COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV.

The EU emissions trading system's (ETS) invalidation rule implies that shocks and overlapping policies can change cumulative carbon emissions. This paper explains these mechanisms and simulates the effect of COVID-19, the European Green Deal, and the recovery stimulus package on cumulative EU ETS emissions and allowance prices. Our results indicate that the negative demand shock of the pandemic should have a limited effect on allowance prices and rather translates into lower cumulative carbon emissions. Aligning EU ETS with the 2030 reduction target of -55% might increase allowance prices to 45-94 €/ton CO2 today and reduce cumulative carbon emissions to 14.2-18.3 GtCO2 compared to 23.5-33.1 GtCO2 under a -40% 2030 reduction target. Our results crucially depend on when the waterbed will be sealed again, which is an endogenous market outcome, driven by the EU ETS design, shocks and overlapping climate policies such as the recovery plan.

The Short-run and Long-run Effects of Covid-19 on Energy and the Environment.

Kenneth Gillingham is an Associate Professor of Economics at Yale University, with a primary appointment in the School of Forestry & Environmental Studies. In 2015 to 2016, he served as the Senior Economist for Energy and the Environment at the White House Council of Economic Advisers. His research interests cover energy and environmental economics, industrial organization, technological change, and energy modeling. He held a Fulbright to New Zealand and has worked for Resources for the Future and Pacific Northwest National Laboratory. He received a PhD and two MS degrees from Stanford University and an AB from Dartmouth College. Christopher Knittel is the George P. Shultz Professor of Applied Economics in the Sloan School of Management at the Massachusetts Institute of Technology (MIT). He is also the Director of MIT's Center for Energy and Environmental Policy Research, which serves as the hub for social science research on energy and the environmental since the late 1970s. Professor Knittel is also the Co-Director of the MIT Energy Initiative's Electric Power System Low Carbon Energy Center and a co-director of The E2e Project, a research initiative between MIT, UC Berkeley, and the University of Chicago to undertake rigorous evaluation of energy efficiency investments. Jing Li holds the inaugural William Barton Rogers Career Development Chair of Energy Economics at the MIT Sloan School of Management. From 2017-2018, Jing Li was a Postdoctoral Associate of the MIT Energy Initiative. Jing's research interests lie in energy economics and industrial organization, focusing on development and adoption of new technologies. Her most recent work examines compatibility and investment in electric vehicle recharging networks in the United States and cost pass-through in the E85 retail market. Jing received double BSc degrees in Mathematics and Economics from MIT in 2011 and her PhD in Economics from Harvard in 2017. Marten Ovaere is a Postdoctoral Associate in the School of Forestry & Environmental Studies of Yale University. His research interests lie in energy and environmental economics, with a focus on electricity markets, carbon pricing, and renewable energy. Marten holds a MSc in Economics, a MSc in Energy Engineering, and a PhD in Economics from KU Leuven. Mar Reguant is an Associate Professor in Economics at Northwestern University. She received her PhD from MIT in 2011. Her research uses high-frequency data to study the impact of auction design and environmental regulation on electricity markets and energy-intensive industries. She has numerous awards, including a Sloan Research Fellowship in 2016, the Sabadell Prize for Economic Research in 2017, a Presidential Early Career Award for Scientists and Engineers award in 2019, and the European Association of Environmental and Resource Economists Award for Researchers in Environmental Economics under the Age of Forty in 2019.

Field experimental evidence shows that self-interest attracts more sunlight.

This study examines how messaging approaches in a prosocial intervention can influence not only the effectiveness of the intervention but also, contagion afterward. Our investigation focuses on leveraging two motivations for solar adoption: self-interest and prosocial. Using data from a natural field experiment in 29 municipalities containing 684,000 people, we find that self-interest messaging is twice as effective in inducing solar adoption both during and after the intervention. Adoptions under self-interest messaging have 10% higher net present value, but prosocial messaging increases the likelihood that adopters recommend solar to their friends and neighbors. Income moderates the effectiveness of self-interest messaging, performing much better in high-income communities than low- and moderate-income communities. There was no significant difference across income groups for prosocial messaging. These results provide guidance to policy makers aiming to encourage prosocial behavior across all income groups.