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Thank you for reading until the end! The full paper can be found here: thomasbourany.github.io/files/Bouran...

thomasbourany.github.io

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Quantifying climate damages and geographic spillovers (through migration and trade) is also challenging. Jordan @jordanrk.bsky.social 's research focuses on estimating climate costs, studies model uncertainty, and explores the role of cities in adapting to global warming. Check out his work!

International agreements are crucial for effective action. We can improve welfare by optimally choosing the carbon tax, the tariffs to enforce agreements, and the optimal size of the "club" when countries can free ride, as I study in my JMP bsky.app/profile/tbou...

Moreover, renewable subsidies are less effective than carbon taxes. Coordinated policies like "climate clubs", i.e. carbon tax with tariffs (e.g. EU’s CBAM) generate global gains but unequal costs across countries depending on differences in climate, energy, and trade linkages

Global climate policies are most effective, reducing emissions by 4% with a $50 carbon tax. But they create stark redistributive effects: hot countries benefit from improved climate, while the strength of the substitution between coal, oil, and gas affects energy costs and rents

Carbon taxation affects countries differently based on their energy profile. China's reliance on coal means that carbon taxes shift consumption toward oil/gas, raising global fossil fuel prices. This benefits oil exporters like Saudi Arabia & Russia while hurting energy importers

Unilateral climate policies have limited effects on global emissions but create significant winners and losers through energy markets and international trade. The welfare effects of carbon leakage can be an order of magnitude larger than gains from emission reductions

Aside from observable moments, such as countries' energy mix (in oil, gas, coal, renewable), international trade shares, or energy rents as a share of GDP, we estimate key parameters like the climate damage and fossil energy supply elasticities

We do a log-linearization of this model to do a welfare decomposition of these policies into four channels: (i) climate damages or direct productivity, (ii) the terms-of-trade effects, (iii) the impact on energy prices and costs, (iv) the effect on profits/energy rents

We study these effects in a model with heterogeneous countries, trade, and energy markets to quantify the welfare effects of climate policies. We summarize them with "sufficient statistics" which only requires observable data moments (energy mix, trade shares) and key elasticities

One of the major drawbacks of carbon taxation is the “leakage effect”: (i) carbon taxes raise goods' prices, reallocating activity to countries without climate policies, and (ii) reducing fossil fuels demand lowers the price of oil and gas for other countries, which now consume and emit more

David Keith @davidkeith.bsky.social · 28/02/2025

New Paper Alert🚨 “The Winners and Losers of Climate Policies: A Sufficient Statistics Approach” with Jordan Rosenthal-Kay @jordanrk.bsky.social We study the spillovers of climate policies across countries through trade and energy markets #EconSky #ClimatePolicy #TradeLeakage #CBAM🧵1/10

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Reposted by Thomas Bourany

I was sitting in NOAA's Boulder lab today when people got fired. Tears in the hallway. Security escort. They fired a great young scientist. Beyond the anti-science nonsense, letting smart & cheap new hires go is an incompetent way to cut costs. www.nytimes.com/2025/02/27/c...

nytimes.com

Mass Layoffs Begin at NOAA

The cuts came just before a separate wave of departures was expected under the Trump administration’s so-called deferred resignation program.

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Thomas Bourany @tbourany.bsky.social · 07/02/2025

Very interesting conference on the Political Economics of Climate change at @stanforddoerr.bsky.social Thank you for allowing to present my JMP on climate agreements

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Reposted by Thomas Bourany

Wolfgang Blau @wblau.bsky.social · 21/11/2024

A new policy brief from Imperial College Business School's Patrick Bolton and Alissa M. Kleinnijenhuis shows that scaling up climate finance for developing countries is not only equitable, it also serves the economic interests of developed countries. #COP29 e-axes.org/research/cop...

e-axes.org

COP29: The Economic Case for a New Common Quantified Goal of Climate Finance (NCQG) at Scale - E-Axes Forum

Patrick Bolton (Imperial College London) and Alissa M. Kleinnijenhuis (Cornell University, Imperial College London) assess the importance of New Common Quantified Goal (NCQG) in order to meet the Pari...

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Research & Work in progress

Thank you for reading until the end! Happy to chat more about these topics during this Job Market season and at upcoming conferences! The job market paper and my research can be found here: thomasbourany.github.io/research/ #EconJMP #EconSky

thomasbourany.github.io

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I stand on the shoulders of giants: Nordhaus, of course, and the amazing research on carbon taxation and the impacts of climate change by my advisors at UChicago, @UChicago economics: Mike Golosov, Esteban Rossi-Hansberg, Lars Hansen, and Michael Greenstone (not yet converted to #EconSky) 11/10

In the paper, I study additional policy instruments and extensions (transfers to developing countries, as discussed in COP28-29, fossil-fuel-specific sanctions, retaliation and trade wars, carbon tax Laffer curve, etc.). Happy to discuss them in more detail! 10/

As a result, it is optimal to lower the carbon tax (from $150/tCO2 to ~$100) to encourage participation. But not too much! It is beneficial to leave Russia out of the club, otherwise we would need to decrease carbon tax so much that we lose the benefits of climate cooperation! 9/

