Journal Articles

Working Paper
Aldy, J. E., & Houde, S. (Working Paper). The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies. NBER Working Paper Series.Abstract

The behavioral responses to taxes and subsidies are often subject to various behavioral biases and transaction costs—what we define as “microfrictions.” We develop a theoretical framework to show how these microfrictions—and their heterogeneity across the population and policy instruments—affect the design of Pigouvian policies. Standard Pigouvian pricing still holds with transaction costs, but requires adjustment with behavioral biases. We use transaction-level data from the US appliance market to estimate the heterogeneous behavioral responses to an array of energy fiscal policies and to quantify microfrictions. We then assess optimal fiscal policies and find that it is rarely optimal to couple a Pigouvian tax on energy with an investment subsidy in this context. We also find that energy labels—intended to increase the salience of energy information—can interact in perverse ways with both taxes and subsidies.

Full Paper.pdf
Aldy, J. E., Gerarden, T. D., & Sweeney, R. L. (Forthcoming). Investment Versus Output Subsidies: Implications of Alternative Incentives for Wind Energy. Journal of the Association of Environmental and Resource Economics.Abstract
This paper examines the choice between subsidizing investment or output to promote socially desirable production. We exploit a natural experiment in which wind farm developers could choose an investment or output subsidy to estimate the impact of these instruments on productivity. Using regression discontinuity and matching estimators, we find that wind farms claiming the investment subsidy produced 10 to 11 percent less power than wind farms claiming the output subsidy, and that this effect reflects subsidy incentives rather than selection. The introduction of investment subsidies caused the Federal government to spend 12 percent more per unit of output from wind farms.
Aldy, J. E. (2022). Updating the Social Cost of Carbon. Issues in Science and Technology , 38 (3), 6-8. Publisher's Version
Aldy, J. E., Burtraw, D., Cropper, M., Fischer, C., Fowlie, M., & III, R. W. (2022). How Is the U.S. Pricing Carbon? How Could We Price Carbon? Journal of Benefit-Cost Analysis , 13 (3), 310-334. aldy_et_al_jbca_2022.pdf
Aldy, J. E., & Armitage, S. (2022). The Welfare Implications of Carbon Price Certainty. Journal of the Association of Environmental and Resource Economics , 9 (5), 921-946. aldy_armitage_jaere_2022.pdf
Aldy, J. E. (2022). Updating the Social Cost of Carbon. Issues in Science and Technology , 38 (3), 6-8. aldy_scc_ist_spring_2022.pdf
Aldy, J. E., Auffhammer, M., Cropper, M., Fraas, A., & Morgenstern, R. (2022). Looking Back at 50 Years of the Clean Air Act. Journal of Economic Literature , 60 (1), 179-232.
Aldy, J. E. (2021). Solar Climate Intervention. Issues in Science and Technology , 38 (1). solar_climate_intervention_-_issues_in_science_and_technology.pdf
Aldy, J. E., Kotchen, M. J., Stavins, R. N., & Stock, J. H. (2021). Keep Climate Policy Focused on the Social Cost of Carbon. Science , 373 (850), 852. aldy_et_al_science_2021.pdf
Aldy, J. E., Felgenhauer, T., Pizer, W. A., Tavoni, M., Belaia, M., Borsuk, M. E., Ghosh, A., et al. (2021). Social science research to inform solar geoengineering. Science , 374, 815-818. Publisher's Version
Aldy, J. E. (2021). Promoting Energy Efficiency as a Part of Decarbonization Strategy. The Environmental Forum , (Jul/Aug), 15. Full Text.pdf
Aldy, J. E. (2021). Decarbonizing the U.S. Economy Has Substantial, Impressive Benefits. The Environmental Forum , (May/Jun), 15. Full Text.pdf
Aldy, J. E. (2021). Modernizing Regulatory Review for Energy, Environmental Policy. The Environmental Forum , (Mar/Apr), 15. Full Text.pdf
Aldy, J. E. (2021). Trying a Whole-of-Government Approach to Climate Change. The Environmental Forum , (Jan/Feb), 15. Full Text.pdf
Edmonds, J., Yu, S., McJeon, H., Forrister, D., Aldy, J., Hultman, N., Cui, R., et al. (2021). How Much Could Article 6 Enhance Nationally Determined Contribution Ambition toward Paris Agreement Goals through Economic Efficiency? Climate Change Economics , 12 (1). Full Text.pdf
Aldy, J. E., Atkinson, G., & Kotchen, M. J. (2021). Environmental Benefit-Cost Analysis: A Comparative Analysis Between the United States and the United Kingdom. Annual Review of Resource Economics , 13. Full Text.pdf
Aldy, J. E., Bento, N., & Gianfrate, G. (2021). National Climate Policies and Corporate Internal Carbon Pricing. The Energy Journal , 42 (5), 87-98. Full Text.pdf
Aldy, J. E. (2020). Evaluating Regulatory Performance: Learning from and Institutionalizing Retrospective Analysis of EPA Regulations. Case Western Reserve Law Review , 70 (4), 971-1006. Full Text.pdf
Aldy, J. E., & Stavins, R. N. (2020). Rolling the Dice in the Corridors of Power: William Nordhaus's Impacts on Climate Change Policy. Climate Change Economics , 11 (4), 2040001. rwp20-022_aldy_stavins.pdf
Aldy, J. E., & Zeckhauser, R. (2020). Three Prongs for Prudent Climate Policy. Southern Economic Journal , (DOI: 10.1002/soej.12433). Full Text.pdf