B07: Policies for Sustainability

The future well-being of societies depends in major ways on their ability to steer economies towards a sustainable path of development. However, global climate change and excessive use of natural resources present important challenges to this goal. This project evaluates the effectiveness and efficiency of a broad range of policies aimed at fostering sustainable behavior by firms and households.

Our research on firms has focused on estimating the causal effects of the EU Emissions Trading Scheme on greenhouse gas emissions, economic performance, and cost pass-through of industrial firms. To enable EU wide analyses, we have founded an international network of researchers with access to relevant manufacturing data. Going forward, we will expand this research network and analyze decarbonization policies envisaged under the European Green Deal. Moreover, we will analyze policies targeted at reducing carbon emissions from transportation which are relevant in a broad class of industries.

On the household side, we have conducted field experiments that clarify the effects of providing behavior-specific real-time feedback on electricity and water use. In the next funding period, we will add design features that help us distinguish between different behavioral motivations which have competing welfare effects. In addition, we will investigate the role of heterogeneity in consumer biases for consumer surplus and work out its implications for environmental equality. Both extensions are key steps towards a full-fledged welfare analysis of information treatments that enhance sustainable behavior.

A central methodological objective of our project is the development of structural estimation techniques to identify welfare effects and for conducting counterfactual policy analysis. This effort has been a catalyst for the successful integration of the two research groups in Bonn and Mannheim. In a similar vein, we have initiated partnerships that allow us to conduct experimental analyses of sustainable behavior in the firm sector. We plan to deepen this line of research in the next funding period.