Publications

This paper presents a detailed economic modelling analysis of public finance in the transition towards carbon neutrality. We outline results from a Net-Zero Emission Ambition scenario, reflecting the ambition to achieve net-zero carbon dioxide emissions globally by mid-century, using a broad and region-specific policy package that combines various policy instruments: carbon pricing, removal of fossil fuel support, regulations in the power sector, and other policies that stimulate investments by firms and households to reduce and decarbonize energy use. The analysis relies on the OECD global computable general equilibrium ENV-Linkages model. Our results show that transitioning towards emissions neutrality involves relatively modest economic and fiscal consequences. The scenario achieves emissions neutrality while maintaining continued economic growth, despite a limited negative impact on global GDP (which excludes the benefits from reduced climate damages) and on public revenues. In our central scenario we find that net public revenues slightly decrease globally in 2050 (-0.5% of Baseline GDP). The fiscal effects reflect a trade-off between instruments that increase public revenues (carbon pricing) or reduce public expenditures (fossil fuel subsidies removal), on the one hand, and more costly instruments (subsidies) and indirect effects (tax base erosion and changes in fiscal and economic structure) on the other hand.

We estimate the impact of temperatures on emergency department visits using daily data from the universe of public hospitals in Mexico from 2008 to 2021. We find that cold temperatures decrease visits by up to 9.1 percent on the same day, and warm temperatures increase visits by as much as 3.7 percent. Using distributed lag models, we then show that cold temperatures can reduce visits for the next 30 days by up to 16 percent. For warm temperatures, contemporaneous and cumulative effects are similar (limited harvesting). These findings suggest that, unlike mortality, temperatures affect the demand for emergency services linearly. Leveraging the granularity of our dataset, we also document significant heterogeneities (e.g., higher sensitivity for children and teenagers) and provide suggestive evidence about mechanisms, such as ecosystem dynamics and behavioral changes. Finally, we project that—absent adaptation—temperature-driven annual emergency department visits might increase by 0.35 percent by midcentury, resulting in an estimated increase of 8.5 million USD in annual medical expenditures in Mexico.

We provide a first globally-relevant assessment of the electricity consumption consequences of households' adaptation to ambient heat through air conditioning (AC). We use household survey data from 25 countries within a discrete-continuous choice empirical framework to model households' joint air conditioning adoption and utilization decisions, and combine the estimated responses with scenarios of socioeconomic, demographic, and climatic change to project air conditioning prevalence and cooling electricity demand circa mid-century. We find that air conditioning ownership increases households' electricity consumption by 36%, on average, but the effect is heterogeneous, varying with weather conditions, income and country contexts, revealing the importance of behaviors, practices, climate, and technologies. Compared to the other drivers of electricity consumption, air conditioning has the leading marginal effect, also accounting for a significant share of household budgets. By 2050, the overall effect is a net increase in global yearly residential cooling electricity to 976-1393 TWh, with an additional 670-956 Mt of CO₂ emissions, and associated social costs of $124-177 billion. Our findings highlight cooling energy expenditure as an emerging indicator of energy poverty as the climate warms, and provide an initial quantification of the economic and environmental risks associated with air conditioning as an adaptation to climate change.

Intersecting socio-demographic transformations and warming climates portend increasing worldwide heat exposures and health sequelae. Cooling adaptation via air conditioning (AC) is effective, but energy-intensive and constrained by household-level differences in income and adaptive capacity. Using statistical models trained on a large multi-country household survey dataset (n = 673,215), we project AC adoption and energy use to mid-century at fine spatial resolution worldwide. Globally, the share of households with residential AC could grow from 27% to 41% (range of scenarios assessed: 33-48%), implying up to a doubling of residential cooling electricity consumption, from 1220 to 1940 (scenarios range: 1590-2377) terawatt-hours yr.-1, emitting between 590 and 1,365 million tons of carbon dioxide equivalent (MtCO2e). AC access and utilization will remain highly unequal within and across countries and income groups, with significant regressive impacts. Up to 4 billion people may lack air-conditioning in 2050. Our global gridded projections facilitate incorporation of AC's vulnerability, health, and decarbonization effects into integrated assessments of climate change.

Do remittances improve the ability of households to adapt to global warming? We try to answer this question by studying the behaviours of households in Mexico, a country that experiences a large and stable flow of remittances. Using an instrumental variable approach, we find an important role of remittances in the climate adaptation process. Remittances are used for adopting air-conditioning, which is an important cooling device for responding to high temperatures and to maintain thermal comfort at home. We exploit climate and income heterogeneity by showing that large differences exist in the use of remittances for climate adaptation between coastal and inland regions, as well as among different income groups. We conclude by quantifying the overall increase in welfare that households attain by adopting air-conditioning.

Increasing temperatures will make space cooling a necessity for maintaining comfort and protecting human health, and rising income levels will allow more people to purchase and run air conditioners. Here we show that, in Brazil, India, Indonesia, and Mexico income and humidity-adjusted temperature are common determinants for adopting air-conditioning, but their relative contribution varies in relation to household characteristics. Adoption rates are higher among households living in higher quality dwellings in urban areas, and among those with higher levels of education. Air-conditioning is unevenly distributed across income levels, making evident the existence of a disparity in access to cooling devices. Although the adoption of air-conditioning could increase between twofold and sixteen-fold by 2040, from 64 to 100 million families with access to electricity will not be able to adequately satisfy their demand for thermal comfort. The need to sustain electricity expenditure in response to higher temperatures can also create unequal opportunities to adapt.

Adjustments in the final use of energy are a critical margin of adaptation for maintaining indoor thermal comfort. This paper explores how households have been adopting air conditioning and thermal insulation to cope with different climatic conditions, and how climatic factors interact with socio-economic, demographic, and household characteristics across eight OECD countries. Changes in the cumulative number of hot and cold days over the year, urbanization, demographics and household characteristics, including attitudes towards energy efficiency, strongly affect those two margins of adaptation, along with income. If the historically-observed adaptation behaviour is maintained also under future socio-economic pathways and climate scenarios, the impact of global warming and income on air conditioning adoption will be reinforced by urbanization trends, which on the contrary will make it more difficult to improve building thermal insulation.