States from reduced pollution. We also find substantial heterogeneity in aggregate avoided damages caused by increases in different states’ RPSs.

Air pollution and visitation at U.S. national parks

Efficient pollution regulation equalizes marginal abatement costs across sources. Here we study a new flaring regulation in North Dakotas oil and gas industry and document its efficiency. Exploiting detailed well-level data, we find that the regulation reduced flaring 4 to 7 percentage points and accounts for up to half of the observed flaring reductions since 2015. We construct firm-level marginal flaring abatement cost curves and find that the observed flaring reductions could have been achieved at 20% lower cost by imposing a tax on flared gas equal to current public lands royalty rates instead of using firm-specific flaring requirements.

CLIMATE ECONOMICS. Opportunities for advances in climate change economics.

Ozone levels in U.S. national parks are similar to those of U.S. cities, and are negatively associated with visitation. Hundreds of millions of visitors travel to U.S. national parks every year to visit America’s iconic landscapes. Concerns about air quality in these areas have led to strict, yet controversial pollution control policies. We document pollution trends in U.S. national parks and estimate the relationship between pollution and park visitation. From 1990 to 2014, average ozone concentrations in national parks were statistically indistinguishable from the 20 largest U.S. metropolitan areas. Further, relative to U.S. cities, national parks have seen only modest reductions in days with ozone concentrations exceeding levels deemed unhealthy by the U.S. Environmental Protection Agency. We find a robust, negative relationship between in-park ozone concentrations and park visitation. Still, 35% of all national park visits occur when ozone levels are elevated.

Steering the Climate System: Using Inertia to Lower the Cost of Policy

Target carbons costs, policy designs, and developing countries There have been dramatic advances in understanding the physical science of climate change, facilitated by substantial and reliable research support. The social value of these advances depends on understanding their implications for society, an arena where research support has been more modest and research progress slower. Some advances have been made in understanding and formalizing climate-economy linkages, but knowledge gaps remain [e.g., as discussed in (1, 2)]. We outline three areas where we believe research progress on climate economics is both sorely needed, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon (SCC), (ii) improving understanding of the consequences of particular policies, and (iii) better understanding of the economic impacts and policy choices in developing economies.