Global climate policies are most effective, reducing emissions by 4% with a $50 carbon tax. But they create stark redistributive effects: hot countries benefit from improved climate, while the strength of the substitution between coal, oil, and gas affects energy costs and rents

Carbon taxation affects countries differently based on their energy profile. China's reliance on coal means that carbon taxes shift consumption toward oil/gas, raising global fossil fuel prices. This benefits oil exporters like Saudi Arabia & Russia while hurting energy importers

Aside from observable moments, such as countries' energy mix (in oil, gas, coal, renewable), international trade shares, or energy rents as a share of GDP, we estimate key parameters like the climate damage and fossil energy supply elasticities

We do a log-linearization of this model to do a welfare decomposition of these policies into four channels: (i) climate damages or direct productivity, (ii) the terms-of-trade effects, (iii) the impact on energy prices and costs, (iv) the effect on profits/energy rents

New Paper Alert🚨 “The Winners and Losers of Climate Policies: A Sufficient Statistics Approach” with Jordan Rosenthal-Kay @jordanrk.bsky.social
We study the spillovers of climate policies across countries through trade and energy markets #EconSky #ClimatePolicy #TradeLeakage #CBAM🧵1/10

The result is summarized in this graph: it shows the participation of different regions for various carbon taxes (y-axis) and trade tariffs (x-axis). We see that Russia, Gulf countries, and South Asia have little incentives to join a climate club for high carbon taxes, in spite of large tariffs 8/

I build a quantitative Integrated-Assessment Model, extended with heterogeneous countries, energy markets, and international trade. It replicates empirically realistic features that are at the heart of countries' decisions to join climate agreements (e.g. income, energy mix, gains from trade) 6/

Despite the pledges made at the COPs, climate agreements are usually non-binding. Nordhaus (AER 2015) suggested the idea of "Climate Clubs" where club members set a carbon tax on their emissions and impose trade tariffs on non-members: this encourages participation/cooperation 3/

I'm excited to share my JMP "The Optimal Design of Climate Agreements" where I study carbon taxation and trade tariffs in the presence of free-riding incentives and inequality.
This is particularly related to the current discussions on trade policies and climate action
#EconSky #COP29 #Climate 🧵1/10

Hi, I'm Thomas Bourany, JMC, working at the intersection of macro, climate, and trade.
In my JMP, I study how to design optimal climate agreements and carbon policy in the presence of free-riding and inequality.
#EconJMP #EconSky #climate
website: thomasbourany.github.io