Handbook on Energy and Climate Change
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Handbook on Energy and Climate Change

Edited by Roger Fouquet

This timely Handbook reviews many key issues in the economics of energy and climate change, raising new questions and offering solutions that might help to minimize the threat of energy-induced climate change.
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Chapter 20: Using micro data to examine causal effects of climate policy

Caterina Gennaioli, Ralf Martin and Mirabelle Muûls


Much of economic research on climate change is concerned with assessing the effects of climate change policies using simulation or general equilibrium models. It is in the nature of such models to rely on strong assumptions and parameters that are only loosely linked to the underlying economy. These models nevertheless make it possible to quantitatively analyze a wide range of scenarios and policy options even if none of them has ever been implemented (e.g. a world carbon tax). For a long time that was the only way forward, as governments were not too keen to put in place any concrete policies to mitigate the risk of climate change. However, in the wake of the first UN conference on climate change in Rio (1992), some governments started implementing various pieces of climate policies. Policy implementation further increased in the wake of the Kyoto conference in 1997, which resulted in the Kyoto Protocol. Worldwide emissions have since been increasing nevertheless. From an efficiency point of view, it would be desirable to have market-based policies imposing a globally uniform price on greenhouse gas (GHG) emissions. The present situation on the ground is a far cry from this ideal. Policies vary greatly in stringency and design between countries, as well as within countries for different emitters. Even in European countries which have gone furthest in their effort to curb emissions, policies are typically believed to fall short of what is necessary.

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