Climate Economics with Arvid Viaene

Arvid Viaene
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A research-focused podcast on the economics of climate change and air pollution. Episodes are released every two weeks on Tuesday at 6 am CET.  Episodes will be either expert interviews or solo explorations of key issues. Hosted by Dr. Arvid Viaene, a climate economist with a PhD from the University of Chicago. He has done research on the impacts of climate change on agriculture and mortality. His research on climate-related mortality has been published in The Quarterly Journal of Economics, and he has advised the European Commission on the impacts of climate policy on firm competitiveness.

  1. #25 Dr. Edwin Woerdman - How the EU ETS Works: Coverage, Cap-setting, Allocation, and the Logic of Cap-and-Trade

    1D AGO

    #25 Dr. Edwin Woerdman - How the EU ETS Works: Coverage, Cap-setting, Allocation, and the Logic of Cap-and-Trade

    The EU Emissions Trading System is back in the spotlight. Permit prices have moved, energy prices are politically sensitive, and in 2026 the ETS is up for review. But in the public debate, a lot of the confusion comes from the basics: what does the ETS cover, how does it work, and what are the key building blocks? In this episode, I’m joined by Professor Edwin Woerdman (University of Groningen), a specialist in carbon market regulation and EU climate law and economics.  This is Part 1 of a series on the EU ETS. We cover the fundamentals: What emissions and sectors the EU ETS covers today The two “efficiencies” of emissions trading: effectiveness vs cost savings How allowances are allocated: auctioning vs free allocation, and why carbon leakage matters Why the ETS moved from grandfathering to benchmarking (and what benchmarks do) The cross-sectoral correction factor (“the cheese slicer”) How auction revenues are supposed to be used Why the EU ETS has been effective at cutting emissions—and how targets tightened over time The linear reduction factor, and why “2039” shows up in the debate (it’s an arithmetic implication, not a symbolic target) Next week (Part 2): we dive into the Market Stability Reserve, price volatility, and why the ETS is being tweaked in 2026.  Note that Professor Woerdman recently published a paper explaining a lot of what we cover in more detail. You can find the paper here: Woerdman, E. and Kotzampasakis, M., 'EU Emissions Trading System' (April 01, 2026), EU Climate Mitigation Law, Cheltenham: Edward Elgar Publishing, forthcoming 2027. Available at SSRN: https://ssrn.com/abstract=6633238 or http://dx.doi.org/10.2139/ssrn.6633238 For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    27 min
  2. #24 - Dr. Luis Garicano - Rethinking EU Climate Policy: Trade-offs, Carbon Pricing, and Public Support

    APR 21

    #24 - Dr. Luis Garicano - Rethinking EU Climate Policy: Trade-offs, Carbon Pricing, and Public Support

    Europe has pioneered carbon pricing through the EU ETS—and now through CBAM. But even the best-designed climate policy runs into a hard constraint: trade-offs are real, and public support can evaporate if the costs are hidden or moralized.  In this episode, I’m joined by Dr. Luis Garicano (LSE professor; former Member of the European Parliament), who argues for a more honest climate policy conversation—one that keeps the strengths of price-based tools like the ETS and CBAM, while being more cautious with mandates and target-driven rule stacks.  What you’ll learn Why “win-win” climate narratives can backfire when households face higher energy prices Carbon pricing vs mandates: where each works, and where mandates can create backlash with limited climate gains How EU institutions and political incentives shape policy design—and make course-correction hard Why “public support” is a core climate policy input, not an afterthought Guest Dr. Luis Garicano is a professor at the London School of Economics and a former Member of the European Parliament (2019–2022), where he worked on major economic policy issues and helped shape early CBAM thinking.  (If you enjoyed the EU policy arc on this show, this episode pairs naturally with the CBAM episodes and EU ETS history episodes.) For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    41 min
  3. #23 Dr. Alec Brandon - Do Nudges Last? Energy Use, Habit Formation, and Technology Adoption

    APR 7

    #23 Dr. Alec Brandon - Do Nudges Last? Energy Use, Habit Formation, and Technology Adoption

