Thomas Stoerk

Does unilateral climate change policy cause companies to shift the location of production, thereby creating carbon leakage? In this paper, we analyse the effect of the European Union Emissions Trading System (EU ETS) on the geographical distribution of carbon emissions by multinational companies. The empirical evidence is based on unique data for the period 2007-2014 from the Carbon Disclosure Project, which tracks emissions of multinational businesses by geographical region within each company. Because they already operate from multiple locations, multinational firms should be the most prone to carbon leakage. Our data includes regional emissions of 1,122 companies, of which 261 are subject to EU ETS regulation. We find no evidence that the EU ETS has led to a displacement of carbon emissions from Europe towards the rest of the world, including to countries with lax climate policy and within energy-intensive companies. A large number of robustness checks confirm this finding. Overall, the paper suggests that modest differences in carbon prices between countries do not induce carbon leakage.

Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them, or represented them in highly stylised ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far, using a meta-analytic integrated assessment model (IAM) with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation modelling. Collectively, climate tipping points increase the social cost of carbon (SCC) by ~25% in our main specification. The distribution is positively skewed, however. We estimate a ~10% chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given some tipping points, tipping point interactions and impact channels have not been covered in the literature so far, but our method of structural meta-analysis means that future modelling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs.

• Cited in the IPCC's 6th Assessment Report.

• Watch a recording of me presenting this work at the Virtual Seminar on Climate Economics, organized by the San Francisco Fed.

• The IAM we built for this project (META - Model for Economic Tipping point Analysis) is available on Github.

Total CO2 emissions from the United States power sector increased over the period 1990-2005, but peaked soon after, and by 2015 they had declined by 20% compared to 2005. This study analyzes the supply-side drivers of the increasing trend up until 2005 as well as the factors across US states that enabled significant reductions in the following decade. Using index decomposition analysis, we show that the two main factors driving the CO2 decrease were natural gas substituting for coal and petroleum, and large increases in renewable energy generation (primarily wind) – which were responsible for 60% and 30% of the decline respectively since 2005. Both effects were concentrated in states where low natural gas prices or a combination of federal tax credits, state energy policies, decreasing costs of renewables, and advantageous wind conditions drove significant reductions of CO2 emissions – resulting in the overall national emissions decline.

In energy consumption, individuals feature a gap between intention and action. Survey data from the US, the UK, and other European countries show that 50–90% of respondents favour energy from renewable sources, even at a small premium. Yet less than 3% actually buy renewable energy. We investigate how nudges – a slight change in the information set that an individual faces when taking a decision – can help individuals align behaviour with intention. We present evidence from an original survey experiment on which nudges affect the choice whether to contract renewable energy or conventional energy. We find that only a default nudge has a significant effect, while all other nudges prove ineffective. In our setting, a default nudge increases the share of individuals who choose renewable energy by 44.6%

I evaluate the effectiveness and cost of China’s first serious air pollution control policy. Using both official, misreporting-prone data as well as NASA satellite data in a differences-indifferences strategy that exploits variation in reduction targets, I find that the policy reduced air pollution by 11% as intended. Compliance was initially rhetorical but later real, and did not differ by intensity of enforcement. I construct marginal abatement cost curves for SO2 for each province in China to calculate the cost of a counterfactual market-based policy instrument compared to the command-and-control policy that China used. I find that the market-based policy instrument would increase average (marginal) efficiency by 25% (49%). I further provide cost estimates for the total cost of a one unit decrease in PM2.5 concentrations in China to complement recent WTP estimates.

• Previously circulated as Compliance, Efficiency, and Instrument Choice: Evidence from Air Pollution Control in China.

Can economic activity grow without increasing carbon emissions? A dominant narrative suggests that the answer is no. However, climate policy has been influential for years. This research explores the question of whether low-carbon transitions may have started at the local level in the US. We merge newly available local CO2 emissions data at the US county level with local economic activity and employment for 1997-2010. Using statistical testing, we find the correlation in the growth rates of CO2 emissions and economic activity to be close to zero (90% confidence intervals: employment [0.07,0.09] and GRP [0.06,0.08]). Our results depart from the narrative that emissions and economic growth generally lead to strong positive correlations: out of all US counties, 28% grew in economic terms while their CO2 emissions declined, thus illustrating a negative correlation between growth in economic indicators and growth in CO2 emissions. These low-carbon transitions are unrelated to sectoral reallocation, and are spatially located around the whole US.

Slides for a 45'-60' lecture on the uses and misuses of climate economics geared towards a policy audience. Link to slide set. Please drop me an email if you'd like to use this material for your teaching.

Link to 2020 teaching evaluation (students rated my teaching a 4.81/5). Please contact me if you are interested these in these lectures or for a copy of the slides.

A non-technical introduction to the tools of applied microeconometrics. Aimed at policy-makers who would like to understand the effect of past policies.

What tools can we use to identify climate policy for Europe in line with 1.5°C? What would such policy look like?

These slides graph the price of traded carbon in all active carbon emissions trading systems around the world since 2015. All prices are in USD/tCO2 based on contemporaneous exchange rates.

I made 4 different versions (i) a line plot of allowance prices over time, (ii) a bar chart of allowance prices over time, (iii) a line plot of allowance prices over time with a line for the social cost of carbon (SCC), and (iv) a logarithmic line plot of allowance prices over time with a line for the SCC.

All slides are freely available, though I'd appreciate an email to let me know you are using them.

Widespread air pollution has accompanied humanity since the industrial use of fossil fuels. In this blog, I use historical data to compare China's air pollution over time to how London fared after the Industrial Revolution. I show that air pollution levels in both places were remarkably similar, and that China has been decreasing its air pollution levels more than twice as fast as London did in the past.

Economists agree that the ideal policy to address climate change is a global carbon price. Unfortunately, such a carbon price does not currently exist. The blog discusses how to identify cost-effective climate policies in the absence of a carbon price, and why climate policies typically show large economic gains, as the benefits of avoiding climate change far outweigh the costs.