NBER’s Environment and Energy Economics Program: Exploring the Intersections of Earth, Wind, and Fire

NBER's Environment and Energy Economics Program: Exploring the Intersections of Earth, Wind, and Fire

A comprehensive overview of the NBER’s Environment and Energy Economics (EEE) Program and its diverse research areas

The NBER’s Environment and Energy Economics (EEE) Program, established in 2007, has become a hub for scholars specializing in environmental, energy, and natural resource economics. With a growing number of affiliated researchers, the program has produced an impressive number of working papers, offering valuable insights into pressing issues related to climate change, energy markets, and conservation efforts. Through regular meetings and specialized workshops, the EEE Program fosters collaboration and knowledge exchange among experts from various fields. In this report, we delve into the program’s diverse research areas, highlighting key studies and their implications.

Earth:

The EEE Program explores the economic costs and benefits of activities that impact the earth. One area of focus is environmental offsets, which play a crucial role in achieving conservation objectives more cost-effectively. Researchers Daniel Aronoff and Will Rafey examine the market for wetlands offsets in Florida, studying the private gains from trade and the predicted environmental outcomes. Their findings demonstrate that while trade increases private welfare, it also leads to increased flood damages. However, by combining the offset market with a Pigouvian tax proportional to local flood risk, significant reductions in flood damages can be achieved while preserving private benefits.

Another study by Alecia Cassidy, Elaine Hill, and Lala Ma investigates the beneficiaries of hazardous waste cleanup under the Resource Conservation and Recovery Act (RCRA) Corrective Action Program. Their research reveals that the housing price benefits of cleanups are highly localized and do not show significant heterogeneity across sociodemographic variables. This suggests that the benefits of hazardous waste cleanup primarily accrue to those living closest to the facilities, often from relatively disadvantaged groups.

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Forests are essential for biodiversity, carbon sequestration, and water cycle maintenance. Rafael Araujo, Juliano Assunção, Marina Hirota, and José Scheinkman examine the likelihood of local disturbances in the Amazon cascading to downwind locations due to atmospheric flow. Their research demonstrates that wind-mediated cascading effects double the impact of initial forest disturbances, providing valuable insights for conservation efforts in the Amazon basin.

Wind:

As electricity markets worldwide transition towards decarbonization, the EEE Program explores the economics of clean energy technologies, with a particular focus on wind and solar power. Olivier Deschenes, Christopher Malloy, and Gavin McDonald analyze the impact of renewable portfolio standards (RPS) on wind and solar investments. Their findings show that RPS increases wind capacity and generation, while the impact on solar capacity and generation is less statistically significant. Stephen Holland, Erin Mansur, and Andrew Yates develop a long-run model to analyze investment in wind, solar, and other carbon-free resources under different policy scenarios. Their research highlights the effectiveness of a carbon tax in eliminating carbon emissions and the varying attractiveness of renewable subsidies compared to nuclear subsidies.

The distributional consequences of the energy transition are also a focus of EEE research. E. Mark Curtis and Ioana Marinescu examine the growth of wind and solar jobs and their wages, finding that these jobs tend to be located in regions with a high share of fossil fuel employment and offer a wage premium. Ben Gilbert, Hannah Gagarin, and Ben Hoen explore the employment and wage impacts of wind energy development, revealing significant effects for marginalized groups.

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Fire:

With the increasing frequency and intensity of wildfires, the EEE Program investigates the implications of these events on air pollution, health, and property damages. Marshall Burke and coauthors demonstrate that wildfire activity has reversed previous air quality improvements across the United States, contributing to increased pollution concentrations. Mark Borgschulte, David Molitor, and Eric Zou estimate the economic impact of wildfire smoke exposure, highlighting the significant reduction in quarterly earnings and overall welfare costs.

Investment in wildfire risk mitigation and adaptation is crucial, and the EEE Program examines effective strategies. Patrick Baylis and Judson Boomhower analyze the effects of wildfire building codes in California, showing that these codes significantly reduce the likelihood of home destruction during wildfires. Their research emphasizes the positive benefits of such codes, particularly in fire-prone areas with closely clustered homes.

Conclusion:

The NBER’s Environment and Energy Economics Program plays a vital role in advancing our understanding of the complex challenges posed by climate change, energy markets, and conservation efforts. Through diverse research areas, the program’s affiliated researchers shed light on the economic implications of activities affecting the earth, the transition to clean energy sources, and the impacts of wildfires. Their findings provide valuable insights for policymakers and stakeholders as they navigate the path towards a sustainable future.