Working Paper: NBER ID: w18794
Authors: Garth Heutel; Carolyn Fischer
Abstract: Environmental economics has traditionally fallen in the domain of microeconomics, but recently approaches from macroeconomics have been applied to studying environmental policy. We focus on two macroeconomic tools and their application to environmental economics. First, real business cycle models can incorporate pollution and pollution policy and be used to answer several questions. How can environmental policy adjust to business cycles? How do different types of policies fare in a context with business cycles? Second, endogenous technological growth is an important component of environmental policy. Several studies ask how policy can be designed to both tackle emissions directly and influence the adoption of clean technologies. We focus on these two aspects of environmental macroeconomics but emphasize that there are many other potential applications.
Keywords: Environmental Economics; Macroeconomics; Environmental Policy; Business Cycles; Directed Technical Change
JEL Codes: E32; O44; Q50; Q55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic conditions (E66) | Optimal emissions tax and cap (H21) |
| Total factor productivity (TFP) shocks (O49) | Emissions tax, cap, and intensity target (Q58) |
| Type of policy (G52) | Economic outcomes (labor and capital levels) (E24) |
| Macroeconomic fluctuations (E39) | Policy effectiveness (D78) |
| Economic growth (O00) | CO2 emissions (Q54) |
| GDP changes (E20) | Emissions (Q52) |