Publications by Author: Aldy, Joseph E.

The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act authorized and appropriated unprecedented spending and tax expenditures to decarbonize the American economy. In the spirit of “build back better,” this paper examines how integrating evaluation in the design and implementation of these new clean energy policies can facilitate the learning necessary for policymakers to make policy better over time. It draws lessons from two case studies: (1) on institutionalizing evaluation based on the experience with regulatory review, and (2) on conducting evaluation based on the research literature assessing the 2009 Recovery Act’s clean energy programs. The paper identifies in recent legislation the programs and their characteristics amenable to various evaluation methodologies. The paper closes with recommendations for a clean energy program evaluation framework that would enable implementation of climate-oriented learning agendas under the Evidence-Based Policymaking Act.

Keywords: program evaluation, learning agendas, renewable energy, energy efficiency

As governments, firms, and universities advance ambitious greenhouse gas emission goals, the demand for emission offsets – projects that reduce or remove emissions relative to a counterfactual scenario – will increase. Reservations about an offset’s additionality, permanence, double-counting, and leakage pose environmental, economic, and political challenges. We review the role of offsets in regulatory compliance, as an incentive for early action, and in implementing voluntary emission goals. The rules and institutions governing offsets drive large variations in prices and in the types of projects deployed to reduce or remove emissions across offset programs. A lack of carbon price convergence and potential information asymmetries may contribute to limited price discovery and market segmentation. Taking into account the financial properties of offsets, an array of financial and technological innovations could enhance offsets’ environmental integrity and promote liquid offset markets. Unresolved questions about the future of policy will influence the evolution of voluntary offsets markets.    

Keywords: climate change, certified emission reductions, offsets, cap-and-trade, corporate social responsibility

JEL Codes: Q54, Q52, Q58, H23

The United States and United Kingdom have longstanding traditions in use of environmental benefit-cost analysis (E-BCA). While there are similarities between how E-BCA is utilized, there are significant differences too, many of which mirror ongoing debates and recent developments in the literature on environmental and natural resource economics. We review the use of E-BCA in both countries across three themes: (a) the role of long-term discounting; (b) the estimation and use of carbon valuation; and, (c) the estimation and use of the value of a statistical life. In each case, we discuss how academic developments are (and are not) translated into use and draw comparative lessons. We find that, in some cases, practical differences in E-BCA can be overstated, although in others these seem more substantive. Advances in the academic frontier also raise the question of when and how to update practical E-BCA, with very different answers across our themes.

The seminal contributions of William Nordhaus to scholarship on the long-run macroeconomics of global climate change are clear. Much more challenging to identify are the impacts of Nordhaus and his research on public policy in this domain. We examine three conceptually distinct pathways for that influence: his personal participation in the policy world; his research’s direct contribution to the formulation and evaluation of public policy; and his research’s indirect role informing public policy. Many of the themes that emerge in this assessment of the contributions of one of the most important economists to have worked in the domain of climate change analysis apply more broadly to the roles played by other leading economists in this and other policy domains.

Since 1970, transportation, power generation, and manufacturing have dramatically transformed as air pollutant emissions have fallen significantly. To evaluate the causal impacts of the Clean Air Act on these changes, we synthesize and review retrospective analyses of air quality regulations. The geographic heterogeneity in regulatory stringency common to many regulations has important implications for emissions, public health, compliance costs, and employment. Cap-and-trade programs have delivered greater emission reductions at lower cost than conventional regulatory mandates, but policy practice has fallen short of the cost-effective ideal. Implementing regulations in imperfectly competitive markets have also influenced the Clean Air Act’s benefits and costs.