Date of Award
Spring 2024
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Economics
First Advisor
Zilibotti, Fabrizio
Abstract
Climate change is one of the main global challenges we face today. It is significant not only because of the size of the impact that a changing climate can potentially have on our lives, but also because of how challenging it is to solve. Economists are often concerned with externalities: when an individual's or group's actions have a positive or negative effect on others, but there is no incentive for the acting group to take the damage or benefit into account. Climate change, unfortunately, has a host of externalities tied to it: At the individual level, I have an incentive to disregard the environment when I can gain from it. For example, I may be willing to chop a tree down to sell some wood, or drive a car when I could easily walk, even if that hurts my neighbors (local or global) more than it helps me. But even with the help of a government to create rules and incentive, the externality problem persists. For example, even if the US government was able to determine exactly how harmful carbon emission or other environmental damages were to its citizens, and design policies to perfectly balance the costs and benefits of environmentalism, the government would still have no direct incentive to account for the damages that the US is causing to all the other countries of the world by not pushing environmental policies further. So there are externalities between countries as well as within countries. Finally, even if the perfect international coalition was formed, we'd have one more externality: the intergenerational one. Namely, even under the truest of democracies, how can we expect that future generations (which may not be born yet, let alone of voting age) will have their voices heard to the extent necessary to construct an environmental policy that guards everyone's welfare? True, there may be some altruism towards future generations, but it doesn't seem to be enough. In the first chapter of this dissertation, I try to tackle this last externality. Namely, I consider the role that government debt can play towards increasing environmental policies supported by current generations. I do this in a politico-economic model, where current voters weigh the pros and cons of different spending and debt policies, but are potentially subject to some restrictions on what kind of debt policies are allowed. I show that whether debt is useful for improving the welfare of future generations depends critically on rules governing how debt revenues are spent. In my second chapter, I move to an analysis of an optimal tax and subsidy policy motivated by environmentally friendly, or green, goods, relating back to the first kind of externality (between individuals). Here I consider a setting where there are three kinds of goods: private goods, which only benefit the consumer who obtains them; public goods, which benefit everyone once it is produced; and green goods, which jointly provide both private and public benefits. I show that we can bring the concept of cost sharing to such a market by establishing a set of taxes and subsidies to make sure that everyone optimally takes into account the extent to which their actions benefit or harm others. My final chapter goes into more detail with the concept of cost sharing in general, and shows that cost sharing can take several forms, from a decentralized tax and subsidy system to a matching scheme where everyone has to contribute a certain share of the public good.
Recommended Citation
Dinelli, Mirco, "Essays on Positive and Normative Aspects of Environmental Policy" (2024). Yale Graduate School of Arts and Sciences Dissertations. 1381.
https://elischolar.library.yale.edu/gsas_dissertations/1381
