Political Science > Environmental Policy

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Ruchir Agarwal
This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network—representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one’s teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly for talent from developing countries. Fourth, certain ‘push’ incentives that reduce immigration barriers—by addressing financing constraints for top foreign talent—could increase the global scientific output of future cohorts by 42 percent. We concludeby discussing policy options for the U.S. and the global scientific community.
International Monetary Fund. Fiscal Affairs Dept.
This Climate Change Policy Assessment (CCPA) takes stock of the Federated States of Micronesia (FSM)’s climate response plans, from the perspective of their macroeconomic and fiscal implications. CCPA explores the possible impact of climate change and natural disasters and the cost of FSM’s planned response. It suggests macroeconomically relevant reforms that could strengthen the national strategy and identifies policy gaps and resource needs. FSM has made progress toward its Nationally Determined Contribution mitigation pledge by beginning to expand renewable power generation and improve its efficiency. The authorities plan to continue this and encourage the take-up of energy efficient building design and appliances. Accelerating adaptation investments is paramount, which requires addressing critical capacity constraints and increasing grant financing. It is recommended that FSM needs to increase its capacity to address natural disaster risks following the expiry of Compact-related assistance in 2023. It is advised to improve climate data collection and use, including on the costs of high and low intensity disasters and disaster response expenditure.
Signe Krogstrup and William Oman
Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale transition to a low-carbon economy. This paper provides an overview of the rapidly growing literature on the role of macroeconomic and financial policy tools in enabling this transition. The literature provides a menu of policy tools for mitigation. A key conclusion is that fiscal tools are first in line and central, but can and may need to be complemented by financial and monetary policy instruments. Some tools and policies raise unanswered questions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goals in the overall policy framework.
Stefan Mittnik, Willi Semmler, and Alexander Haider
Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback e?ects on the macroecon-omy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically the link between carbon dioxide emission and the frequency of climate re-lated disaster is investigated using cross-sectional and panel data. The modeling part then uses a multi-phase dynamic macro model to explore this causal nexus and the e?ects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as one phase, is suitable for studying mitigation and adaptation policies.
Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, and Ricardo Marto
For the world's 20 largest emitters, we use a simple trend/cycle decomposition to provide evidence of decoupling between greenhouse gas emissions and output in richer nations, particularly in European countries, but not yet in emerging markets. If consumption-based emissions—measures that account for countries' net emissions embodied in cross-border trade—are used, the evidence for decoupling in the richer economies gets weaker. Countries with underlying policy frameworks more supportive of renewable energy and climate change mitigation efforts tend to show greater decoupling between trend emissions and trend GDP, and for both production- and consumption-based emissions. The relationship between trend emissions and trend GDP has also become much weaker in the last two decades than in preceding decades.
International Monetary Fund
Reinvigorating trade integration should be a key component of the global policy agenda to boost growth. Trade policy’s new frontiers such as services, regulatory cooperation, and trade and investment complementarities carry high potential to bolster efficiency and productivity. But with governments differing on whether to continue the WTO Doha Round, there is an urgent need to identify a path for the global trading system in today’s more complex trade policy landscape. A long interregnum without a path forward would risk fragmenting the global trade system and undermining its governance. Tackling trade policy issues important to the global economy may require flexible approaches to multilateral negotiations, including modalities such as plurilaterals. Enhanced coherence efforts are also needed to ensure that regional trade agreements and multilateralism coexist productively.
Mr. Michael Keen and Mr. Christos Kotsogiannis
This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether some form of border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distributional concerns that can make non-uniform carbon pricing efficient and, more particularly, that Pareto-efficiency requires a form of BTA when carbon taxes in some countries are constrained, a special case being identified in which this has the simple structure envisaged in practical policy discusions. It also stresses—a point that has been overlooked in the policy debate—that the efficiency case for BTA depends critically on whether climate policies are pursued by carbon taxation or by cap-and-trade.
Mr. Michael Keen and Benjamin Jones
Negotiations toward a successor to the Kyoto Protocol on climate change have come to a critical point, and domestic climate policies are being developed, as the world seeks to recover from the deepest economic crisis for decades and looks for new sources of sustainable growth. This position paper considers the challenge posed by these two policy imperatives: how to exit from the crisis while developing an effective response to climate change. Blending the objectives of a sustained recovery and effective climate policies presents both challenges and opportunities. Although there are potential “win-win” spending measures conducive to both, the more fundamental linkages and synergies lie in the broader strategies adopted toward each other. Greater climate resilience can promote macroeconomic stability and alleviate poverty; and carbon pricing, essential for mitigation, can contribute to the strengthening of fiscal positions that is expected to be needed in many countries. There are, nevertheless, also difficult trade-offs to face, notably in the somewhat greater caution now warranted in moving to more aggressive emissions pricing. However, the simple policy guidelines for addressing climate issues remain fundamentally unchanged; the need to deploy a range of regulatory, spending, and emissions pricing measures.
Mr. Muthukumara Mani and Mr. Per G. Fredriksson
We develop and test a theory of the rule of law and environmental policy formation. In our model an increase in the degree of rule of law has two opposing partial effects on environmental policy: first, a greater share of policy decisions are implemented according to law; second, industry bribery efforts increase because more is at stake. Moreover, we find that an increase in corruptibility of policymakers lowers the stringency of environmental policy. The empirical findings suggest that a greater degree of rule of law raises environmental policy stringency, but the effect is lower where corruptibility is high.
Mr. Muthukumara Mani and Mr. Per G. Fredriksson
This paper seeks to contribute to the unresolved issue of the effect of economic integration on environmental policy. In particular, we discuss the joint impact of trade openness and political uncertainty. Our theory predicts that the effect of trade integreation on the environment is conditional on the degree of political uncertainty. Trade integration raises the stringency of environmental policies, but the effect is reduced when the degree of political uncertainty is great. Political uncertainty has a positive effect on environmental policy as it reduces lobbying efforts. Applying our model to a unique data set of primarily developing countries, the empirical findings support the theory and are robust under alterntive specifications.