Working Papers

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.

This paper investigates the consequences of inequality in heat adaptation, examining the effectiveness of alternative cooling technologies in mitigating mortality associated with extreme heat in India for the period 2014-2019. Our empirical results highlight a critical trade-off in heat adaptation. Air conditioning is highly effective in moderating heat-related mortality, but it is expensive, with generally low ownership that tends to be restricted to high-income cities. Conversely, many Indian households, including low-income ones, purchase evaporative coolers, which are much cheaper but do not robustly mitigate the adverse health consequences of humid heat. We show that coolers' limited effectiveness is due to their inability to operate in the humid ambient conditions that prevail over the Indian subcontinent for much of the year, and the small amount of indoor temperature reduction they provide.

This paper examines the role of positive income shocks in helping workers adapt to extreme temperatures. We use daily temperature variations alongside the exogenous implementation of a wage and fiscal policy in Mexican municipalities along the US border to show that increased disposable income significantly reduces temperature-related mortality in treated areas. Exploring the mechanisms, we find that income gains increase households' adaptive capacity, particularly through higher electricity expenditures and the purchase of electric heaters. Our findings provide causal estimates of how income influences the marginal effect of temperature on mortality and contribute to the debate on the effectiveness of climate-related redistribution policies.

Higher temperatures can increase substance abuse and exacerbate its physiological effects on the human body, raising the risk of violent behavior. Using administrative crime records and daily temperatures in the United States between 1991 and 2023, we show that two public policies regulating substance abuse --- the expansion of substance abuse treatment facilities and the reformulation of the prescription opioid OxyContin --- substantially moderate the impact of temperature on interpersonal violent crime. We monetize the policy benefits for intimate partner violence, the most widespread crime in the United States, and show that substance abuse regulations can be a cost-effective tool for climate adaptation.

In 2004, Italy introduced a national program to address heat-related health risks through public awareness campaigns, heatwave warning systems, and hospital protocols. Leveraging administrative mortality data, temperature variations, and the plausibly exogenous timing of the policy's rollout, this paper shows that the program mitigated the mortality impact of extreme heat (days at or above 30 °C) by more than 57%. Exploring the mechanisms, we find that the staggered implementation of the heat wave warning systems contributed to reducing excess mortality on days exceeding 30 °C in treated provinces. We further show that enhancing access to information is essential to achieving these mitigating effects. Our findings underscore the critical role of public adaptation policies that leverage information disclosure on the health risks associated with heat stress.