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. (Working Paper). Investment Versus Output Subsidies: Implications of Alternative Incentives for Wind Energy. NBER Working Paper Series.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.
Full Paper.pdf
Aldy, J. E., Auffhammer, M., Cropper, M., Fraas, A., & Morgenstern, R. (Forthcoming). Looking Back at 50 Years of the Clean Air Act. Journal of Economic Literature. Full Text.pdf
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
Aldy, J. E., & Armitage, S. (2020). The Cost-effectiveness Implications of Carbon Price Certainty. American Economic Association Papers and Proceedings , (110), 113-118. Full Text.pdf
Aldy, J. E., Kotchen, M., Fowlie, M., Levinson, A., & Palmer, K. (2020). Deep Flaws in a Mercury Regulatory Analysis. Science . Full Text.pdf
Aldy, J. E. (2020). Carbon Tax Review and Updating: Institutionalizing an Act-Learn-Act Approach to U.S. Climate Policy. Review of Environmental Economics and Policy , 14 (1), 76-94. Full Text
Aldy, J. E. (2019). Can a Carbon Tax Be Designed to Benefit Low-Income Households? The Environmental Forum , (Sept/Oct 2019), 15. Full Text
Aldy, J. E. (2019). Birds of a Feather: Estimating the Value of Statistical Life from dual-earner families. Journal of Risk and Uncertainty. Full Text
Aldy, J. E. (2017). Real world headwinds for Trump climate change policy. Bulletin of the Atomic Scientists , 1-6.Abstract
It has now been 12 months since Donald J. Trump was elected President of the United States, a man who as a candidate for the job called the scientific evidence for climate change “a hoax,” vowed to deregulate the American economy from what he considered to be onerous oversight, and bring back jobs that he claimed were lost as a result of the effort to combat the rise in global atmospheric temperatures. So, now is a good time to examine the president’s words and deeds regarding climate change – a sort of first-year job performance review or report card. What has he been able to accomplish? Has he laid a foundation for a successful agenda? And what are the most significant challenges to his energy and climate policy objectives?
Aldy, J. E., Hafstead, M., Metcalf, G. E., Murray, B. C., Pizer, W. A., Reichert, C., & III., R. C. W. (2017). Resolving the Inherent Uncertainty of Carbon Taxes: Introduction. Harvard Environmental Law Review Forum , 41, 1-13. Full_Paper.pdf