Greedo

Partners: (Palermo, D. Furceri; Brescia, D. Bazzana; Roma La Sapienza, G. Di Bartolomeo)

Abstract
There are few issues that have sparked more attention in recent years than how to tackle climate change. It is therefore not surprising that governments around the world have started (talking) to implement climate change policies (CCPs) to facilitate a
green transition—either via carbon taxes or cap and trade systems—and improve the resilience and sustainability of the economy and the environment in the long run. Yet, while it is recognized that these policies can have negative short- to medium-term economic consequences, there is limited evidence on the magnitude of these costs in the context of Europe and even scarcer knowledge about how these effects are distributed across economic agents. If these short-term heterogeneous effects are sizable and there are concentrated costs from CCPs across voters, governments may lack political capital to confront organized vocal interest groups and hold back on climate change reforms (Alesina and Drazen 1989).
The aim of the project GREEDO is to shed light on these two issues: (A) identify the economic dynamic consequences of CCPs, and how they vary across regions and economic agents; and (B) assess the potential political costs of distributional conflicts sparked by CCPs. GREEDO will use a multi-pronged approach relying on existing and newly constructed data, as well as on novel empirical and modelling analyses. GREEDO will be articulated in four interconnected parts.
-The first (A1) is the empirical analysis of the effects of CCPs on key economic, financial and environmental variables, and how they vary across types of CCPs, regions and economic agents. To this end, GREEDO will combine existing databases on many economic outcomes and financial variables with newly-constructed databases on climate-related variables (such as long time series of daily emissions, temperatures, natural disasters at the regional level) and job-market vacancies (such as online-job postings).
-The second part (A2) will consist of using the empirical evidence produced in A1 to develop and calibrate new DSGE models to analyze the transitional macroeconomic welfare and economic consequences of CCPs and identify policies that can foster long-term resilience.
-The third part (B1) aims at disentangling different sources of heterogeneity in the way people perceive climate crises and CCPs, including under different climate change scenarios. It will rely on a newly constructed survey to identify the role of socio-demographic, economic and political characteristics shaping perceptions towards CCPs.
-The results of B1 will be used in the last part (B2) to identify clusters of agents and model them—in the context of an Agent Based Model (ABM)—according to their different information sets and behavioral rules. The ABM analysis will be used to examine the (heterogenous) effects of alternative types of CCPs on households’ welfare and the implication of these effects for the optimal adoption of alternative CCPs.