Publications by Author: Aldy, Joseph E.

Houde, Sebastien, and Joseph E Aldy. “Belt and Suspenders and More: The Incremental Impact of Energy Efficiency Subsidies in the Presence of Existing Policy Instruments.” Cambridge, Massachusetts, {USA}: Harvard Environmental Economics Program, 2014.Abstract

The effectiveness of investment subsidies depends on the existing array of regulatory and information mandates, especially in the energy efficiency space. Some consumers respond to information disclosure by purchasing energy-efficient durables (and thus may increase the inframarginal take-up of a subsequent subsidy), while other consumers may locate at the lower bound of a minimum efficiency standard (and a given subsidy may be insufficient to change their investment toward a more energy-efficient option). We investigate the incremental impact of energy efficiency rebates in the context of regulatory and information mandates by evaluating the State Energy Efficient Appliance Rebate Program (SEEARP) implemented through the 2009 American Recovery and Reinvestment Act. The design of the program – Federal funds allocated to states on a per capita basis with significant discretion in state program design and implementation – facilitates our empirical analysis. Using transaction-level data on appliance sales, we show that most program participants were inframarginal due to important short-term intertemporal substitutions where consumers delayed their purchases by a few weeks. We find evidence that some consumers accelerated the replacement of their old appliances by a few years, but overall the impact of the program on ong-term energy demand is likely to be very small. Our estimated measures of cost-effectiveness are an order of magnitude higher than estimated for other energy efficiency programs in the literature. We also show that designing subsidies that reflect, in part, underlying attribute-based regulatory mandates can result in perverse effects, such as upgrading to larger, less energy-efficient models.

dp59_houde-aldy.pdf pb1_houde-aldy.pdf
Aldy, Joseph E. “The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Oil Drilling Moratorium.” Cambridge, Massachusetts, {USA}: Harvard Environmental Economics Program, 2014.Abstract

In 2010, the Gulf Coast experienced the largest oil spill, the greatest mobilization of spill response resources, and the first Gulf-wide deepwater drilling moratorium in U.S. history. Taking advantage of the unexpected nature of the spill and drilling moratorium, I estimate the net effects of these events on Gulf Coast employment and wages. Despite predictions of major job losses in Louisiana – resulting from the spill and the drilling moratorium – I find that Louisiana coastal parishes, and oil-intensive parishes in particular, experienced a net increase in employment and wages. In contrast, Gulf Coast Florida counties, especially those south of the Panhandle, experienced a decline in employment. Analysis of accommodation industry employment and wage, business establishment count, sales tax, and commercial air arrival data likewise show positive economic activity impacts in the oil-intensive coastal parishes of Louisiana and reduced economic activity along the Non-Panhandle Florida Gulf Coast.

Aldy, Joseph E, and Seamus J Smyth. “Heterogeneity in the Value of Life.” Cambridge, Massachusetts, {USA}: Harvard Environmental Economics Program, 2014.Abstract

We develop a numerical life-cycle model with choice over consumption and leisure, stochastic mortalityand labor income processes, and calibrated to U.S. data to characterize willingness to pay ({WTP})for mortality risk reduction. Our theoretical framework can explain many empirical findings in thisliterature, including an inverted-U life-cycle {WTP} and an order of magnitude difference in prime-aged adults {WTP}. By endogenizing leisure and employing multiple income measures, we reconcilethe literature's large variation in estimated income elasticities. By accounting for gender- and race-specific stochastic mortality and income processes, we explain the literature's black-white and female-male differences.

Aldy, Joseph E, and Robert N Stavins. “The Promise and Problems of Pricing Carbon: Theory and Experience.” Cambridge, Massachusetts, {USA}: Harvard Environmental Economics Program, 2011.Abstract

Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market‐based instruments in the form of carbon‐pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap‐and‐trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions.

Aldy, Joseph E, and Robert N Stavins. “Using the Market to Address Climate Change: Insights from Theory and Experience.” Cambridge, Massachusetts, {USA}: Harvard Environmental Economics Program, 2011. dp29_stavins-aldy.pdf