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The substantial booms and busts in agricultural prices marked by extreme events across commodities lead to heated debates about the effects of speculative trading on commodity price fluctuations. This study proposes a new approach to understanding extreme events and boom-bust processes in agricultural markets. Using weekly futures data for twelve indexed agricultural commodities during 2006 to 2016, we find that extreme price changes, located in the 10% tails of the distribution, cluster across agricultural markets. We then implement a multinomial logit model to investigate which factors are associated with the propagation of extreme events. Specifically, we disentangle three transmission conduits. (1) The macroeconomic conduit captures the possibility that the synchronized extreme price events are generated by business-cycle driven demand shifts mainly in emerging economies. (2) The financial conduit refers to potential links between extreme returns and the increasing flow of money from financial participants into agricultural futures markets. (3) Finally, the energy conduit accounts for possible spillover effects due to oil price shocks. Our results indicate an important role of managed money positions and oil prices while the real demand channel remains mostly insignificant. (C) 2017 Elsevier Ltd. All rights reserved.
Steuern und Abgaben auf Produkte oder Verbrauch mit gesellschaftlichen Folgekosten (externe Kosten) – sogenannte Pigou- oder Lenkungssteuern – sind ein gesellschaftliches „Win-Win-Instrument“. Sie verbessern die Wohlfahrt und schützen gleichzeitig die Umwelt und das Klima. Dies wird erreicht, indem umweltschädigende Aktivitäten einen Preis bekommen, der möglichst exakt der Höhe des Schadens entspricht. Eine konsequente Bepreisung der externen Kosten nach diesem Prinzip könnte in Deutschland erhebliche zusätzliche Einnahmen erbringen: Basierend auf bisherigen Studien zu externen Kosten wären zusätzliche Einnahmen in der Größenordnung von 348 bis 564 Milliarden Euro pro Jahr (44 bis 71 Prozent der gesamten Steuereinnahmen) möglich. Die Autoren warnen allerdings, dass die Bezifferung der externen Kosten mit erheblichen Unsicherheiten verbunden ist. Damit Lenkungssteuern und -abgaben ihre positiven Lenkungs- und Wohlstandseffekte voll entfalten können, seien zudem institutionelle Reformen notwendig.
Sollte Klimapolitik auf Energiepreisanstiege reagieren und kurzfristig CO2-Preise anpassen, um Haushalte zu entlasten? Alkis Blanz, Ulrich Eydam, Maik Heinemann und Matthias Kalkuhl, Mercator Research Institute on Global Commons and Climate Change (MCC) und Universität Potsdam, zeigen, dass die Verwendung der Einnahmen aus der CO2-Bepreisung von entscheidender Bedeutung ist. Werden diese weitestgehend durch Steuersenkungen oder Transfers an Haushalte rückverteilt, sollten CO2-Preise nicht an kurzfristige Energiepreisschwankungen angepasst werden. Haushalte profitieren stärker von einer direkten Stabilisierung ihres Einkommens als von der Stabilisierung der Energiepreise. Werden Einnahmen aus der CO2-Bepreisung nicht rückerstattet, sind dagegen antizyklische CO2-Preise wohlfahrtserhöhend.
Limiting global warming to well below 2 degrees C may pose threats to macroeconomic and financial stability. In an estimated Euro Area New Keynesian model with financial frictions and climate policy, we study the possible perils of a low-carbon transition and evaluate the role of monetary policy and financial regulation. We show that, even for very ambitious climate targets, transition costs are moderate along a timely and gradual mitigation pathway. Inflation volatility strongly increases for disorderly climate policy, demanding a strong monetary response by central banks. In reaction to an adverse financial shock originating in the fossil sector, a green quantitative easing policy can provide an effective stimulus to the economy, but its stabilizing properties do not significantly differ from those of market neutral asset purchase programs. A financial regulation, encouraging the decarbonization of the banks' balance sheets via ad hoc capital requirements, can significantly reduce the severity of a financial crisis, but prolongs the recovery phase. Our results suggest that the involvement of central banks in climate actions must be carefully designed to be in compliance with their mandate and to avoid unintended trade-offs.
Coal transitions - part 1
(2021)
A rapid coal phase-out is needed to meet the goals of the Paris Agreement, but is hindered by serious challenges ranging from vested interests to the risks of social disruption. To understand how to organize a global coal phase-out, it is crucial to go beyond cost-effective climate mitigation scenarios and learn from the experience of previous coal transitions. Despite the relevance of the topic, evidence remains fragmented throughout different research fields, and not easily accessible. To address this gap, this paper provides a systematic map and comprehensive review of the literature on historical coal transitions. We use computer-assisted systematic mapping and review methods to chart and evaluate the available evidence on historical declines in coal production and consumption. We extracted a dataset of 278 case studies from 194 publications, covering coal transitions in 44 countries and ranging from the end of the 19th century until 2021. We find a relatively recent and rapidly expanding body of literature reflecting the growing importance of an early coal phase-out in scientific and political debates. Previous evidence has primarily focused on the United Kingdom, the United States, and Germany, while other countries that experienced large coal declines, like those in Eastern Europe, are strongly underrepresented. An increasing number of studies, mostly published in the last 5 years, has been focusing on China. Most of the countries successfully reducing coal dependency have undergone both demand-side and supply-side transitions. This supports the use of policy approaches targeting both demand and supply to achieve a complete coal phase-out. From a political economy perspective, our dataset highlights that most transitions are driven by rising production costs for coal, falling prices for alternative energies, or local environmental concerns, especially regarding air pollution. The main challenges for coal-dependent regions are structural change transformations, in particular for industry and labor. Rising unemployment is the most largely documented outcome in the sample. Policymakers at multiple levels are instrumental in facilitating coal transitions. They rely mainly on regulatory instruments to foster the transitions and compensation schemes or investment plans to deal with their transformative processes. Even though many models suggest that coal phase-outs are among the low-hanging fruits on the way to climate neutrality and meeting the international climate goals, our case studies analysis highlights the intricate political economy at work that needs to be addressed through well-designed and just policies.
