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We investigate how management quality moderates the impact of carbon pricing on Chinese firms. Based on interviews with managers and lead engineers at manufacturing firms in Hubei and Beijing, we construct a novel index of climate-change-related management practices and link it to firm data from various sources. We document higher average productivity and more green innovation among firms that are well managed according to the index. In an event study of the introduction of regional cap-and-trade schemes for CO2, we analyze how management quality interacts with treatment. While treated firms reduced coal consumption more than control firms, this effect is statistically significant only for well-managed firms. The reduction could have been 25% greater if badly managed firms had been well managed. Our study highlights that good management practices, in particular energy monitoring, enhance the effectiveness of market-based climate policies by enabling firms to rationally comply with those policies. [ABSTRACT FROM AUTHOR]

We develop a computable general equilibrium model of the US economy to study the unemployment effects of climate policy and the importance of cross-industry labor mobility. We consider two specifications of mobility costs: either perfect mobility with no moving costs, as is assumed in much previous work, or a model where workers face moving costs. The effect of a $45 per ton carbon tax on aggregate unemployment is small and similar across the two labor mobility assumptions (0.2 percentage points). The effect on unemployment in fossil fuel sectors is much larger under the immobility assumption—for example, a 13-percentage-point increase in the coal sector unemployment rate—suggesting that models omitting labor mobility frictions may greatly underpredict sectoral unemployment effects. Returning carbon tax revenue through labor tax cuts can dampen or even reverse negative impacts on unemployment, while command-and-control policies yield less efficient outcomes. [ABSTRACT FROM AUTHOR]

A sizable body of literature on climate economics uses the notion of inequality aversion. This is the idea that a society will give up some personal benefits or economic efficiency to achieve greater equality. We review and synthesize published estimates of inequality aversion to guide this literature. We review both normative studies (which treat ethical values as axioms from which good behavior is deduced) and empirical studies (which try to infer a society's beliefs about inequality from its public policy decisions). In the normative case, a variety of ethical principles underlie the recommendations for inequality aversion. The empirical studies use various methods to present estimates based on some form of "revealed ethics," in which a society's actions or individuals' responses unveil preferences to reduce inequality. Examples include progressive income tax schedules or the level of foreign aid. In these empirical studies, we find strong support for the view that people are averse to inequality, but only to a limited degree. Studies that look at domestic policies support values between one and four (where zero indicates no aversion toward inequality). By contrast, studies that look at foreign aid find lower values, ranging from above zero to one. [ABSTRACT FROM AUTHOR]

The carbon neutrality goal has emerged as the most popular way for institutions to frame policy responses to climate change, largely because of its flexibility as a net-zero emissions target. We highlight two desirable features arising from this flexibility: the potential for reducing emissions at a lower cost and the potential for promoting distributive justice. To demonstrate the role of cost-effectiveness, we report estimates of average emissions abatement cost of solar electricity plants located (hypothetically) in each of the 48 states of the conterminous United States. We then explain how institutions may pursue distributive justice by targeting cobenefits of emissions-reducing projects to specific areas or groups. We also describe the two primary concerns with carbon neutrality goals: additionality and ethics. To allay these concerns, we suggest improvements to the basic integrity of carbon markets and ways in which institutions can commit to local decarbonization in tandem with carbon neutrality. [ABSTRACT FROM AUTHOR]

"The Carbon Calculation: Global Climate Policy, Forests, and Transnational Governance in Brazil and Mozambique" by Raquel Rodrigues Machaqueiro is a book review that examines the contradictions in carbon compensation policy, specifically focusing on REDD (Reduced Emissions from Deforestation and Forest Degradation). The author critiques the practice of placing the responsibility for carbon compensation on rural communities in less-developed countries, while the main sources of emissions in the Global North are not adequately addressed. The book utilizes a political ecology perspective and explores the social implications of REDD policy implementation in Brazil and Mozambique. Despite some limitations, the book provides valuable insights into how powerful nations deflect blame onto marginalized communities for global emissions. [Extracted from the article]

We develop a novel analysis of climate change and policy regarding climate damages to growth under regional cooperation or noncooperation. We introduce a new stylized climate module and compute the regional social cost of carbon (SCC) when climate change impacts the growth rate of regional GDP under cooperation and noncooperation between regions. We find that in the presence of climate damage to economic growth, the regional SCC is high in either a cooperative or a noncooperative world, implying that it is optimal for each region to choose stringent climate policies. Moreover, relative to cooperation, noncooperation reduces the GDP of countries in both high northern latitudes and the tropics, while the loss for developing countries in the tropics is especially significant. The welfare losses to the tropics are larger still in the absence of compensatory transfers from wealthier regions most responsible for climate change. [ABSTRACT FROM AUTHOR]

Abstract Many types of capital stocks—natural, physical, and human—stand to lose value because of climate policy and to become "stranded." The owners of such assets will resist climate policies. We survey the recent climate economics literature and highlight research gaps related to stranded assets. In line with recent literature in political science, we argue that economists can provide more effective policy recommendations by putting greater emphasis on the distributional consequences of asset stranding. Our recommended policies focus on targeting new capital stocks related to energy production and consumption: banning fossil-intensive investment and encouraging investment into renewable and energy-efficient capital. These policies may face less resistance than price-based mechanisms and could improve the credibility of future carbon pricing. [ABSTRACT FROM AUTHOR]

Environmental policy with uncertainty is often posed as a choice between price and quantity instruments. Adding flexibility to fixed policy instruments can improve outcomes. Roberts and Spence noted the efficiency advantages of matching emissions allowances supply to the marginal damage schedule. We propose an implementable approach to making that match, an approach we call "price-responsive supply," which treats prices and quantities as simultaneously determined in the allowance auction. For competitive environments, price-responsive supply outperforms fixed-price and fixed-quantity instruments. Price-responsive supply can enhance the performance of real-world regulatory environments through an automatic adjustment mechanism that responds instantaneously to new information about abatement costs. We demonstrate the improved performance of price-responsive supply in experiments and simulations. A price-responsive supply schedule, while offering efficiency advantages, also translates the cost-lowering effects of other, coincident policies into accelerated reductions under an emissions cap, thereby helping to resolve the waterbed effect. [ABSTRACT FROM AUTHOR]