The result is summarized in this graph: it shows the participation of different regions for various carbon taxes (y-axis) and trade tariffs (x-axis). We see that Russia, Gulf countries, and South Asia have little incentives to join a climate club for high carbon taxes, in spite of large tariffs 8/

This policy question is challenging: it involves solving jointly for the optimal policy (as in Public Finance) and the choice of countries (as in Combinatorial Discrete Choice problems) in a Nash Equilibria. I develop a method inspired by these two lit. to handle this problem 7/

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I build a quantitative Integrated-Assessment Model, extended with heterogeneous countries, energy markets, and international trade. It replicates empirically realistic features that are at the heart of countries' decisions to join climate agreements (e.g. income, energy mix, gains from trade) 6/

This reveals a trade-off between an intensive margin - a small club with a high carbon tax (think of the EU) - and an extensive margin - a club with more countries, at the cost of lowering the carbon tax in order to encourage participation (e.g. a non-binding world agreement) 5/

In my Job Market Paper, I study the optimal design of such climate clubs: the optimal choice of the carbon tax and trade tariffs, and the choice of countries in the climate agreement, subject to strategic participation constraints when countries can deviate and leave the agreement 4/

Despite the pledges made at the COPs, climate agreements are usually non-binding. Nordhaus (AER 2015) suggested the idea of "Climate Clubs" where club members set a carbon tax on their emissions and impose trade tariffs on non-members: this encourages participation/cooperation 3/

Free-riding is a major obstacle to climate action: countries have no incentives to implement globally optimal climate policies. Moreover, free-riding is exacerbated by the redistributive effects of fossil-fuels taxation across countries and the heterogeneous impacts of climate change 2/

I'm excited to share my JMP "The Optimal Design of Climate Agreements" where I study carbon taxation and trade tariffs in the presence of free-riding incentives and inequality. This is particularly related to the current discussions on trade policies and climate action #EconSky #COP29 #Climate 🧵1/10

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Also, thanks to @carbonbrief.org and @climatenews.bsky.social for following and summarizing the results of these debates!

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Research & Work in progress

I explore some of these theoretical considerations in my Job Market Paper! Looking forward to further climate policy debates and more ambitious objectives next year at Belém’s COP in Brazil! thomasbourany.github.io/research/

thomasbourany.github.io

One conclusion we can find: despite all these drawbacks, the UN and COPs still promote global cooperation. More countries have pledged to increase renewable and nuclear capacity, and a less ambitious deal is better than no deal at all: no country can afford one more year of climate inaction!

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Finally, the COP negotiations occurred in the shadow of the US election: with considerably lower ambitions for climate and cuts in aid budgets, the future Trump presidency will probably weaken the US's position as a global leader in the multilateralism of future COPs

In optimal carbon taxation, if policymakers are conscious of such cross-country redistributive effects, they would also slow down the energy transition: the carbon tax should be *lower* than the Social Cost of Carbon (by 10-20%) to avoid harming developing and energy-exporting economies

Another point of tension: the Arab group led by Saudi Arabia, and host Azerbaijan have been accused of blocking references to “phasing out fossil fuels” in the text. But is that surprising? As their income depends largely on energy rents, they have a strong interest in slowing the energy transition

Despite 10 years of delay after the Paris Accord, the COP29 finally paved the way for proper implementation of international carbon credits in the coming years (through the PACM and its supervisory body) and potentially offered ways for funding further emissions reductions

In comparison, agreeing on a single carbon price/carbon tax is much easier, as it serves as a “focal point” (Weitzman, referring to Schelling). In that regard, COP29 was quite successful in reaching an agreement on carbon markets and emissions trading.

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Agreeing on so many instruments in multilateral bargaining (here the transfers from N to N’ countries, and the source of those funds) faces transaction costs/bargaining frictions/free-riding strategies. Therefore, the Coase theorem fails. No wonder it is so hard to achieve a good deal!

That’s why they sought to include private investment and broaden the funding sources (private funds and voluntary contributions from developing countries, too). The goal: channel higher amounts toward the energy transition, with details on those sources to be decided at COP30

Is it unconditional transfers? Funds for adaptation? Investment in energy capacity? Direct loans? World Bank/IMF finance? Unclear! For the first two options, there is no reason why developed countries would agree to transfer their public funds: this explains their reluctance to such deals

The COP29 was called the “money COP” as climate finance was at the center of the debates. It resulted in $300bn/year of pledges of transfers from developed to developing countries by 2035, short of the 1.3tn/y initially proposed. But what is this climate finance money from, and for what?

Before we start, recall that without international climate agreements, there is a natural tendency for individual countries to do too little for climate: that’s the usual “free-riding problem”. But what can we achieve with such an agreement? and with which policy instruments?

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Thomas Bourany @tbourany.bsky.social · 20/11/2024

After a chaotic bargaining process, the COP29 reached an agreement last week in Baku! Let’s analyze this result, its success for climate, and the failures of multilateralism through the lens of economic theory! A thread 🧵 on some salient points #climate #COP29Baku #Econsky 1/12

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Salut! Je serais heureux de rejoindre le groupe! Merci!! 🥖🧀🍷🤩🇫🇷