Jacob Moscona (03/01/2022)

Harvard University

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“Does Directed Innovation Mitigate Climate Damage? Evidence from US Agriculture”

[joint with Trade/ARE/EI]

Abstract:

This paper studies how innovation reacts to climate change and shapes its economic impacts, focusing on US agriculture. We show in a model that directed innovation can either mitigate or exacerbate climate change’s economic damage depending on whether new technology is on average a substitute for or complement to favorable climatic conditions. To study the technological response to climate change empirically, we combine data on the geography of agricultural production, shifting temperature distributions, and crop-specific temperature tolerance to estimate crop-specific exposure to damaging extreme temperatures; we then use a database of crop-specific biotechnology releases and patent grants to measure technology development. We first find that innovation has re-directed toward crops with increasing extreme temperature exposure and show that this effect is driven by types of agricultural technology most related to environmental adaptation. We next find that US counties’ exposure to innovation significantly dampens the local economic damage from extreme temperatures, and estimate that directed innovation has offset 20% of the agricultural sector’s climate damage since 1960 and could offset 15% of projected damage by 2100.

Time: 2:10-3:30pm Pacific

Location: 597 Evans

Richard Sweeney (10/06/21)

Boston College

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“Winds of Change: Technical Progress and Learning in Wind Power” (with Thom Covert)

Abstract: We study the impact of learning-by-doing and product innovation on the path of technical progress in wind turbine manufacturing. To measure changes in wind turbine cost over time, we leverage a simple but physically realistic model of how observable wind turbine characteristics, like rotor size, relate to power production and manufacturing material needs.  We embed this into a model of wind turbine demand, and estimate it using 20 years of global data on wind farm characteristics, including wind speeds, power prices, and the turbines they installed.  Our cost estimates negatively correlate both with manufacturer experience, and with measures of manufacturing innovation, like the delivery of newer and larger turbines.  These results are consistent with a theory that LBD and innovation explain much of the observed decline in wind turbine prices over the last 20 years.

Time: 12-1:30pm Pacific

Location: Zoom

David Lobell (04/22/20)

David Lobell

Stanford University

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“Are satellite data ready for agricultural economists? ”

Abstract: Satellites have been observing the Earth for many decades, with monitoring of agriculture a key application since the beginning. Yet the generation of quantitative datasets has been lacking, hampering the ability of econometricians to achieve their divine purpose of causal inference, especially in developing countries where existing agricultural datasets are limited. Recent advances both in sensors and algorithms have been improving the scope for tracking key agricultural outcomes. This talk will review these advances, with particular emphasis on (i) how yield estimates from satellite compare to traditional ground measures, and (ii) examples of how these estimates can be applied to quantify associations and assess causality in both developed and developing country settings. It will also review remaining obstacles to make satellite-based datsasets truly mainstream for use by econometricians.

Sam Kortum (04/24/20)

Sam Kortum

Yale University
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“Optimal Unilateral Carbon Policy”

Abstract: We consider climate policy by one country in a world with international trade in energy and in manufactured goods produced with energy and labor. Assuming that the country’s trading partner is passive, we derive an optimal unilateral policy to confront the global externality from manufacturing’s combustion of carbon-based energy. Our solution strategy combines techniques from Markusen (1975) and from Costinot, Donaldson, Vogel, and Werning (2015). We interpret the optimal policy as a particular set of taxes and subsidies. The key features are: (i) the country institutes a carbon tax equal to its damages from emissions, raising the cost of energy for its manufacturers relative to the price received by its energy extractors; (ii) this Pigouvian tax is the sum of an extraction tax and a production tax on the use of energy, with a border adjustment on imports equal to the production tax; (iii) the mix between the extraction and production tax is optimized to reduce carbon leakage and to improve the country’s terms of trade; (iv) the border adjustment on the energy content of imported manufactured goods leaves the country’s consumption decisions undistorted; (v) energy taxes are not removed at the border for exports, but instead the country subsidizes exports of goods in which its comparative advantage is weak while taxing those where its comparative advantage is strong; (vi) the country expands exports of manufactures on the extensive margin, potentially even exporting goods that it also imports. Features (i)-(iii) of this optimal policy are reminiscent of Markusen, in a model with trade only in energy. Features (iv)-(v) are reminiscent of Costinot et al., in a model with no externalities. A novel property, captured in (vi), is how the country can exploit international trade in manufactured goods to expand the reach of its climate policy. Through its tax policy the country indirectly controls how energy is used in producing both its imports and its exports.

This seminar will be online. Zoom details will be provided a couple of days prior.

Clare Balboni (03/11/20)

Clare Balboni

Massachusetts Institute of Technology
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“In Harm’s Way? Infrastructure Investments and the Persistence of Coastal Cities”

Abstract: Coasts contain a disproportionate share of the world’s population, reflecting historical advantages, but environmental change threatens a reversal of coastal fortune in the coming decades as natural disasters intensify and sea levels rise. This paper considers whether large infrastructure investments should continue to favour coastal areas. I use a dynamic spatial equilibrium framework and detailed georeferenced data from Vietnam to examine this issue and find evidence that coastal favouritism has significant costs. Road investments concentrated in coastal regions between 2000 and 2010 had positive returns but would have been outperformed by al-locations concentrated further inland even in the absence of sea level rise. Future inundation renders the status quo significantly less efficient. Under a central sea level rise scenario, welfare gains 72% higher could have been achieved by a foresighted allocation avoiding the most vulnerable regions. The results highlight the importance of accounting for the dynamic effects of environmental change in deciding where to allocate infrastructure today. Full Paper

Lint Barrage (12/04/19)

Lint Barrage

UC Santa Barbara
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“Climate Change, Directed Innovation, and Energy Transition: The Long-run Consequences of the Shale Gas Revolution”

Abstract: We investigate the short- and long-term effects of a shale gas boom in an economy where energy can be produced with coal, natural gas, or clean energy sources. In the short run, cheaper natural gas has counteracting effects on CO2 emissions: on the one hand it allows substitution away from coal which reduces CO2 emissions, ceteris paribus; on the other hand the shale gas boom may increase pollution as it increases the scale of aggregate production. We then empirically document another potentially important effect, namely that the shale boom was associated with a decline in innovation in green relative to fossil fuels-based electricity generation technologies. Introducing directed technical change dynamics in our model, we derive conditions under which a shale gas boom reduces emissions in the short-run but increases emissions in the long-run by inducing firms to direct innovation away from clean towards fossil fuels innovation. We further show the possibility of an infinitely delayed switch from fossil fuels to clean energy as a result of the boom. Finally, we present a quantitative version of the model calibrated to the U.S. economy, and analyze the implications of the shale boom for optimal climate policy.

Steve Cicala (11/06/19)

Steve Cicala

University of Chicago
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“Advantageous Selection as a Policy Instrument: Unraveling Climate Change”

Abstract: This paper applies principles of advantageous selection to overcome obstacles that prevent the implementation of Pigouvian policies to internalize externalities. Focusing on negative externalities from production (such as pollution), we evaluate settings in which aggregate emissions are known, but individual contributions are unobserved by the government. The government provides firms with the option to pay a tax on their voluntarily and verifiably disclosed emissions, or an output tax based on the average of rate of emissions among the undisclosed firms. The certification of relatively clean firms raises the output-based tax, setting off a process of unraveling in favor of disclosure. We derive the conditions under which unraveling will yield an outcome close to the first best. We then implement our mechanism in an international setting with unilateral climate change policy as the motivation. We show how such a mechanism extends the reach of a carbon tax, and that the gains over a system of carbon tariffs depend on a small number of estimable parameters. Full Paper