Essays in Environmental Economics : Carbon Markets, Competitiveness and Common Pool Resources.

Summary This thesis includes 3 empirical essays that study the behavior of firms and individual agents in response to environmental policies. These chapters are linked to each other by the fact that they study an unexpected effect or consequence of these policies. The first two chapters focus on the European carbon market, which was designed to reduce polluting emissions, but which also has an impact on the competitiveness of firms and international investments. The third chapter provides empirical evidence that the social preferences of individuals who enjoy a common property can influence preservation policies, sometimes in surprising ways. In the first chapter, I produce an empirical analysis of the effect of the EU ETS on international investment by drawing on both a theoretical framework that models the investment decision by firms and on novel firm-level microeconomic data. In contrast to the scientific literature on the subject, I emphasize in my analysis the importance of heterogeneity across firms. I first compute the optimality conditions of firms' polluting emissions in order to measure the sensitivity of investments to the carbon price based on observable pollution data. This then allows me to estimate the effect of the EU ETS on international investments by comparing the benefits to firms of an investment strategy in multiple countries. My results indicate that investments are sensitive to the carbon price, and that this effect is greater the more pollution intensive the investments are. However, the aggregate sum of diverted investments is small, and the resulting losses alone do not justify the generosity of the compensation mechanisms put in place to safeguard these investments. In the second chapter, Giulia Pavan, Sara Calligaris and I provide evidence on the causal impact of the EU ETS on firms' input choice and total factor productivity. We use both structural estimation of firms' function output and policy evaluation techniques to estimate the effect of the EU ETS on Italian firms in the industrial sector. Our results show a slightly negative effect on productivity but heterogeneous across sectors. These results support the hypothesis of a fuel switching rather than a radical change in the production process. In the third chapter, George Joseph, Gautam Gupta, Barry Sopher, and Quentin Wodon study the effects of differential harvesting rights on the social preferences of individual agents through a field experiment. In game theory models, no variation in agents' choices or payoffs a priori describes their social preferences. We propose a solution by estimating this decision game using a two-step procedure, which can be applied more generally to the study of altruistic preferences. Our results indicate that altruistic preference models are better at explaining the empirical data than individualistic models, and that altruism is also better suited to do so than inequality aversion. When harvesting rights increase asymmetrically for some individuals, agents in turn increase the degree of altruism in their preferences and become less selfish. When resource sharing is set according to a proportionality rule, this effect increases further, but participants then show more equality aversion when their gain is smaller than others'.