Kevin Lewis

December 26, 2018

Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election
Stefano Ramelli et al.
NBER Working Paper, November 2018

Donald Trump's 2016 election and the subsequent nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate change policy. Firms' stock-price reactions to these events reveal whether their climate strategies affected their valuations. As widely reported, firms in industries with high carbon intensity benefited, at least briefly. It might be expected that companies with "responsible" strategies on climate change would also have lost value, since they were paying for actions that seemed less urgent. In fact, investors actually rewarded such firms. The analysis shows that this observed climate responsibility premium results, at least in part, from the strategic behavior of long-horizon investors who looked into the future to assess the valuation of corporations.

Estimating Recent Local Impacts of Sea-Level Rise on Current Real-Estate Losses: A Housing Market Case Study in Miami-Dade, Florida
Steven McAlpine & Jeremy Porter
Population Research and Policy Review, December 2018, Pages 871–895

Sea-Level Rise (SLR) Projections from the National Oceanic and Atmospheric Administration (NOAA) and the U.S. Army Corp of Engineers (USACE) indicate increasing, and imminent, risk to coastal communities from tidal flooding and hurricane storm surge. Building on recent research related to the potential demographic impacts of such changes (Hauer et al. 2016, in Nat Clim Chang 3:802–806, 2017; Neumann et al. 2015; Curtis and Schneider in Popul Environ 33:28–54, 2011), localized flooding projections in the Miami Beach area (Wdowinski et al. in Ocean Coast Manag 126:1–8, 2016) and projected economic losses associated with this rise in projected SLR (Fu et al. Ocean Coast Manag 133:11–17, 2016); this research investigates the accrued current cost, in terms of real-estate dollars lost, due to recurrent tidal flooding and projected increases of flooding in Miami-Dade County. Most directly related to this line of research, Keenan et al. (2018) have recently produced results indicating that Climate Gentrification is taking place in Miami, FL with higher elevations in flood prone areas appreciating at a higher rate. In that vein of thinking, we seek to answer a question posed by such research: What is the actual accrued loss to sea-level rise over the recent past? To answer this question, we replicate well-documented estimation methods by combining publicly available sea-level rise projections, tide gauge trends, and property lot elevation data to identify areas regularly at risk of flooding. Combining recent patterns of flooding inundation with future forecasts, we find that properties projected to be inundated with tidal flooding in 2032 have lost $3.08 each year on each square foot of living area, and properties near roads that will be inundated with tidal flooding in 2032 have lost $3.71 each year on each square foot of living area. These effects total over $465 million in lost real-estate market value between 2005 and 2016 in the Miami-Dade area.

Impact of Climate Change on Firm Earnings
Artur Hugon & Kelvin Law
Arizona State University Working Paper, October 2018

This study examines the impact of climate change on firm earnings, and how well managers anticipate the impact. Exploiting regional temperature variation around corporate headquarters, we find that firms’ earnings, on average, are negatively impacted by an unusually warm climate. In economic terms, a 1°C increase in temperature is associated with a $1.6 million decrease in earnings for a median-sized firm. A warmer climate not only reduces sales, but also increases operating expenses and the frequency of special and extraordinary expense items. In cross-sectional analyses, we find a substantially smaller impact on firms with greater diversification and for those in industries with higher climate lobbying intensity. Firm-level regressions indicate that about one-third of firms are positively impacted by a warmer climate, with substantial variation across industries. Finally, managers of firms which are the most susceptible to a warmer climate tend to underestimate the negative impact on earnings, and this problem is more severe in states where climate change skepticism is high.

How Do State‐Level Environmental Policies Impact the Voting Behavior of National Legislators?
Thomas Brunell & Brett Cease
Social Science Quarterly, forthcoming

Method: We examine several key environmental policies (i.e., renewable portfolio standards and regional cap‐and‐trade agreements) and utilize historical state‐level inventories and congressional roll‐call votes in our analysis.

Results: We demonstrate that Democratic and Republican members of the U.S. House in both scenarios were much more likely — even after controlling for ideology and constituency preferences — to vote in favor of increasing environmental regulations if their home state already put such a policy in place.

Long-term impacts of exposure to high temperatures on human capital and economic productivity
Ram Fishman, Paul Carrillo & Jason Russ
Journal of Environmental Economics and Management, forthcoming

Weather anomalies have a range of adverse contemporaneous impacts on health and socio-economic outcomes. This paper tests if temperature anomalies around the time of birth can have long-term impacts on individuals' economic productivity. Using unique data sets on historical weather and earnings, place and date of birth of all 1.5 million formal employees in Ecuador, we find that individuals who have experienced in-utero temperatures that are 1 °C above average are less educated and earn about 0.7% less as adults. Results are robust to alternative specifications and falsification tests and suggest that warming may have already caused adverse long-term economic impacts.

