Climate Economics with Arvid Viaene

Arvid Viaene

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. #29: Dr. Joseph Shapiro – The $800 billion Implicit Subsidy for Dirty Industries Due to Trade Policy

    Jun 16

    #29: Dr. Joseph Shapiro – The $800 billion Implicit Subsidy for Dirty Industries Due to Trade Policy

    Sometimes you hear: “we should stop subsidizing dirty industries.” But are we actually doing that—and how big is it? In this episode, I’m joined (again) by Professor Joe Shapiro (UC Berkeley) to discuss his paper “The Environmental Bias of Trade Policy” (QJE, 2021). Joe’s core finding is striking: dirty industries tend to face lower trade protection, while cleaner industries face higher trade protection—a pattern that appears across countries, years, and even non-tariff barriers.  Joe then translates that pattern into an intuitive metric: if you interpret existing trade policy as a carbon tariff, it looks like an implicit carbon subsidy of around -$100 per ton of CO₂ (roughly -$85 to -$120/tCO₂) or  $550 to $800 billion dollars per year. In other words, goods with higher embedded emissions often face less trade protection—trade policy gets the magnitude “about right,” but the sign wrong.  We unpack what drives this: tariff escalation linked to “upstreamness” (upstream, commodity-like inputs tend to be dirtier and receive lower protection; downstream consumer goods are cleaner and receive higher protection).  Finally, Joe walks through his model-based simulations showing that harmonizing protection between clean and dirty goods could modestly raise GDP while meaningfully reducing global emissions.  In this episode The key empirical fact: dirty industries have low tariffs; clean industries have high tariffs The implied magnitude: ~-$100/tCO₂ “implicit carbon tax” embedded in trade policy The mechanism: upstreamness → tariff escalation → environmental bias What the simulations show when you “flatten” the bias across sectors A surprising map result: countries with strong climate reputations can still have trade policy that tilts toward dirtier goods If you care about CBAM, industrial policy, or the political economy of decarbonization, this episode is a powerful reminder: trade policy can be climate policy—even when nobody intended it. For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    33 min
  2. #28: Dr. Lily Hsueh - Corporations at Climate Crossroads: What Drives Real Emissions Cuts

    Jun 2

    #28: Dr. Lily Hsueh - Corporations at Climate Crossroads: What Drives Real Emissions Cuts

    A lot of climate economics focuses on carbon pricing and carbon markets. But what happens when firms don’t face an explicit cap on emissions? Why do some companies make real operational changes, while others focus on pledges and disclosure? In this episode, I’m joined by Dr. Lily Hsueh to discuss her book Corporations at Climate Crossroads: Multi-Level Governance, Public Policy, and Global Climate Action. Lily argues that corporate climate behavior is shaped by a nested structure of governance: what happens inside the firm (leadership, incentives, organizational capabilities) interacts with domestic public policy and top-down global norms.  We talk about how to distinguish symbolic climate action from substantive emissions reductions, why managerial authority matters (data collection is not the same as decision power), and how domestic policy signals can change firm behavior. Lily also explains how she uses the Clean Power Plan as a quasi-experimental shock to identify mechanisms—and why “disclosure” isn’t enough without verification and accountability.  What we cover Why it’s misleading to treat firms as “unitary actors” (internal politics and incentives matter) How managerial capacity and complementary capabilities shape real climate outcomes The difference between pledges, disclosure, and measurable emissions reductions How domestic regulation and global norms influence corporate strategy Why corporations can engage and obstruct at the same timeWhy the next step is disclosure → verification → accountabilityLinks Dr. Lily Hsueh’s website: https://www.lilyhsueh.com Open-access book (MIT Press): https://direct.mit.edu/books/oa-monograph/6016/C For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    44 min
  3. # 27 Jos Cozijnsen - The EU ETS Is Here to Stay: The MSR Debate, Price Controls, and the 2040 Package

    May 19

    # 27 Jos Cozijnsen - The EU ETS Is Here to Stay: The MSR Debate, Price Controls, and the 2040 Package

    The EU ETS is up for review again in 2026, but the debate is noisy: volatile permit prices, politically sensitive energy costs, and lots of claims about whether the system is being “weakened” or “strengthened.”  If you listened to the two-part EU ETS primer with Professor Edwin Woerdman, this episode is the real-time application: what’s actually happening inside EU climate policy right now.  My guest is Jos Cozijnsen, a Dutch lawyer and long-time expert on carbon markets and international climate policy. He has worked on emissions trading since the 1990s, including the Kyoto era, and remains closely involved in today’s debates on ETS design, Article 6, and carbon markets.  In this episode we discuss: What an “EU ETS review” really means—and why geopolitics is changing the context The EU’s recent climate amendment and what it implies for the 2040 target packageThe MSR and why proposed changes are controversial (and detail-dependent) Why price controls like a corridor are politically tempting—and technically complicated Flexibility on the path forward: free allocation, removals, and possible Article 6 credits Why Jos calls the ETS a “docking station” for linking mechanisms over time If you want a clear sense of what is substance versus signaling in the ETS debate—and what the next phase of EU carbon markets could look like—this episode is for you. You can find many informative blog posts from Jos here:  https://www.emissierechten.nl/  One such article is exonerating effects of hte EU ETS https://www.emissierechten.nl/column/ex-lege-libertas-de-vrijwarende-werking-van-het-eu-emissiehandels-systeem/ For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    54 min
  4. #26 Dr. Edwin Woerdman - The EU ETS in 2026: MSR, Economic (In-)Efficiencies and What Might Change

    May 12

    #26 Dr. Edwin Woerdman - The EU ETS in 2026: MSR, Economic (In-)Efficiencies and What Might Change

    This is Part 2 of my conversation with Professor Edwin Woerdman on the EU ETS. In Part 1, we covered the core mechanics of cap-and-trade—and why “2039” is an arithmetic consequence of the linear reduction factor.  In Part 2, we tackle the moving part that keeps returning to headlines whenever prices move: the Market Stability Reserve (MSR)—which Edwin calls the ETS “vacuum cleaner.” We discuss why it was created, how it changes auction supply, why its cancellation rules matter, and why the Commission is now reconsidering parts of it in the current energy and geopolitical context.  We also go beyond “ETS 101” and talk about where real design frictions show up: How the MSR works, and why it can affect expectations and price dynamics Why a positive carbon price can persist even with a surplus (forward-looking firms) Why free allocation is not a problem in economic theory (opportunity costs) Where the EU ETS deviates from the economic “first best,” including output-based free allocation and administrative burden What kinds of tweaks might realistically appear in the 2026 review (and why many changes are incremental) 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 Up next: if you want to apply this toolkit to what’s happening right now in EU policy, the next episode with Jos Cozijnsen digs into current discussions, the 2040 targets, the MSR reform, and proposals around price controls.  For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com

    34 min
  5. #25 Dr. Edwin Woerdman - How the EU ETS Works: Coverage, Cap-setting, Allocation, and the Logic of Cap-and-Trade

    May 5

    #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
  6. #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
  7. #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
  8. #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
See All (29)

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.

Information

You Might Also Like