    In this episode, I speak with Dr. Alec Brandon of Johns Hopkins Carey Business School about one of the most interesting questions in behavioural economics and climate policy: when do nudges actually persist? A common example is the home energy report: a letter that tells households how their electricity use compares with that of their neighbours. These reports have been widely used by energy providers and have repeatedly been shown to reduce energy use in the short run. But there has been a puzzle in the literature. In energy and water conservation, much of the effect seems to remain even after the letters stop. That is very different from other settings—such as voting, charitable giving, or exercise—where nudge effects tend to fade much faster. Alec Brandon explains the core idea of the paper: persistent effects may come not only from habits, but from technology adoption. If a nudge leads a household to install something more efficient, the savings can remain with the home even after the original resident leaves. That insight leads to a clever empirical test. Because utilities stop sending the reports when a household moves, the authors can compare what stays with the person and what stays with the property. In their sample, the initial effect is about 2.1%, and roughly 1.1% remains after the original resident moves—suggesting that a substantial share of persistence comes through durable changes to the home. Renters, by contrast, show persistence while they live there, but little that remains once they leave.  We also discuss: why the usual habit-formation story may be too simplewhy renters and homeowners respond differentlywhy “persistent” does not mean “costless”how behavioural tools can complement pricing and technology policywhat this implies for climate policy more broadlyThis is a really useful episode for thinking more clearly about what nudges do well, where they fall short, and how behavioural policy can be paired with more durable structural change. The transcript frames this as a broader question for climate policy: not just whether a nudge works today, but why it works and whether that mechanism can last. For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    47 min
  4. #22 Dr. Richard Tol - The Social Cost of Carbon, EPA Rulemaking, and How Models Get Misunderstood

    MAR 31

    #22 Dr. Richard Tol - The Social Cost of Carbon, EPA Rulemaking, and How Models Get Misunderstood

    In Part 2 of my conversation with Richard Tol, we move from model structure to policy use. We discuss the social cost of carbon, how the Obama-era EPA worked with FUND, DICE, and PAGE, and why Tol thinks the process of understanding a model matters as much as running it. We also talk about why integrated assessment models are often misunderstood, why debates around damage functions get so heated, and what this reveals about the boundary between economics and politics. The second half of the episode turns to Europe: why cap-and-trade won out over a carbon tax, why cost-benefit analysis is often awkward in real policy settings, and what Tol is working on now at the frontier of climate economics. This is Part 2 of a two-part conversation. In this episode: why a single social cost of carbon estimate can be misleadinghow the EPA used FUND in practicewhy misunderstood models are dangerousdamage-function debates and the politics around IAMsEU climate policy, cap-and-trade, and cost-benefit analysisTol’s current work on transfers, population, and welfareThese descriptions fit the show’s “paper to policy” framing and your economist/policy audience. For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    42 min
  5. #21 Dr. Richard Tol on FUND, Climate Damages and Why Adaptation Matters

    MAR 24

    #21 Dr. Richard Tol on FUND, Climate Damages and Why Adaptation Matters

    In this episode, I speak with Richard Tol about the origins of the FUND integrated assessment model and why its structure matters for climate economics. We start with the basic question: what is an integrated assessment model actually for? From there, Richard explains how FUND was built in the early 1990s, why it took a different path from models like DICE and PAGE, and why sector-by-sector damages, public goods, demography, and adaptation all matter if you want to say something useful about climate damages. A central theme in this conversation is that climate impacts are not just a simple function of temperature. Vulnerability changes with income, public health, infrastructure, and technological change. That has big implications for how economists should think about damages, development, and policy design. This is Part 1 of a two-part conversation. In this episode: what integrated assessment models dohow Richard Tol got started building FUNDwhy FUND differs from DICE and PAGEadaptation, public goods, and sectoral damagesmalaria, heat, and technological changehow FUND was calibrated from the literatureFor questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    27 min
  6. #20 Dr. Matthias Rodemeier - Willingness to Pay for Carbon Mitigation: Evidence from 250.000 Consumers

    MAR 10

    #20 Dr. Matthias Rodemeier - Willingness to Pay for Carbon Mitigation: Evidence from 250.000 Consumers