Stratospheric aerosol injection tactics and costs in the first 15 years of deployment
Wake Smith & Gernot Wagner
Environmental Research Letters, November 2018

We review the capabilities and costs of various lofting methods intended to deliver sulfates into the lower stratosphere. We lay out a future solar geoengineering deployment scenario of halving the increase in anthropogenic radiative forcing beginning 15 years hence, by deploying material to altitudes as high as ~20 km. After surveying an exhaustive list of potential deployment techniques, we settle upon an aircraft-based delivery system. Unlike the one prior comprehensive study on the topic (McClellan et al 2012 Environ. Res. Lett. 7 034019), we conclude that no existing aircraft design — even with extensive modifications — can reasonably fulfill this mission. However, we also conclude that developing a new, purpose-built high-altitude tanker with substantial payload capabilities would neither be technologically difficult nor prohibitively expensive. We calculate early-year costs of ~$1500 ton−1 of material deployed, resulting in average costs of ~$2.25 billion yr−1 over the first 15 years of deployment. We further calculate the number of flights at ~4000 in year one, linearly increasing by ~4000 yr−1. We conclude by arguing that, while cheap, such an aircraft-based program would unlikely be a secret, given the need for thousands of flights annually by airliner-sized aircraft operating from an international array of bases.

Economic carbon cycle feedbacks may offset additional warming from natural feedbacks
Dawn Woodard, Steven Davis & James Randerson
Proceedings of the National Academy of Sciences, forthcoming

As the Earth warms, carbon sinks on land and in the ocean will weaken, thereby increasing the rate of warming. Although natural mechanisms contributing to this positive climate–carbon feedback have been evaluated using Earth system models, analogous feedbacks involving human activities have not been systematically quantified. Here we conceptualize and estimate the magnitude of several economic mechanisms that generate a carbon–climate feedback, using the Kaya identity to separate a net economic feedback into components associated with population, GDP, heating and cooling, and the carbon intensity of energy production and transportation. We find that climate-driven decreases in economic activity (GDP) may in turn decrease human energy use and thus fossil fuel CO2 emissions. In a high radiative forcing scenario, such decreases in economic activity reduce fossil fuel emissions by 13% this century, lowering atmospheric CO2 by over 100 ppm in 2100. The natural carbon–climate feedback, in contrast, increases atmospheric CO2 over this period by a similar amount, and thus, the net effect including both feedbacks is nearly zero. Our work highlights the importance of improving the representation of climate–economic feedbacks in scenarios of future change. Although the effects of climate warming on the economy may offset weakening land and ocean carbon sinks, a loss of economic productivity will have high societal costs, potentially increasing wealth inequity and limiting resources available for effective adaptation.

Co-extinctions annihilate planetary life during extreme environmental change
Giovanni Strona & Corey Bradshaw
Scientific Reports, November 2018

Climate change and human activity are dooming species at an unprecedented rate via a plethora of direct and indirect, often synergic, mechanisms. Among these, primary extinctions driven by environmental change could be just the tip of an enormous extinction iceberg. As our understanding of the importance of ecological interactions in shaping ecosystem identity advances, it is becoming clearer how the disappearance of consumers following the depletion of their resources — a process known as ‘co-extinction’ — is more likely the major driver of biodiversity loss. Although the general relevance of co-extinctions is supported by a sound and robust theoretical background, the challenges in obtaining empirical information about ongoing (and past) co-extinction events complicate the assessment of their relative contributions to the rapid decline of species diversity even in well-known systems, let alone at the global scale. By subjecting a large set of virtual Earths to different trajectories of extreme environmental change (global heating and cooling), and by tracking species loss up to the complete annihilation of all life either accounting or not for co-extinction processes, we show how ecological dependencies amplify the direct effects of environmental change on the collapse of planetary diversity by up to ten times.

Trends and patterns in the contributions to cumulative radiative forcing from different regions of the world
D.M. Murphy & A.R. Ravishankara
Proceedings of the National Academy of Sciences, forthcoming

Different regions of the world have had different historical patterns of emissions of carbon dioxide, other greenhouse gases, and aerosols as well as different land-use changes. One can estimate the net cumulative contribution by each region to the global mean radiative forcing due to past greenhouse gas emissions, aerosol precursors, and carbon dioxide from land-use changes. Several patterns stand out from such calculations. Some regions have had a common historical pattern in which the short-term offsets between the radiative forcings from carbon dioxide and sulfate aerosols temporarily led to near-zero radiative forcing during periods of exponential emissions growth with few emission controls. This happened for North America and Europe in the mid-20th century and China in the 1990s and 2000s. However, these same periods lead to a commitment to future radiative forcing from the carbon dioxide and other greenhouse gases that stay in the atmosphere long after the aerosols. For every region, this commitment to future radiative forcing (2018–2100) from emissions already in the atmosphere is larger than the cumulative radiative forcing to date (1900–2017). This comparison again highlights how the full radiative forcing from greenhouse gases is unmasked once the aerosol emissions are reduced to improve air quality. The relative contributions from various regions to global climate forcing depends more on the time the contributions are compared (e.g., now or 2100) and future development scenarios than on whether cumulative radiative forcing, ocean heat content, or temperature is used to compare regional contributions.

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