Even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing, the existing literature reveals ambiguous results. For this reason, we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low- and middle-income countries. Building on a consistent dataset and method, we find that for countries with per capita incomes of below USD 15,000 per year (at PPP-adjusted 2011 USD) carbon pricing has, on average, progressive distributional effects. We also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy, rather than of food, goods or services. We argue that an inverse U-shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income. Since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues, our findings suggest that mitigating climate change, raising domestic revenue and reducing economic inequality are not mutually exclusive, even in low- and middle-income countries. (C) 2018 The Authors. Published by Elsevier Ltd.
Pigou in the 21st century
(2021)
The year 2020 marks the centennial of the publication of Arthur Cecil Pigou's magnum opus The Economics of Welfare. Pigou's pricing principles have had an enduring influence on the academic debate, with a widespread consensus having emerged among economists that Pigouvian taxes or subsidies are theoretically desirable, but politically infeasible. In this article, we revisit Pigou's contribution and argue that this consensus is somewhat spurious, particularly in two ways: (1) Economists are too quick to ignore the theoretical problems and subtleties that Pigouvian pricing still faces; (2) The wholesale skepticism concerning the political viability of Pigouvian pricing is at odds with its recent practical achievements. These two points are made by, first, outlining the theoretical and political challenges that include uncertainty about the social cost of carbon, the unclear relationship between the cost-benefit and cost-effectiveness approaches, distributional concerns, fragmented ministerial responsibilities, an unstable tax base, commitment problems, lack of acceptance and trust between government and citizens as well as incomplete international cooperation. Secondly, we discuss the recent political success of Pigouvian pricing, as evidenced by the German government's 2019 climate policy reform and the EU's Green Deal. We conclude by presenting a research agenda for addressing the remaining barriers that need to be overcome to make Pigouvian pricing a common political practice.
Das Klimaschutzgesetz hat einen Paradigmenwechsel eingeleitet: den Einstieg in eine CO2-Bepreisung als künftiges Leitinstrument der Klimapolitik. Auf den ersten Blick ist der CO2-Preis unter einer Fülle von Fördermaßnahmen und ordnungsrechtlichen Regelungen verschüttet, deren Wirksamkeit und Kosten höchst unsicher sind. Der CO2-Preis ist aber so angelegt, dass er langfristig das dominante Instrument einer europäisch harmonisierten Klimapolitik werden kann. Der angedeutete Paradigmenwechsel der deutschen Klimapolitik öffnet damit die Tür, die europäische und internationale Kooperation zu stärken. Dazu ist es aber notwendig, neben der europäischen auch die globale Klimapolitik neu auszurichten. Auch dort sollten sich die Verhandlungen statt auf nationale Mengenziele auf CO2-Preise konzentrieren. Die erforderliche Kooperation wird möglich, wenn die Regierungen Transferzahlungen strategisch und reziprok nutzen. So könnte die Effektivität der Klimapolitik erhöht werden und es ließen sich die entstehenden Verteilungskonflikte entschärfen.
How assets get stranded
(2020)
Internalizing external costs of carbon is a fundamental goal of climate policy. Since the seminal work of Arthur Pigou in 1920, economic theory has analyzed the efficiency gains arising from various instruments that internalize externalities and lead to Pareto-improvements. It is widely recognized in environmental economics that a carbon price would effectively reflect the scarcity of the atmospheric disposal space for carbon depending on the temperature target that is to be achieved. The question of how to organize the transition process, i.e. moving from inefficient to efficient allocations, and implementing the necessary policies, has gained increasing attention in recent years. Arguably, the transition process is tightly interwoven with political processes that include complex interactions between societal stakeholders, such as households and firms, on the one hand, and political decision makers, on the other. Accordingly, understanding political-economy aspects of the transition process, including distributional outcomes, is becoming increasingly relevant. While a growing literature discusses the distributional implications of climate policy on households, it is less well understood how asset owners might be affected by climate policy and how these potential impacts would interact with the transition process. This Special Section focuses on public policy challenges related to this transition problem, with special emphasis on asset owners. A core theme is the special role of stranded assets, i.e. a devaluation of capital stocks or financial assets either by introducing a stringent carbon price or by omitting a pre-announced policy of this kind.