    Voluntary carbon offsets are often discussed on the supply side—quality, additionality, adverse selection. In this episode, we go to the demand side: what do people actually pay for carbon mitigation when it shows up as a real choice at checkout?  My guest is Matthias Rodemeier (Assistant Professor of Finance, Bocconi University), co-author of the paper “Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets.” Using a large-scale field experiment with a German online supermarket, the team randomised the price and impact of a delivery-offset option across ~250,000 consumers.  We unpack a striking result: consumers are price elastic (lower price → more take-up) but initially impact inelastic(higher CO₂ mitigation → no change in demand). Then we dig into what changes that—learning over repeated exposure and, importantly, firm participation (subsidies vs matching contributions).  What we cover The checkout experiment: what exactly was randomised, and why this design identifies willingness to pay from revealed preferences Price elastic, impact inelastic: why “more mitigation for the same price” doesn’t move demand (at first) Warm glow vs valuation under frictions: how scope insensitivity can be about preferences and comprehension Learning effects: repeated exposure helps consumers map “kg of CO₂” into meaningful comparisons Converting results into the policy unit: ~€13–€16 per ton of CO₂ (with learning and firm participation) Subsidy vs match: why matching can be more cost-effective than simply making offsets cheaper Survey vs real choices: hypothetical willingness to pay can exceed revealed willingness to pay by an order of magnitude Policy implications: voluntary markets as complements, not substitutes, for regulation—and what this implies for greenwashing incentives Related episodes: If you want the supply-side backdrop on offsets, see Episode 4 (Ben Probst) and Episode 17 (Beatriz Granziera).  About the guest Matthias Rodemeier is Assistant Professor of Finance at Bocconi University. His research sits at the intersection of behavioural economics and public finance, with a focus on environmental policy, taxation, and household finance—often using field experiments with private and public organisations.  For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    33 min
  7. #19 Pauline Miquel - The Surprising Complexity of Implementing CBAM: Monitoring, Verification, and Real Costs

    FEB 24

    #19 Pauline Miquel - The Surprising Complexity of Implementing CBAM: Monitoring, Verification, and Real Costs

    CBAM is simple conceptually, but very hard to put into practice. Turning CBAM into a working system requires something the EU doesn’t naturally have for global supply chains: credible, product-level emissions data, verified across jurisdictions. In Episode #19, I’m joined by Pauline Miquel, a policy expert who has been tracking CBAM’s fast-moving details and its implications for importers. We discuss: What CBAM covers first (cement, steel, aluminium, hydrogen, electricity, fertilizers—and even some downstream products) Why the end of 2025 brought major last-minute changes—especially around default values that can materially raise expected costs The “ETS logic,” but globally: how third-party verification is supposed to work when emissions are embedded across fragmented supply chains Key uncertainties for importers: timing, predictability of liability, and the shift from quarterly to annual reporting A technical detail that matters: the benchmark (reflecting remaining free allocations under the ETS) and why it can move costs substantially Why CBAM is ultimately a procurement + finance + contracting problem—not just a sustainability reporting line item For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    50 min
  8. #18 Kimberly Clausing - The Global Effects of CBAM: Quantifying Benefits, Costs, and Leakage

    FEB 10

    #18 Kimberly Clausing - The Global Effects of CBAM: Quantifying Benefits, Costs, and Leakage

    Climate policy faces a built-in incentive problem: countries bear the costs of domestic regulation, while the benefits of lower CO₂ are shared globally. One proposed solution is a Carbon Border Adjustment Mechanism (CBAM) — charging imports a carbon cost comparable to domestic producers (with credits for carbon prices already paid abroad).  In this episode, I’m joined by Kimberly Clausing to discuss her paper on the global effects of CBAM, with a focus on steel and aluminium — two sectors that are both highly traded and emissions intensive. Using detailed plant-level data, the analysis quantifies impacts on welfare, competitiveness, leakage, and distribution across firms and countries.  We cover: Why CBAM is an answer to the free-rider / leakage / competitiveness triad — and what it can and can’t solve (domestic vs third-market competition). A key empirical surprise: emissions intensity is not tightly correlated with income per capita, which changes how we think about impacts on lower-income countries. “Two types of firms” logic: clean producers may benefit from access to a higher-price market, while dirtier producers may be pushed toward unregulated markets (with price effects abroad). Quantitative results: why welfare effects can be modest in magnitude, why CBAM shifts some burden from producers to consumers, and why CBAM revenue may be smaller than expected due to reallocation. Emissions outcomes: carbon pricing drives substantial reductions; CBAM can add incremental reductions and reduce leakage — especially when only one large jurisdiction acts. The “climate club” logic: how CBAM can make carbon pricing more politically feasible at home and more attractive abroad over time. For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    33 min
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About

A research-focused podcast on the economics of climate change and air pollution. Episodes are released every two weeks on Tuesday at 6 am CET.  Episodes will be either expert interviews or solo explorations of key issues. Hosted by Dr. Arvid Viaene, a climate economist with a PhD from the University of Chicago. He has done research on the impacts of climate change on agriculture and mortality. His research on climate-related mortality has been published in The Quarterly Journal of Economics, and he has advised the European Commission on the impacts of climate policy on firm competitiveness.

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