Essays in Environmental Economics

Author:

Polborn, Sarah Elisabeth

Graduate Program:

Economics

Degree:

Doctor of Philosophy

Document Type:

Dissertation

Date of Defense:

June 08, 2010

Committee Members:

Barry William Ickes, Dissertation Advisor/Co-Advisor
Barry William Ickes, Committee Chair/Co-Chair
Mark John Roberts, Committee Member
Vijay Krishna, Committee Member
Michael Barth Berkman, Committee Member

Keywords:

environmental economics
global warming
lobbying
environmental policy
climate change

Abstract:

The central topic of this dissertation is environmental policy. Using a supply side approach to the problem of anthropogenic emissions of carbon dioxide the first essay studies the effect of backstop technology research on the speed at which fossil fuels are depleted. The key insight is that backstop technology research encourages fossil fuel owners to supply more of their resource in the near future because they anticipate that their resource will become obsolete before it is depleted. Thus, while backstop technology research offers the promise of an eventual decrease in carbon dioxide emissions, it creates a higher near future cost of climate change due to the increase in near future carbon dioxide emissions. The paper shows that even if backstop technology research was costless, for a large enough discount rate on the cost of global warming no backstop technology research can be optimal. The following chapters study carbon abatement policy instruments from a political economy perspective. They illustrate some problems with both traditional cap and trade systems and carbon taxation and then proceed to propose an alternative policy instrument with significant advantages over these systems. The key feature of the proposed carbon securities is that they entitle their owners to a fixed proportion of ex ante unknown total emissions. The total level of carbon emissions is set by the political process after the carbon securities have been sold. In contrast to a traditional permit system, in which a government's choice of emissions quota is influenced by one lobby which represents industries that consume significant amounts of carbon-based energy, a system based on carbon securities creates an additional group of stakeholders with a strong incentive to get organized and influence the government's choice of an emission level. The advantages over existing systems include stronger commitment to abatement policy, an equilibrium carbon price closer to the social optimum, a more predictable environmental policy in the presence of either climate or political uncertainty, and higher investment in abatement technology.