Climate & Environment Research
Solomon Hsiang, Associate Professor of Public Policy; Associate Director, Center for Environmental Public Policy.
Reed Walker, Assistant Professor of Business and Public Policy and Economics.
Michael Anderson, Associate Professor of Agricultural and Resource Economics
Meredith Fowlie, Associate Professor of Agricultural and Resource Economics; Class of 1935 Endowed Chair in Energy.
Edward Miguel, Oxfam Professor of Environmental and Resource Economics; Faculty Director, Center for Effective Global Action.
Climate & Environment Initiative:
Research increasingly demonstrates that environmental factors are key economic assets that deliver value to all members of society. For example, global climate change is possibly the most pressing economic challenge of our generation and air pollution is one of the leading causes of mortality in the developed and developing world. The Opportunity Lab’s Climate and Environment Initiative supports research to better understand the social value of environmental conditions and externalities while also trying to better understand the economic consequences of existing or proposed policies. Led by Professors Solomon Hsiang and Reed Walker, the initiative uses data-driven approaches to better understand the social costs of greenhouse gas emissions and energy use, the cost-effectiveness and distributional consequences of resource management strategies and environmental policies, and inequalities in exposure to environmental harm.
- Hsiang, Solomon, Paulina Oliva, and Reed Walker. "The Distribution of Environmental Damages." Working paper, 2017.
Most regulations designed to reduce environmental externalities impose costs on individuals and firms. An active body of research has explored how these costs are disproportionately born by different sectors of the economy and/or across different groups of individuals. However, much less is known about the distributional characteristics of the environmental benefits created by these policies, or conversely, the differences in environmental damages associated with existing environmental externalities. We review this burgeoning literature and develop a simple and general framework for focusing future empirical investigations. We apply our framework to findings related to the economic impact of air pollution, deforestation, and climate, highlighting important areas for future research. A recurring challenge to understanding distributional effects of environmental damages is distinguishing between cases where (i) populations are exposed to different levels or changes in an environmental good, and (ii) where an incremental change in the environment may have very different implications for some populations. In the latter case, it is often difficult to empirically identify the underlying sources of heterogeneity in marginal damages, as damages may stem from either non-linear and/or heterogeneous damage functions. Nonetheless, understanding the determinants of heterogeneity in environmental benefits and damages is crucial for welfare analysis and policy design.
For centuries, thinkers have considered whether and how climatic conditions—such as temperature, rainfall, and violent storms—influence the nature of societies and the performance of economies. A multidisciplinary renaissance of quantitative empirical research is illuminating important linkages in the coupled climate-human system. We highlight key methodological innovations and results describing effects of climate on health, economics, conflict, migration, and demographics. Because of persistent “adaptation gaps,”current climate conditions continue to play a substantial role in shaping modern society, and future climate changes will likely have additional impact. For example, we compute that temperature depresses current U.S. maize yields by ~48%, warming since 1980 elevated conflict risk in Africa by ~11%, and future warming may slow global economic growth rates by ~0.28 percentage points per year. In general, we estimate that the economic and social burden of current climates tends to be comparable in magnitude to the additional projected impact caused by future anthropogenic climate changes. Overall, findings from this literature point to climate as an important influence on the historical evolution of the global economy, they should inform how we respond to modern climatic conditions, and they can guide how we predict the consequences of future climate changes.
- Ganapati, Sharat, Joseph S. Shapiro, and Reed Walker. "Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing." Working paper, 2016.
This paper uses plant-level production data from a set of U.S. manufacturing industries to study how changes in energy input costs for production are differentially shared between consumers and producers via changes in product prices (i.e., pass-through). In doing so, we explore the ways in which energy prices affect plant-level marginal costs, price-cost markups, and output prices. We show that in markets characterized by imperfect competition, the pass-through rate and two other market-level statistics are sufficient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We find that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. Pass-through is therefore incomplete, with estimates centered around 0.75. Our confidence intervals reject both zero pass-through and complete pass-through. We find heterogenous incidence of changes in input prices across industries, ranging from consumers bearing a third of the burden in gasoline refining to consumers bearing large majorities of the burden in other industries.
- Shapiro, Joseph and Reed Walker, "Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences." Working paper, 2015.
Between 1990 and 2008, air pollution emissions from U.S. manufacturing fell by 60 percent despite a substantial increase in manufacturing output. We show that these emissions reductions are primarily driven by within-product changes in emissions intensity rather than changes in output or in the composition of products produced. We then develop and estimate a quantitative model linking trade with the environment to better understand the economic forces driving these changes. Our estimates suggest that the implicit pollution tax that manufacturers face doubled between 1990 and 2008. These changes in environmental regulation, rather than changes in productivity and trade, account for most of the emissions reductions.
- Burke, Marshall, Solomon Hsiang, and Edward Miguel. "Global Non-linear Effect of Temperature on Economic Production." Nature, 2015.
We show that overall economic productivity is nonlinear in temperature for all countries, with productivity peaking at an annual average temperature of 13 C and declining strongly at higher temperatures. The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries, with important implications. If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality, relative to scenarios without climate change.
- Isen, Adam, Maya Rossin-Slater, and Reed Walker. "Every Breath You Take – Every Dollar You’ll Make: The Long-Term Consequences of the Clean Air Act of 1970." Journal of Political Economy, Forthcoming, 2015.
This paper examines the long-term impacts of early childhood exposure to air pollution on adult outcomes using U.S. administrative data. We exploit changes in air pollution driven by the 1970 Clean Air Act to analyze the difference in outcomes between cohorts born in counties before and after large improvements in air pollution relative to those same cohorts born in counties that had no improvements. We find a significant relationship between pollution exposure in the year of birth and later life outcomes. A higher pollution level in the year of birth is associated with lower labor force participation and lower earnings at age 30.
- Hsiang, Solomon, M. Burke, and Edward Miguel. "Quantifying the Influence of Climate on Human Conflict." Science 2013.
A rapidly growing body of research examines whether human conflict can be affected by climatic changes. Drawing from archaeology, criminology, economics, geography, history, political science, and psychology, we assemble and analyze the 60 most rigorous quantitative studies and document, for the first time, a remarkable convergence of results. We find strong causal evidence linking climatic events to human conflict across a range of spatial and temporal scales and across all major regions of the world. The magnitude of climate's influence is substantial: for each 1 standard deviation (1σ) change in climate toward warmer temperatures or more extreme rainfall, median estimates indicate that the frequency of interpersonal violence rises 4% and the frequency of intergroup conflict rises 14%. Because locations throughout the inhabited world are expected to warm 2 to 4σ by 2050, amplified rates of human conflict could represent a large and critical impact of anthropogenic climate change.