Curriculum Vitae
Sarah Polborn |
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Placement Director: Neil Wallace
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Graduate Secretary & Placement Assistant: Lynn Sebulsky (814)865-1458 lms50@psu.edu |
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Curriculum Vitae |
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THESIS ABSTRACT Essay 1.“The Political Economy of Carbon Securities and Environmental Policy” (Job Market paper) This paper studies carbon abatement policy instruments from a political economy perspective. Unlike previous models of carbon abatement policies which ignore the impact of lobbies, this paper addresses the question how lobbying affects the government’s choice of the abatement level and how different policy instruments perform in this respect. The paper illustrates some problems with both the cap-and-trade system and carbon taxation. It then proposes an alternative policy instrument — carbon securities — with significant advantages over these traditional 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 a single lobby which represents carbon using industries, a system based on carbon securities creates a counterveiling group of stakeholders with a strong incentive to get organized and influence the government's choice of emission levels. Specifically, the paper develops a two period model with three agents: a government, a lobby representing carbon-using firms and a lobby representing carbon speculators (this group includes people who buy carbon securities for investment purposes as well as environmentalists). In the first period the carbon securities are sold to carbon speculators and carbon-using firms decide if they want to invest in carbon abatement technology. In the second period, the agents first play a common agency game similar to Grossman and Helpman (1992) to determine the emission level and then each speculator sells her share of the emissions total to carbon-using firms. I find a unique equilibrium in truthful strategies and compare the equilibrium with carbon securities to the equilibria under a carbon tax and a cap-and-trade system. I show that a system with carbon securities has a number of advantages. First, the carbon price is closer to the social optimum than with a carbon tax or a cap-and-trade system. This is a direct consequence of the presence of stakeholders with an interest in low carbon dioxide emissions. Second, climate and political uncertainty have a smaller effect on the expected variance of the carbon price. Third, there is higher investment in carbon abatement technology under the system I propose. This is because carbon securities encourage both a higher carbon price and a more stable carbon price. Fourth, carbon securities alter the policy environment so that the government can, in effect, credibly commit to long term policies even when the government can only commit to property rights but not to tax rates.
Using a supply-side approach to the problem of global warming, this paper 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 is costless, for a large enough discount rate on the cost of global warming, no backstop technology research can be optimal. I apply the theory of optimal extraction of exhaustible resources to study the effect of backstop technology research on the problem of global warming. The moment of development of the backstop technology is assumed to be an uncertain function of research effort. I show that an increase in backstop technology research effort leads to faster planned depletion of fossil fuels and thus higher near-future carbon dioxide emissions. This change in the distribution of carbon dioxide emissions over time affects the cost of global warming for two reasons: First, planned depletion of the resource may never happen if a backstop technology has already been developed by that time. Second, a more gradual global warming is likely to be associated with lower cost since it makes adaptation easier. I show that the research intensity which minimizes the expected cost of global warming decreases with the discount rate used for global warming related costs. The final section illustrates the implications of the model by means of a simulation. For this, I use data published by the International Energy Agency. |
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